Buying a car is one of those purchases where it’s easy to get caught up in the excitement. You find a model you like, take it for a spin and start picturing it sitting in the driveway.
But before you get too attached to a particular set of wheels, it’s worth working out what you can actually spend. That means looking beyond the price on the windscreen and thinking about the costs that come with owning the car, as well as how you’ll pay for it.
Start with the car you actually need
It’s tempting to start with the cars you like and work backwards from there, but a better place to begin is what you need the car to do.
Is it mainly for commuting or ferrying the kids around? Do you regularly head out of Sydney for weekends away? Or are you after something that can handle the weekly shop, school runs and everything else life throws at it?
Once you’ve got that sorted, you can start narrowing down the type of car that makes sense. If you’re buying second-hand, there’s a bit more homework to do before handing over the money. Service NSW recommends checking:
- Registration: Check the vehicle’s registration status and expiry date.
- Service history: Look at the car’s servicing and maintenance records.
- Market value: Research what similar vehicles are selling for to get a better idea of whether the asking price is reasonable.
- Independent inspection: Consider having the vehicle inspected before you buy it.
- Personal Property Securities Register: Search the PPSR to check whether there’s money owing on the vehicle, or another security interest attached to it.
- Vehicle history: Check the available history of the car, including details that could affect the purchase.
Doing these checks before you buy can give you a better handle on what you’re actually getting, rather than judging the car on its appearance or test drive alone.
Look beyond the price on the windscreen
The purchase price is obviously a big part of the budget, but it’s not the whole story. In NSW, buying a car can also mean paying for registration, CTP insurance and motor vehicle duty. There are also ongoing costs such as servicing, repairs and spare parts.
Then there are the everyday running costs.
Fuel is an obvious one, but insurance, tyres, servicing and the occasional repair can all add to what you spend on the car over time.
It’s worth putting these costs alongside the purchase price before deciding what you can comfortably spend. A car that looks affordable based on the sale price alone can look quite different once the ongoing costs are added in.
Work out what you’re comfortable spending
Once you’ve got a shortlist, it’s time to put a realistic figure on the purchase.
This is where it can help to think of the car as an ongoing expense, rather than one big payment. If you’re financing the purchase, the loan repayment will sit alongside your regular household expenses, plus the costs of running the car.
ASIC’s MoneySmart suggests looking at your budget and factoring in the other costs before deciding how much you can spend. They also recommend comparing car loans before shopping for the vehicle, so you know what your finance options look like before you start negotiating.
Having that figure in mind can make the car search a lot simpler. Instead of asking whether you can stretch to the next model up, you’ve got a better sense of where the car fits within your overall budget.
Comparing the entire loan, not just what’s advertised
There’s more to comparing car loans than finding the lowest advertised interest rate.
MoneySmart recommends looking at the interest rate, fees and loan features, as well as the length of the loan. A longer loan term can mean lower regular repayments, but you may pay more interest over the life of the loan.
If finance is part of your plans, Handy Finance’s car loans are available for new and used vehicles, with loan amounts from $2,001 to $100,000. Terms range from one to seven years, with fixed interest rates and the option to make repayments weekly, fortnightly or monthly. There are also no monthly account-keeping fees or early repayment fees.
Before settling on a loan amount, it can be useful to compare how the repayments change with different loan terms. Their car loan calculator lets you run the numbers using your loan amount, term and repayment frequency. The results are estimates, but they can help you see how different borrowing amounts could fit into the budget you’ve set.
Giving yourself room to choose
Having a budget doesn’t mean you need to settle on one particular car straight away. It can actually give you more room to compare.
You might find a used model that gives you the features you want for less, or decide that spending a little more upfront makes more sense when you compare the running costs.
The important thing is to look at the overall cost, not just the sticker price. Two cars at a similar price point can have very different fuel, servicing, insurance and maintenance costs.
Taking a little extra time to compare those details can help you find a car that makes sense for your budget.
Making your next car purchase count
A sensible car budget starts with the full picture: what you need from the car, what it will cost to own and run, and how the repayments fit alongside your other expenses.
Once you’ve worked through those numbers, you can focus on finding a car that suits your needs and sits comfortably within the budget you’ve set. From there, you can narrow down your options and get those keys in your hand.
The above article is paid content, and any information presented should be independently verified before making any decisions as a result of the content. This article does not constitute advice of any kind, nor does it represent the opinions of the website publisher.