Before you buy the car of your dreams, make sure you can afford all the costs. Learn about one-off and ongoing expenses, how to avoid sales pressure and get the best deal.
Cars make getting around a lot more convenient – but that convenience comes at a price! Two key decisions about buying a car come down how to buy, and how much it’s going to cost.
How to buy a car
There are three main ways you can buy a car.
1. Car dealerships
Buying through a car dealership comes with some consumer guarantee rights. That’s for both new and used cars.
New cars come with a full manufacturer's warranty. If there's a mechanical problem and you're still in the warranty period, the problem will be fixed free of charge.
The warranty on a used car from a car dealership varies from car to car. See the ACCC website for information on warranties.
Know that, as a buyer, you have rights. your state or territory consumer protection agency to find out your rights when buying from a car dealership.
Car dealerships may want to sell you extras, like add-on car insurance. This includes loan protection, gap cover, and tyre and rim protection. These products may not be good value for money. Don't feel pressured to buy them.
2. Private sales
Buying from a private seller can sometimes be cheaper than a dealership, but you don't always know what you're getting, and you’re not covered by the same consumer protections. You won’t receive a warranty, or a cooling off period.
When you buy privately:
- Check the car is registered
- Get the car’s VIN or chassis number. This is like a serial number so, unlike rego, it can’t be changed. Then search the Personal Property Securities Register (PPSR) to check:
- there are no debts owing on the car
- it has not been reported stolen or written off
- For a $2 fee, the PPSR will email you a report on the car.
- It's a good idea to get a qualified mechanic to do a vehicle inspection. To find one, contact your state or territory motor club.
3. Auctions
Buying a car at an auction can be cheaper, but you'll get no warranty and no test drive beforehand.
Just as when you buy privately, use the VIN to search the Personal Property Securities Register (PPSR).
Check the paperwork and do your homework before making a bid – you cannot back out of a sale.
Read the contract carefully. Contracts are legally binding. Don't feel pressured to sign on the spot. You might not be able to get out of a contract if you change your mind.
Take your time to read the contract. If there's anything you're not sure about, get help from family or friends to understand the fine print.
How much a car will cost
Car costs can be divided into purchase costs and ongoing costs.
Before you buy a car, work out how much it costs to keep it on the road (the ongoing costs). It might be more than you think.
Car registration
Your car has to be registered before you can drive it, and you have to pay rego every year. How much you pay depends on where you live and what type of vehicle it is. Check with your state or territory's registration and licensing authority.
- NSW registrations
- VIC registrations
- QLD registrations
- WA registrations
- SA registrations
- ACT registrations
- TAS registrations
- NT registrations
As an example, the cost of rego and compulsory third party (CTP) insurance for a 4-cylinder car in Queensland is around $850.
Car insurance
You need basic insurance, called compulsory third party (CTP) insurance, to register and drive your car. This is the minimum insurance you can have.
You can also choose to get extra insurance, that covers more situations. The types of car insurance are:
Compulsory Third Party (CTP): covers injuries to people caused by your car. Does not cover damage to cars or property. You must have CTP to register your car. In some states, CTP is included in your car registration costs so you don’t need to buy it separately.
Third Party Property Damage: does not cover damage to your car but covers damage to other people’s cars or property caused by your car – which can really add up. Some policies allow you to pay extra to protect your car if it’s stolen or damaged by fire (see below).
Third party property damage, fire and theft: this includes the same cover as Third Party Property Damage (above), plus it covers your car if it’s stolen or damaged by fire.
Comprehensive: covers damage to your car and other people’s cars or property, even if you caused the accident. Also covers your car if it’s stolen or damaged by fire or weather events. It won’t cover everything though – make sure you check what the exclusions are.
The insurance cost will depend on your age, driving record and where you live. Find out how to choose the right car insurance for you.
Repairs and maintenance
A trip to the mechanic is a major hidden cost of having a car. Whether for regular servicing, new tyres, or an unexpected breakdown, prepare to pay hundreds of dollars every year.
Petrol, parking and more
Petrol is expensive! And unlike catching public transport, you have to park your car somewhere when you arrive. Parking and speeding fines – and even using tolls roads – can be a nasty surprise.
If you’re buying an electric vehicle, look into the logistics of charging it when you’re doing your budget. Charging it at home might not always be practical, so factor in some cost for public recharging stations.
Work out how much you can afford to spend on buying and running a car.
How to pay for the purchase
If you’ve decided you can afford the running costs of a car, the next step is to buy one!
If you don't have enough savings, you can take out a car loan to help cover the cost of a car. You'll have to make regular repayments to pay back the loan and pay interest on top of what you borrow.
Car dealerships may offer you finance, but it's important to consider other options as well. See how to choose the best car loan.
Costa buys a used car
Costa took out a $15,000 car loan to buy a near-new used car. The length of the loan was four years, with an 11% interest rate.
Over the four-year term, Costa paid:
- Interest charges — $3,609
- Stamp duty — $450
- Transfer of registration costs — $30
- Annual registration costs — $450 a year
- Comprehensive car insurance — $1,523 a year
- Petrol — $60 a week
- Servicing — $325 a year
This brought the total cost to nearly $10,000 a year for four years, which was over $800 a month.
All those payments took a big chunk out of Costa's income. Luckily, he did a budget before he bought the car. So he made sure he could afford the loan repayments and extra costs.