Buying a Car

Different ways to buy

You can buy a car by

• Paying for it with your savings
• Taking out a personal loan to cover all or part of the cost
• Borrowing the money from the seller (this dealer finance is usually provided by an outside financial institution - and beware the higher interest rates and charges)
• Private leasing

Arrange your finance first

If you need a loan to purchase the car, it's best to organise this first before you pick a car you can't afford or rush into a car finance offer. Make sure you have the bargaining power of pre-approved finance when searching for your 'dream vehicle'.

• To find out about a Credit Union Car Loan click here.

Checklist for selecting the right car

• Will it seat enough people and carry a big enough load?
• Does it have sufficient power?
• Will it do all the jobs required?
• Can I afford to run and maintain it?
• Is comprehensive insurance for this model affordable?
• Will this model hold its value?
• Is it going to be reliable?
• Is it safe and environmentally responsible?
• Am I going to enjoy owning it?
• Lastly and most importantly, am I letting my heart rule my head?

Examine the whole picture

When buying a car, it is important to look at the whole financial equation, because the purchase price does not represent the entire cost of a car. There's a range of other bills that you can expect either immediately or soon after your purchase.

Whether you buy new or second-hand, you will encounter government charges. State governments levy stamp duty and either a registration fee or a transfer fee if the vehicle is already registered.

With new cars, there has been a trend towards drive-away prices but many advertisements still put dealer preparation charges in small print. The message here is simple: work out all the charges and make sure they fit into your total budget.

There's also compulsory third party personal insurance to organise and you'll need comprehensive insurance too.

In certain cases, such as when a car is registered in the name of a business, fringe benefits tax may be payable. For information on this, speak to the Australian Taxation Office or your accountant.

Whats it worth?

How do you know what the car you are buying is really worth? Simple - do your homework! There are various car magazines, motoring associations and websites (autoedge or red book) which will provide a guide to average used car prices.

Buying privately

Buying privately is generally cheaper but it means going without a warranty unless the car is still covered by a transferable new car warranty. You cant compare a range of cars side-by-side (except at a car market) and buying privately often means trudging all over the city to see cars which dont always live up to the expectations raised by the advertisements.

If buying at a car market which brings together a group of buyers and private sellers you must treat the purchase in the same way as a private sale and do all the usual checks. At a market you can do some comparative shopping, and can often do more bargaining.

Get it checked

When you think youve finally found the right car, check it thoroughly. The NRMA has a useful vehicle checklist at the following site:

http://www.mynrma.com.au/

For a fee, your state motoring organisation will complete a comprehensive pre-purchase inspection and issue a report. The thoroughness of these reports means theres virtually no car they cant find fault with. What you have got to decide is whether the listed faults are major or minor, and whether they are likely to compromise your safety, enjoyment or ability to afford to run the car. Is it still worth the price being asked?

Double-checking

The majority of people are honest and decent, but you must still double-check everything you are told. If a car is described as a 1995 model, for example, and the paperwork doesnt confirm this, it could have a significant influence on the vehicles value. Also examine the logbooks or service records to confirm the car has been regularly and properly serviced throughout its ownership.

Used car dealers

If you buy from a used car dealership, it pays to go to a professional, service-oriented establishment which offers a good selection of stock and has a well set-up workshop to perform any repairs which may be required during the course of the warranty. Some car dealers provide NRMA reports. If so, ensure that it is up to date, and then study it carefully to ensure that you understand the condition of the car you wish to purchase

Auctions

Unless youre feeling very brave or lucky, its best to leave auctions to the pros. They involve a greater risk, since cars are sold as is and its usually not possible to perform a thorough mechanical inspection beforehand. Another trap for new players is that the purchasing decision has to be made quickly, which is rarely the best way to make it.

Car brokers

Some buyers prefer to use the services of an independent motor vehicle broker. You explain to the broker what you want and he or she finds the car and negotiates the price on your behalf. The broker can also organise a trade-in. Vehicles bought through brokers should carry the manufacturer or dealer warranty. The broker generally receives a fee from the seller, so you pay no additional fees. We now offer this free service to our members. Please contact one of our friendly staff if you would like more information.

Legal ownership

Is the car encumbered, which is to say:

• Does the car truly and fully belong to the person selling it?
• Is it still the subject of a financing arrangement?
• Has it been used as security on a loan which has not been discharged?
• If so, can it be repossessed, even though you have bought it in good faith?

The place to check is through one of the registers of encumbered vehicles (REVS). These vary slightly from state to state but, in general, will provide free advice as to outstanding loans or other financial encumbrances affecting any properly registered motor vehicle.

In NSW, the REVS website is www.revs.nsw.gov.au

To search for encumbrances (any money owing on the vehicle) enter the;

• Vehicle registration;
• VIN/chassis number; and
• Engine numbers
  

For a small fee, the REVS register can issue a search certificate which gives you conditional legal protection against repossession due to the previous owners unpaid debt

It is also important to check that the registration is valid. To check in NSW, contact the RTA [www.rta.nsw.gov.au] or your local Motor Registry.

Different types of insurance

There are four basic types of automotive insurance.

1. Comprehensive
   This covers the damage caused to your vehicle during an accident and any damage your vehicle may cause to other cars or property. Many policies include additional benefits such as a rental car while yours is off the road. Driving a car which does not have comprehensive insurance is putting yourself at great financial risk.
2. Third Party Property
   This covers the damage you might cause to other vehicles or property in an accident. Damage to your own vehicle, however, is not included. It's better than nothing but still leaves you exposed to loosing the entire value of your car.
3. Third Party, Fire and Theft
   A more expensive version of third party property insurance, this will cover your car if it is stolen or damaged by fire, but not if it is involved in an accident.
4. Third Party Personal
   This is also known as compulsory third party (CTP) or, in NSW, 'green slip insurance'. It is obligatory in all states, though there are different methods of paying for it (in most states it is automatically included in registration, though in NSW you need to purchase a green slip each time you renew your registration).

Third party personal insurance covers the injuries sustained by victims of an accident. It does not cover property damage and, technically speaking, doesn't cover a driver who is 'at-fault'. However, many companies now offer CTP policies which include 'at-fault' drivers.

Arrange Your Insurance Before You Pick Up Your Car

Protect yourself and your new asset - make sure it's insured before you take it home.

Source: 'Buying a car on your terms' produced by Credit Union Services Corporation (Australia) Limited 2000.