Factors to consider before owning a car – expert advice

Consider these factors before owning a car

Determine your budget.

Take a look at your savings, income, and debt. This should give you a ballpark estimate of how much you can afford to spend on a car. Be flexible, but always set a firm maximum price.
Making a budget should also include determining whether you can afford to pay in full or through a financial plan. If you have a large sum of money saved up, paying outright may save you money on interest payments, whereas borrowing to buy can give you more budget wiggle room if you have a regular income and can easily make payments. But getting a car loan is a big responsibility that should not be taken lightly. But getting a car loan is a big responsibility that should not be taken lightly. Make sure you do your research and create a budget so you know you can afford the payments.
When creating your budget, consider any long-term associated costs, such as fuel, registration, insurance, and maintenance.

Understand the difference between 'want' and 'need'

Now that you've narrowed down your options based on your budget, it's time to create a list of needs versus wants - and there is a distinction.
For example, you may simply require a dependable vehicle that will get you from A to B and last for at least a few years. What about the leather upholstery and wireless charging pad? Those probably belong on the 'wants' list.

Understand the lifetime costs.

When purchasing your first car, consider the vehicle's lifetime cost. In the short term, the price may appear to be relatively low. However, the long-term cost of the car may be far greater than you anticipated.
Your car's lifetime cost includes on-road costs like fuel, maintenance, registration, and insurance.
Fortunately, there are some excellent tools to help make things easier. ASIC's MoneySmart Cars app can help you understand the true cost of purchasing and operating a car. On the app, you can enter loan options and other hidden costs to calculate the lifetime cost of purchasing and operating a vehicle, as well as alternative financing options.

Depreciating value

It's no secret that new cars lose value quickly. However, not all cars depreciate at the same rate. As a general rule, the higher the demand for a car, the less likely it is to depreciate over time. According to Canstar 1, new vehicles depreciate by an average of 19% in their first year. Some cars lose up to 40% of their value within the first year. In the second and third years, this could drop by another 15%. However, not every vehicle is a bad investment. New cars are more fuel efficient, less likely to break down, and are covered by warranties. If you're purchasing a new car model, you should consider the resale value - the price you'd reasonably expect to get for your car if you sold it. This is critical if you find yourself locked into a finance plan at the new car price for a vehicle that will depreciate in value over time, particularly as newer models enter the market.

Do your homework.

There isn't a one-size-fits-all car for first-time buyers. The most important consideration is whether the car's make and model will meet your current and future needs, as well as whether you can afford the on-road costs.
You can avoid making rushed decisions. Consider your lifestyle and how you'll use the car, such as whether you intend to start a family soon, to narrow down the size and model that's best for you.
Whether it is a new or used model, look into how well it has performed and read any third-party reviews. It's also important to consider the vehicle's safety performance; car reviews can help here.

Choose whether you want a new or used car.

Consider the advantages and disadvantages of purchasing a new or used car based on your budget, needs, and lifestyle. There is no right or wrong answer; it will depend on your individual circumstances.

New cars.

Come with a new vehicle warranty.
Can include features such as improved fuel efficiency and the latest technology.
Are more expensive.
Depreciate in value quickly
May result in higher car insurance premiums.

Used automobiles

It may not come with a warranty.
Require you to check that they are debt-free before buying.
May come with unexpected problems or be more likely to require repairs.
Can still include great features (especially if they're only a few years old).
Are typically less expensive.
Car insurance premiums may be lower.

Purchase from a private seller, dealership, or auction.

Next, decide where you'll buy it. If you want to buy a new car, you'll go straight to a dealership. If you're looking to buy used, you can do so at a car dealership, from a private seller, or at an auction.

Choose whether to buy outright or finance your car.

If you're thinking about buying a car with a loan, consider whether the additional fees and interest are worthwhile. If you buy a car outright, you may need to save up for a while. Financing a car allows you to get it right away, but you will end up paying more in fees and interest. If you need advice on which option is best for you, consider speaking with an independent financial advisor.
Some people prefer to lease a car, particularly if it is used for business purposes. If you finance your car, your monthly payments may be higher than if you leased it, but you will eventually own it. Leasing a car is less expensive, but you're basically renting it.

Take a test drive.

Before purchasing a vehicle, take it for a test drive to ensure you are completely satisfied. A test drive allows you to see how the car performs on the road and evaluate its condition. This can help you decide if it's the right fit for you.

Shop around and don't be afraid of negotiating.

Many first-time car buyers fall into the trap of accepting the first offer without looking around. Look around to see if there is a better deal out there. If you understand the market value, you may be able to use that information to negotiate.

Check out your car insurance options.

If you're thinking about buying a new car, it's important to understand your car insurance options. Bingle can help! With our Third Party Property Damage Car Insurance, you are protected against accidental damage to another person's vehicle or property caused by the use of your car. With our Comprehensive Car Insurance, you're protected against accidental damage to someone else's vehicle or property caused by the use of your vehicle, as well as accidental loss or damage to your car, including damage caused by collisions, theft, and natural disasters.
Compare Bingle's car insurance options and request a quote to determine how much your coverage would cost. You might also want to read our Car Insurance for P Platers article.