Buying a car
Buying a new car can be a great feeling. But be
careful not to let your excitement get in the way of you getting
the best deal - buying a car can be really expensive. As well as
the car, you will need to pay for petrol, insurance, registration
fees, repairs and roadside assistance.
Here is some information about how to shop around for the right
car and the best option to pay for it.
The cost of owning a car
Buying a car comes with lots of extra costs. The costs are
different in each state, but here are some examples of the extra
costs you might need to pay:
- Stamp duty - a payment made to the state
government when you buy a car
- Motor vehicle registration - paid annually on
all vehicles and if it's due on the vehicle you buy, you must renew
- Registration transfer fee - if the car is
already registered you must pay to have this transferred to your
- Compulsory third party (CTP) insurance -
covers injuries you may cause to other people
- Car insurance - to cover damage to your car,
other people's cars and yourself
- Petrol - will be your biggest single
- Regular repairs and service - to keep
your car running
Before you start looking at cars, think about how much money you
want to spend in total. See budgeting and saving for
information on how to make a budget. Financial counsellors can
also help you do a budget and work out how much you can afford to
spend. To find a financial counsellor in your area, see financial
Work out the real cost of buying and running a car.
MoneySmart Cars app
Check the condition and
price of the car
Check the condition of a car before you buy it. If you're buying
a second-hand car it's helpful to have someone check it out for
you, because cars can have problems that can be difficult to
You can get a mechanical inspection done by an independent
mechanic that you trust or you can ask someone who knows about cars
to come along with you to take a look before you buy it. It might
also be helpful to use NSW Fair Trading's
vehicle inspection checklist.
Make sure you also check the price of the car against what other
sellers are asking for it. There are many websites which provide
this information for free. You can find them by doing an internet
search for 'car value' for the make and model of the car you are
If the car you're looking at is being offered well below the
market price, you should make sure it doesn't have serious faults
and wasn't stolen.
Video: Naomi buys a new car
Buying a car
Joel reminds his sister Naomi how to avoid traps when she
buys a new car.
This video features Joel and Naomi Wenitong from The Last
Ask the seller to show you the following:
- A current certificate of registration for the car
- A Safety Inspection Report that is no more than 42 days
- Proof that they own the car, e.g. a sales receipt and service
Also do an ownership check for as little as $3.40 using the
Australian Government Personal Property
Securities Register (PPSR) to make sure the car won't be
repossessed if the owner still owes money on it.
If the Safety Inspection Report is marked 'failed - repairs
needed', this means the car is not roadworthy. Do not buy the
Buying privately means you won't get a warranty. If anything
goes wrong, you will have to pay for it.
Buying from a licensed
Buying through a licensed dealer can be more expensive than
finding a car privately. Generally, however, buying from a
licensed car dealer should give you more protection if things going
wrong. A licensed car dealer will give you:
- a guarantee that the car will not have any money owing on
- a cooling-off period where you might be
able to get a refund if you change your mind. Check the rules for
cooling off periods in your state, because sometimes the cooling
off period is waived when you drive the car away from the caryard;
- a warranty period on new and used
Find your local state or territory
consumer protection agency for more information about your
rights when buying a car.
You might also be offered finance by a car yard. This can often
be more expensive than other loan options. Find out how to get the
best car loan for
Read ASIC's media release about action we have taken against a
car salesman who issued loans of up to 48% interest to
Indigenous consumers, breaching consumer credit
Avoid sales pressure
Don't ever feel pressured into buying a car. Take your time to
inspect the car and shop around. If a dealer pressures you into
signing a contract, it could be a sign that there's something wrong
with the car. Be wary if they use lines like 'There's another buyer
interested so it may not be here tomorrow' or 'You won't get a
better price anywhere else'.
Choosing the right car is a really big financial decision, and
walking away for a day or two to think it over will be worth the
Extra insurance offered by car dealers
If you are getting a loan from a car dealer you may also be
offered add-on insurance products like loan protection, gap cover
or tyre and rim insurance. Think twice before you take up these
offers, and don't feel pressured to sign up to them.
- can add a lot to what you owe,
- might not be good value for money
- will only pay out on a claim in some circumstances.
Find out more about add-on insurance.
Paying for the car
Getting a car loan
If you haven't got the money upfront for your car, you will
probably have to organise a loan.
When you get a loan, you borrow an amount of money and agree to
repay it within a certain period of time (called 'the term'). You
will also have to pay other fees, charges and interest. Interest is additional money
you pay to the lender in return for borrowing the money. The
quicker you pay off a loan the less interest you will pay. Before
you get a loan, you will need to do your budget and work out how
much you can afford to borrow. Our personal loan calculator can
help you with this.
See car loans
for more information and listen to our audio segments on buying a car.
Always shop around for the best deal on your
loan. You can do this by using a comparison website or by
talking to a few different lenders (like banks, building societies and credit unions). Here are some suggested
questions to ask:
- How long will I have to pay back the money?
The term of the loan is usually between 12 months and 5 years.
- What is the interest rate? Interest rates can
be between 0 - 48%, but remember the lower the better.
- What are the other fees and charges?
Examples might include an establishment fee for setting up
the loan, or late payment fees.
- What are the terms and conditions? Don't feel
pressured to sign anything and if you don't understand. You can ask
to take the loan documents away to talk with someone who can help
Get a receipt
- Pay with a bank cheque - Never pay with cash,
and ask for a receipt from the seller
- Keep good records - Make sure you
understand the details in the contract you are signing and keep a
copy of all documents for your records.
Case study: Johnny is buying a car
Johnny has a great new job, but he really needs a car to get to
work. He's done a budget and worked out he can afford to repay
about $350 per month. Johnny talks to a few different lenders and
decides the best loan for him is through his bank. The bank
provides 'in principle approval' to lend Johnny $16,000, this way
he knows how much he can spend before he goes looking for a car.
After finding his dream car, Johnny makes monthly repayments to the
bank over the next 5 years. The interest rate for the loan was 10%
so over the 5 years, Johnny will have paid the bank a total of
$21,600, which includes about $6,000 in interest.
MoneySmart does not lend money
ASIC's MoneySmart website does not lend money or arrange loans
but is happy to answer questions you might have about borrowing
money. You can call our Indigenous Help Line on 1300 365
957 or email us at firstname.lastname@example.org.
Get car insurance
Arrange insurance for your car before you drive away. You must
have compulsory third party insurance, which covers death and
injury to people if you are involved in an accident.
Other types of car insurance to think about include:
- Third party property insurance - Covers
damage to other people's property (e.g. their car or home) and your
own legal costs
- Third party, fire and theft insurance
- Covers damage to other people's property, and provides
limited cover for damage to your own car caused by theft or
- Comprehensive insurance - Covers damage
to your own car and other people's property if your car is in an
accident (including fire) as well as theft
Why you should get third party property insurance
Third party property insurance may seem like an optional extra,
but if you damage another person's car you will have to pay to fix
it. Even if the other person has insurance that will cover their
car, their insurer will charge you the repair costs if it's your
fault. The average vehicle repair cost is around $3,000.
No claim bonus
No claim bonus schemes are meant to reward safe drivers or those
who don't claim on their insurance but a no claim bonus does not
always reduce the cost of your premium. Don't just stick with your
current insurer for a no claim bonus, as you could get a better
deal elsewhere. Find out more about what a no claim bonus really
insurance for more information and listen to our audio
segments on insurance.
Buying a car is a big commitment, so don't feel
pressured into signing anything. Always take some time to think
over your decision away from the dealer. Be prepared by
knowing how much you can afford, where you are going to get the
money and who will check the condition of the car.
Last updated: 29 Mar 2018