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The steps of buying a car in Australia

The steps of buying a car in Australia

If you’re on the hunt for a new vehicle, there are plenty of steps to take to make sure your savings account doesn’t take an unnecessary hit when buying a car in Australia.

From warranties and insurance to choosing the right vehicle for the job, make sure you consider every aspect carefully before committing to a car loan or maxing out your credit card. Here are the simple steps to follow when buying a car in Australia.

Start with research

This is the easy part of the car buying process — if you know what you want. You should consider your driving habits and needs. Are you a single person, driving to the train station and occasionally the shopping mall? Or are you part of a large family that drives all over town on the weekends? As you can see with just these two examples, very different vehicles are required — so don’t just go on looks when you’re buying a car.

Once you’ve figured out what type of car to look at, the next car-buying step is to compare the stats online to see which makes and models provide better fuel economy, safety and other features. Of course, you do want to drive something you’re proud of, so we take it back — looks do count a little bit.

Get on the hunt

Once you’ve decided what you’re looking for, you need to choose the method of car purchase you’re most comfortable with. According to the New South Wales government, when buying a car from a dealer you have a lot more legal protection than if you buy from an individual or at an auction. This can include guarantees that there is no money owing on the vehicle and that it hasn’t had flood or hail damage.

Buying a car privately can unearth some great deals, but you will be much more reliant on your own knowledge and experience without those guarantees in place. If you’re unsure of whether or not you’re capable of doing this, take along a knowledgeable person that you trust. You can also have cars checked by mechanics at your own cost.

Get your finance sorted

When buying a car, most of us don’t have the cash just sitting in our savings accounts, so a personal loan or car finance becomes necessary. When you buy from a dealer, they can offer you finance and insurance, but you aren’t under any obligation to use their products.

In fact, when buying a car in Australia, it pays to shop around, according to Matt Burgess, finance director at 360Finance:

“The number one tip is to definitely shop around for the best rate, preferably before purchasing a vehicle. The rate offered by your bank or the motor dealer may not necessarily be the cheapest rate or the most suitable product for your personal situation.”

You can conduct your own car loan comparison and choose the finance that offers you the best deal and most suits your circumstances.

Sort out the fine details

Once you’re sure that this is the right car for you — and before you sign anything — make sure all of the details match up with legal records and that the car is good to go. This is particularly important with private sales. Each state has different rules and regulations surrounding the car buying process, so make sure you brush up on these, especially if you’ve recently moved and are unfamiliar with the local legalities.

For example, Queensland has safety certificates that should be in place when the vehicle is sold, and Western Australia allows transfer of vehicle ownership between individuals online.

Every situation is different, so make sure you find out what is applicable to you and your circumstances.

It’s important to understand the finer details of your car loan and how they apply to your needs, too, adds Burgess:

“Make sure you structure the loan taking into account things like, how long you are likely to keep your vehicle so as to avoid unnecessary fees and charges.”

“For instance, taking out a seven year loan might reduce your minimum monthly repayment, yet most car finance products are fixed rate loans and paying that loan out after three or four years may lead to expensive early payment fees and charges.”

Once you know you have everything on the level and your finance is ready, you can start thinking about negotiating on the price and the extras.

Get ready to drive away

Owning a car comes with all sorts of responsibilities that you need to make sure you’re ready for. Aside from stamp duty and other taxes that you need to pay when buying a car in Australia, you should also make sure that you have sufficient insurance in place when you drive off the lot.

The last thing you want is to pull away in your nice new car, only to write it off in a freak accident on your way home. That sinking feeling in your stomach will only be second to the sinking feeling your savings account will experience.

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Learn more about car loans

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.

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 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 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 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 vehicle finance?

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

Where can I get a student car loan?

Student car loans are not a necessarily a product in and of themselves, but what you may be looking for is a guarantor car loan.

A guarantor car loan has a third-party act as a form of guarantee for your loan application, telling the bank or lender that if you default on your loan, someone will pay the loan repayments.

Going guarantor on a car loan is no new thing, and before internet-based credit scores, guarantor car loan applicants would apply for loans with a guarantor or property owner who could vouch for the person borrowing the loan.

To get a guarantor car loan, you’ll need someone willing to act as a guarantor for your car loan.

How to find a great car loan

Historically, finding a great car loan would require excess research ranging from visiting an excess of websites or making phone calls, but technology has moved on. Using RateCity, Australia’s leading financial comparison service, you can check out great deals from a range of lenders on the one site.

To start, select the amount you want to borrow and the length of the loan, narrowing your search to show just fixed or variable interest rate results.

Once you’ve indicated your search criteria, you’ll see an immediate list of lenders, ranked by interest rate or application fees. You’ll also be able to view the monthly repayment amount for each result, helping you to know what you can afford.

Up to six products can be compared side-by-side, complete with more information about each car loan, giving you more information about your options.

When comparing your car loan options, it’s ideal to keep in mind some points find a great car loan for your needs. Consider the following:

  • Choosing a low interest car loan can reduce costs
  • Selecting an option with low fees and charges is ideal, because these can really add up
  • Be aware of penalties, such as early exit penalties if you pay off the loan sooner than expected
  • Consider the features that best suit your situation

There are many ways to ensure that you get a great car loan. Ultimately, you’ll end up with the best deal by doing your research and selecting the most suitable product for you.

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.

Can I get a car loan with poor credit?

Poor credit doesn’t necessarily mean you won’t be able to get finance for your car purchase, though your options aren’t likely to be the same as someone with good credit.

In fact, a number of specialist lenders exist offering car finance for customers with poor credit, able to provide access to bad credit car loans.

However having a history of poor credit will likely mark you as a potential risk to lenders, so your car financing needs could see higher fees and interest rates. Alternatively, consider a secured car loan, which is a type of loan that uses the car you purchase as collateral, reducing the risk.

Other options include getting someone close to act as a guarantor for your car loan, or to talk to a broker about a personalised rate specific to your circumstances.

I’ve been denied a car loan before; can I still get car finance?

Even if you’ve been denied a car loan before, you might still be able to get car finance. The key is to make the right application to the right lender.

The ‘right’ application is one that makes you look like an acceptable risk, which might include things like improving your credit score, increasing your savings rate and accumulating a bigger deposit.

The ‘right’ lender is one that deals with borrowers like you. For example, while some car loan lenders only deal with good credit borrowers, there are others that specialise in bad credit or poor credit borrowers.

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. 

What is a guarantor car loan?

A guarantor car loan is a type of loan that features a guarantor on the agreement. The guarantor is a third-party individual, often a friend or relative, who guarantees the loan will be repaid if the borrower defaults on the car loan.

Guarantor car loans are often geared at people who might otherwise struggle being accepted for a secured car loan when purchasing a vehicle. Some of the reasons might include a lack of credit history such as with a student or young person, if there’s bad credit, or age as a factor such as with pensioners.