Questions to ask before you buy a new car

Questions to ask before you buy a new car

Buying a new car is one of the biggest financial decisions you will make.

You wouldn’t purchase a used car without asking the owner a few standard questions first – how long have they owned it, what is the reason for selling, what condition is it in? – and it’s no different when it comes to buying new.

Here are RateCity’s top questions to ask before you buy a new car:

What’s the fuel efficiency?

Financially savvy shoppers will need to ensure their new car has good fuel efficiency to avoid a costly weekly spend on fuel. According to Cars Guide, fuel efficiency refers to the distance you can travel on an amount of fuel. 

“Anything that is listed as less than 6-litres/100km or more than 16.5km/1-litre is considered to be pretty good.”

What is the warranty coverage?

If you experience any faults with your new car, you’ll want to know you’re covered for the replacement of faulty parts and the labour to do so. Asking your dealer about the vehicle’s warranty coverage will allow you to know for how long your dealer is obligated to fix the issue at no extra cost to yourself.

For new cars, often the manufacturer’s warranty will be two-year/40,000kms or three-year/60,000kms. The statutory warranty for new cars is also usually for 12 months/20,000kms. For additional coverage, you can also purchase extended warranties to suit your needs.

Is it good for long drives/off-road conditions?

Are you the outdoorsy type? Do you use your car for work and know you often have to make long drives? Choosing the right car for you isn’t just about the price, but also about how you will use it. If you know the car will be taking you across dirt roads every weekend, it will be best to ask your dealer how the car can handle these conditions.

Can I have a test drive?

You would never purchase a house without having first visited an inspection. The same rule applies for any car purchases. It is highly recommended you ask to test drive any car before purchasing it to have first-hand experience of how it performs and to see whether it meets your expectation.

Test vehicles are not always immediately available, so your dealer may have to schedule you for a later date. Check with your dealer about the length of time and the route of your test, as if you are looking for an off-road SUV you won’t want to test it in city conditions.

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Can I afford it?

It sounds obvious, but a surprisingly large number of people apply for finance after they’ve committed to buying a car, rather than before. The main reason you should organise your finance up front is so that you know exactly how much to spend – because it’s not uncommon for people to overestimate their borrowing capacity. As part of the research process, make sure you punch some figures into a car loan calculator. This will tell you how much you’ll have to repay under different scenarios.

Has the car been used as a demo model?

If you’re looking to save hundreds, sometimes thousands of dollars, it’s worth asking your dealer if they have any demo cars available.

According to Cars Guide there are several pros and cons to picking up a demo car:

Pros
  • Cheaper (always compare the price to a new model just in case)
  • Well-maintained with bugs ironed out
  • Drive away now (no waiting time)
Cons
  • Less time left on a new car warranty
  • No option to customise the car
  • Not brand new

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How much is your car worth?

If you already own a car, you could potentially bring down the cost by selling your car in the process. Before that happens, though, you’ll need to find out how much your car is worth.

One of the first places to find this value is to research the value of your current car, giving you an idea of roughly how much it’s worth in its peak condition.

There are plenty of websites that offer a free online valuation, allowing you to enter your car’s make, model, year, badge and description, with results listing a price guide based on both selling your car privately and through a dealership.

Of course, dealerships will try to profit on your trade-in by buying it for less than they can sell it, making it highly unlikely that you’ll get the same price selling a car to a dealer as you would selling a car privately.

However, private car sales can be costly and can take months to sell, making car trading more convenient with a guaranteed return, even if you may not be able to realise the total value of your car’s worth.

Remember that everything is negotiable. If the dealership is offering you less for your trade than you wanted, try to negotiate elsewhere to gain that money back. Start by negotiating on the price of the trade and then ask them if they can give you a further discount on your new car.

How much is my car worth?

If you own a car, it may be something that can help you bring down the cost of your next vehicle purchase through its sale. However, before you can do that you’ll want to find out how much your car is worth.

Your car’s worth can depend upon various aspects, including:

  • Age
  • Condition
  • Model and make

A great starting place for aspects of this includes websites that offer online valuations, allowing you to enter your car’s make, model, year, badge and description, with the listed results displaying a price guide based on both selling your car privately and through a dealership.

Both have pros and cons, as cars can be very profitable, something that will no doubt impact any chance you have to make the most of your car’s value upon sale. Dealerships will try to profit on your trade-in by buying it for less than they can sell it for, so you shouldn’t expect the same price selling a car to a dealer that you would necessarily get selling a car privately.

Can you get a chattel mortgage with bad credit?

Getting approval for a chattel mortgage with bad credit may be possible, given ‘chattel’ (usually a piece of equipment or car) is put up as security for the loan. That means if you fail to repay the loan, the creditor can recover the loaned amount by repossessing and selling the car or piece of equipment. This differs from unsecured car loans, where the asset is not tied to the loan and cannot be taken if you don’t meet the repayments. 

How to get a chattel mortgage?

Both businesses and individuals may use a chattel mortgage, provided that the car is being used predominantly for business purposes. 

To apply for a chattel mortgage, you need to first consider your options and choose a suitable lender that meets your requirements. Once you have selected a lender, you can apply for the loan online by filling out a form. If the lender doesn’t offer an online application process, you can either call them or visit their nearest branch. 

After you’ve applied, the lender will ask you to supply documents that confirm your identification, income, job profile, etc. If everything is in order, most lenders will arrange the loan’s settlement, so all you need to do is pick up your car!

Can I buy a car as a student?

Buying a car is a huge financial decision, and shy of marriage and purchasing a house (or perhaps around the world travels), it may be the biggest financial decision you make. But if you’re looking at your empty pockets, don’t despair! Your dream of owning your own car could become a reality, if you look for and compare the right car loans for your circumstances.

What is a car loan?

A car loan, also known as vehicle finance, is money that a consumer borrows with the express purpose of buying a vehicle, such as a car, motorbike, van, truck or campervan. Car loans can be used for both new and used vehicles.

What is dealer finance?

Dealer finance is a car loan organised through a car dealer – as opposed to car loans organised by a finance broker or directly by the lender.

How much can I get towards a new car as a single parent?

It really depends on your financial circumstances as to how much a lender will grant you towards a new car as a single parent. With most lenders, the smaller the loan you apply for, the higher your chances are of approval, so getting a cheaper car or adding some savings of your own, may be a valid option if you are struggling for approval on a car loan.

How do you get a car loan?

There are four different ways you can get a car loan. You can go straight to a lender. You can get a finance broker to organise a car loan for you. You can get ‘dealer finance’ – which is when the car dealer organises a car loan for you. Or you can organise your own car loan through a comparison website, like RateCity.

Whichever method you choose, you will need to provide proof of identification, proof of income and proof of savings. So you may be asked for any combination of passport, driver’s licence, bank statements, payslips, tax returns and utility bills. You might also be asked to provide proof of insurance.

How much can I get towards a new car as a single parent?

It really depends on your financial circumstances as to how much a lender will grant you towards a new car as a single parent. With most lenders, the smaller the loan you apply for, the higher your chances are of approval, so getting a cheaper car or adding some savings of your own, may be a valid option if you are struggling for approval on a car loan.

Can you put a deposit on a car to hold it?

It’s up to individual car dealers to decide whether to promise to hold on to cars in exchange for deposits.

Some car dealers will request a deposit and promise, in return, to hold on to the car for a certain period of time. Others will request a deposit but make no guarantees, other than to return the deposit if they end up selling the car to someone else.

Some car dealers ask for deposits; others don’t. If you get asked for a deposit and you decide to pay it, make sure the dealer gives you signed paperwork before you make the payment and a receipt after you’ve made the payment.

How to apply for pre-approval of a car loan from RACV?

If you’re planning to apply for a car loan with RACV, the best way to start is by having a clear picture of your requirements. By getting pre-approval on your car loan, you’ll be able to go shopping for your new car with a definite budget that will help you narrow your search. Once you’ve decided to buy a car with the help of a loan, you may have even identified the type of car you would like to purchase, you can seek pre-approval on a car loan from RACV. 

You can apply for pre-approval by filling out a form online and uploading the relevant documentation regarding your identification, income, debt and credit history. Once you submit your application, RACV will review and verify the documents. If you meet their eligibility criteria, you will get pre-approval for the amount they are willing to lend to you. With this pre-approval, you can go car shopping with the confidence of knowing what you can afford.

What is a secured car loan?

A secured car loan is a loan that is connected to a form of security, or collateral. Generally, the security for a car loan is the car itself. If you fail to repay the loan, the lender might seize your car, sell it and then use the proceeds to recover their debt.

What is the luxury car tax?

The federal government imposes a luxury car tax of 33 per cent on the value of a car above a threshold. As of the 2017-18 financial year, that threshold was $75,526 for fuel-efficient vehicles and $65,094 for other vehicles. So a fuel-efficient car worth $80,000 would be taxed only on the difference between the threshold and the value of the car ($4,474), rather than taxed on the entire $80,000. Similarly, an ordinary car worth $70,000 would be taxed on the $4,906 above the threshold, rather than the entire $70,000. The luxury car tax is paid by dealers that sell or import luxury cars, and also by individuals who import luxury cars.