Flicking through automotive magazines or clicking on car ads in your social media feed can build the excitement of buying a new car, but an important step before you decide on your new ride is to calculate a realistic budget. The key is that this budget should not only cover the purchase price but a range of typically mandatory ongoing costs such as any loan repayments, registration, insurance, maintenance and fuel. Here we break down some of the important considerations to factor into your budget.
In Australia, there are many finance options available and choosing the best one for you will depend on your circumstances. You could choose to purchase a new car outright using cash that you have saved. Alternatively, you could take out a car loan from a bank or lending institution, obtain finance directly from the car dealer or enter into a rent-to-buy agreement where you pay an ongoing fee to essentially hire the vehicle, with the option to buy it outright at the end of the contract. Here are some of the pros and cons of each option, however, be sure to do your homework before making a decision.
One thing to keep in mind is that advertised prices for cars may not be a true representation of the total cost you will pay before you drive out of the lot (or driveway if it is a private sale). On-road costs can add up and typically include fees for registration (or transfer of registration), stamp duty and CTP insurance, with these costs varying depending on which state or territory you live in. While they are fixed costs, they will sometimes be included in the driveaway price if you’re buying from a dealer. You may want to check with your state or territory government to get an idea of what these costs could be for you.
Dealer delivery charges can vary drastically and depend on many variables, meaning you may be able to negotiate these. To help stick with a budget, you could consider whether you could get better value from a used car over a new car. Cars with manual transmission are often cheaper than their automatic counterparts, so if you have a manual licence this may also be something to consider. If you are buying a new car from a dealer, you may be offered extras such as extended warranties, paint protection, etc. Consider whether these add-ons suit your needs and fit within your budget.
Before you drive away in a used car, keep in mind that for a few hundred dollars upfront, an independent vehicle inspection could save you thousands by uncovering potential hidden issues with a car.
Running a car can be expensive, with the total cost varying depending on the model you buy. It’s generally a good idea to factor in things like fuel efficiency, ongoing registration costs and ongoing maintenance (for example, some models may cost more to service than others due to more expensive parts or complexity in repairs).
In addition to CTP insurance, which provides cover for drivers who have injured another person in a motor vehicle accident, you may want to consider car insurance such as third-party property, third-party fire and theft or comprehensive insurance. These policies will provide a level of financial protection to cover damage in an accident. With so many options available, it’s a good idea to shop around and compare car insurance before choosing a policy to find cover that suits your needs and budget.
As you can see, regardless of which car finance option you choose, there are a number of upfront and ongoing costs to consider, above and beyond a vehicle’s advertised sale price. Before you make your final decision, it could be worth doing your research to get the full picture of what your car will cost both to buy and keep on the road.
This article is made in collaboration with Canstar, Australia’s Biggest Financial Comparison Site.