Here’s one thing you already know about buying your first car: Freedom! No more begging the olds for a lend of the keys, no more third degree about where you’re going or when you’ll be back…no more guilt driving through Macca’s late at night. Buying your first car is all about freedom…to do responsible stuff like get to work on time, of course.
Buying your first car is a huge deal – quite literally – and you want to make sure you do it right. Here’s five things you need to know before you dip your toes into the sometimes murky waters of car ownership.
Know what the car is for
For driving, right? Duh. Well, it’s not that simple.
You should know what you’d be using the car for on a day-to-day basis. Is it going to be for short trips to a local job, or will you be using it to commute all over the city? Do you need to carry tools or work equipment? There’s little point buying a big (fuel-guzzling) sedan if you only use it from time to time.
It might be worth buying new (which is expensive) if you plan to use it for a long time. Otherwise, a good used option might be better.
Yes, you should have a deposit saved
If you’re poor and eating packet noodles for the fiftieth time this month, you may see ads on TV for cars with “zero percent” finance or other deals that make the dealer look like total suckers. No friend, YOU are the sucker, if you fall for it.
Zero percent finance sounds great but often hide heaps of hidden costs and charges. You should have some deposit saved – 20% of the car’s price is a good starting point – so you don’t have to rely totally on finance. It also offsets your monthly payments, which can save you a bit on interest.
If you don’t know the health of your credit, find out
Lenders and brokers will check out your credit history when you’re applying for finance. Even if you don’t think you have a history…you do. See your phone? If that’s on a plan, your provider checked your credit at least once. This shows up on your credit history.
You can find out your credit history (see the MoneySmart website for more) If there are unpaid bills or “defaults” that may have not been your fault (thanks, world’s most awful roommate who never paid anything ever) you should clear them up. This can save you a lot in interest over the long-term.
No, you shouldn’t buy the first car you see
If you have your heart set on one car…then don’t. You should research until your eyes roll out of your head. There’s no excuse for laziness – you can find cars on so many apps and sites that suit your budget and requirements.
If you’re looking at cars up close with a private seller, you should take someone car savvy with you, to help you look for bits and pieces that don’t add up. You should always take a test drive, too!
The sticker price is just beginning of your costs
If you’ve ever heard the phrase “cars are a money pit…” well, you aren’t alone. The sticker price is only the initial cost of a car. You have to factor in insurance, rego, monthly fuel costs and repairs (if the car you’re after is an older vehicle).
You should also know your monthly repayment cost and how this affects your budget. Sometimes a low sticker price is more trouble than it’s worth!