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New to the city? Chances are that if you’re not living close to your new workplace, you have a growing family or like to hit the road on weekends to the snow or the beach, you’ll be needing a car.
If you’re in Canberra and are considering buying a car, either new or used, this guide outlines the basics so you know what to look for and can avoid the most common pitfalls.
Budget, budget, budget
Before buying a car—new or used—you need to work out your budget. Using a car loan calculator, you can approximate how much you can afford to spend every month on finance repayments. You need the interest rate, loan term, and amount you seek to borrow to make the calculation.
Other costs to factor in are registration, insurance, fuel and servicing. Using this figure, you can shop around for something within your budget.
“Buying new has advantages such as better safety features, higher fuel economy, and of course, that new car smell,” says Bill Tsouvalas, Managing Director at Savvy and car buying expert.
“It is more costly and you lose 20% of the value when you drive it out of the car yard, but you also get consumer protections—if you buy from a private seller, you’re more or less on your own.”
Buying a Used or Certified Used Car
If you’re part of the Buy Nothing New movement and are trying to live as sustainably as possible, you may want to buy used instead. Buying used is cheaper, but you also have to sink a lot of time and effort into checking your used car out; first by looking at online car classifieds, then making your way to look at the car itself.
“You can get a good deal with buying used, especially in Canberra as there are a lot of transient workers and diplomats coming in and out of the place,” says Bill. “But you’ll need to inspect the car inside and out, ask why they’re buying, and do your due diligence using the Personal Property Security Register.”
A middle ground is approaching a dealer about certified used cars. They are indeed pre-owned, but are no older than three years, are refurbished, and come with a manufacturer warranty.
“This is a slightly more costly option though provides you greater peace of mind with the warranty included.”
Car Finance and Credit History 101
Most of us will need to finance our cars with a loan of some sort. Dealers often push their finance offers on to buyers—though caveat emptor (buyer beware) definitely applies here, as Bill says.
“Dealer finance that seems too good to be true, like zero percent or one percent car loans…well, they come with a downside,” he laughs. “The dealer is taking control and you, the buyer, lose your negotiating power. You should also be aware that once fees and charges have been factored in, that 1% car loan may work out to be quite a bit more expensive.”
If you are afraid your credit isn’t up to scratch, you may not get approved. You can, however, gain approval for a bad credit car loan instead.
“A bad credit car loan isn’t as drastic as it seems,” says Bill. “You may have to pay more in interest due to a low credit score. But over time, as you pay the car off, your credit can improve. The other benefit is you will be pre-approved and know you can afford on the day. This gives you more room to haggle for a better deal.”
Bill emphasises you should check your credit score thoroughly for free before making any credit inquiry.
“That former flatmate who forgot to pay an electricity bill in your name? That can show up as a default and torpedo your otherwise good credit rating,” he says. “If your credit file contains errors, you may need to approach a credit reporting bureau and have it cleared up. It could save you a lot of money.”