Cars mean freedom, right? Whether you have a shiny new drivers licence and are itching to get your first set of wheels, you’re wanting to upgrade your current car, or a recent accident or breakdown has meant you need a new vehicle, there is plenty to think about when you start car shopping. Sometimes, all the decisions can be a little overwhelming, so although we can’t help you pick the colour, we can certainly help when it comes to budgeting, test drives and car finance. Read on to make a confident car purchase today!
Do your car research first
A car purchase can be a very emotional purchase. People are often tempted by impractical cars, based on their ‘wants’ rather than ‘needs’. Take some time early on to work out what you can afford and what your top priorities are. At the end of the day, a car needs to suit your lifestyle – a gas guzzling SUV may not be the best option for your inner city living situation, and the sporty two seater might not be the best option for someone that loves roadies with mates.
Other factors for consideration are petrol consumption, the number of doors and seats, safety features, kilometres travelled and emissions. You can confirm safety and fuel ratings for cars you’re considering at the click of your mouse.
Car reviews from other car owners are also a great source of honest information – better to know in advance that engine noise is an issue, or those back seats don’t fit teenagers, let alone full size adults. Here are some reputable sites for checking out consumer reviews:
Once you’re super clear on what you ‘need’, it’s time to draw up a shortlist of options that meet your criteria.
Understanding your budget
Unlike some other large purchases, it’s important to understand that cars are not investments. Few vehicles hold their value, so when you purchase a vehicle, it is unlikely that you will recoup your investment unless you’re selling it very soon after purchase. It’s also a large purchase. For many people, their car is one of their largest assets after their family home.
It’s an important asset too. Cars enable people to conduct essential travel – to work, get their children to school, purchase essential goods and so on. They are also a way to connect with family and friends, allowing you the freedom to socialise and support others you care about.
The most important thing to consider is that a car purchase is usually a large upfront cost, but also has many ongoing costs too – fuel, parking, insurance, licensing and maintenance, to name a few!
Buying a car privately or buying from a car dealer?
When buying a second-hand car, there are generally two ways you can go – purchase privately from another car owner, or purchase through a car dealer.
Private car purchase
People buying privately often do so as they feel they can get a better ‘deal’. It’s helpful to keep in mind that these vehicles don’t have to have current WOF’s and registration, and you’re relying on the current owner to provide information about the vehicle’s history. You are also relying on them fronting up about any finance that might be owed on the vehicle.
Private sales don’t need to comply with various consumer protection laws such as the Consumer Guarantees Act or the Fair Trading Act. People with a sound mechanical knowledge or who are well researched can often get around these issues, for the sake of a good buy. Learn more about how to protect yourself from private sellers.
If you do elect to buy privately, it’s still important to understand the sensible pre-purchase checks to make. Helpful considerations when purchasing vehicles privately are readily available.
Dealership car purchase
Some people opt to buy from a car dealer for the additional protection they afford in the purchase process. Car dealers can be found online or can be auction houses and physical car yards. Some dealers may also belong to the Motor Trade Association, which may give you an additional level of comfort that your dealer is complying with their legal obligations.
People are generally concerned about having issues with their vehicle soon after purchase, which is why they seek the security of a car dealer who abides by consumer protection laws. It’s worth noting that car dealers do have to provide a Consumer Information Notice which details items including vehicle history, odometer reading and any finance payments owing on the car. Not all dealers are the same though, so in order to seek a reputable dealer, check with friends and family for recommendations and read up on online reviews on how other customers have found their service. It may pay to ensure your chosen car dealer is registered on the Motor Vehicles Trading Register.
Car finance options
There are a number of ways to finance your new purchase. If you purchase through a car dealer, they can support you with car finance, but you’re likely able to access more competitive interest rates if you apply for a car loan. You can apply for car loans through your bank, or personal finance companies such as Nectar.
Often, interest rates and your ongoing repayments can be the make or break factor of your purchase decision, so do your research on competitive car loan interest rates. With a Nectar car loan, you can apply online and instantly see your interest rate and repayment options. Nectar offers same day approvals and no hidden fees or charges either.
Weighing up your repayments against purchasing a slightly newer, more reliable vehicle can save your bank balance from high maintenance costs. Purchasing an older or higher mileage car may cost you more in the long run.
Working out upfront costs and ongoing car ownership costs
There are two types of costs when it comes to buying a car. The initial purchase price is your upfront cost. In addition to this, there are costs you’ll incur over time – the ongoing costs. These types of costs include petrol, car insurance, WOF, registration, and any maintenance costs. If you have car finance (dealer finance or a car loan), you will also have regular car repayments.
Many of your ongoing costs will be annual expenses, such as insurance, registration, road user charges for diesel vehicles and WOF. These are expenses you can expect to pay each year. To cover yourself for breakdowns and other emergencies, you may also want to invest in an annual AA membership.
There are also a number of ongoing costs that are variable. Petrol or fuel will depend on the distance you’re driving and the type of driving you do. Parking costs will depend if you’re parking in the inner city or outer suburbs, and how frequently. Maintenance and repairs may be quite minor, or could be significant – make sure you have some money set aside for these.
Test drives are important!
You may love the look of your chosen vehicle online, but it might not drive the way you expect it to. It’s really important to make sure you do a test drive to get a feel for the car and make sure you feel confident driving it. There are some good things to keep in mind while you take it for a test drive:
- Can you adjust the driver’s seat easily?
- Can you reach the pedals?
- Can you move the steering wheel into a comfortable position?
- Do you have good visibility – of all mirrors and out all windows?
- Are the seats comfortable and have enough legroom?
- Is there enough boot space for the things you need to drive around (think sports equipment, pets and baby buggies)?
- Is there room and safety fittings for a child’s car seat?
- Is acceleration, deceleration and braking smooth?
- Do you like the way it feels when you drive?
- Practice parking
- Check all seatbelts.
If you think it needs a mechanical check, you can get this done at a reputable provider such as VTNZ.
Negotiating on price
The negotiating part of buying a car can be daunting for many people. What’s a fair price? What’s a good deal? To get around these fears, it’s important to keep a few things top of mind, when finalising your car purchase:
- Do your research – a quick check online can make sure that the listing price is fair for the model, year and odometer reading of your chosen vehicle.
- Consider your timing – time of the year can be a factor for private sellers and dealers. End of month, financial quarter and year end are key for dealers as they try and meet their sales targets. For private sellers, making a sale before Christmas might make them open to lower offers, so they don’t need to worry about the sale of the summer holiday period. Time of the week can also be key for dealers – think about a mid week visit rather than trying to negotiate on a busy weekend.
- Organise your finance in advance – money in the bank ready to go into your negotiation is preferred, as is pre-approved finance for your car loan if this is the way you’re purchasing your vehicle. Sometimes, navigating car dealer finance can delay the sale for you.
- Negotiation attitude – some people are better at negotiating than others. At the end of the day it’s a game, and you need to stay true to the price you can afford to pay. Experienced friends and family can often support you through this process too, if you find it too intimidating.
Remember that once you have signed the legal purchase agreement, you are committed to the purchase, so it’s worth putting in the time and effort to land on a price you’re happy with.
The NZ Automobile Association has some great tips for first time negotiators:
“If you can’t reach an agreed price, shake the salesperson’s hand and give them your phone number. Tell them to give you a call during the week if things change and explain that you’ll be searching elsewhere in the meantime. This in itself can sometimes achieve a breakthrough before you’ve had a chance to walk out the door, or you may even receive a call later that week.”
Don’t forget the paperwork!
In the excitement of your car purchase, don’t forget to complete all the necessary paperwork – purchase agreements, change of ownership and insurance cover are key. The paperwork can be slightly different depending on whether you’ve purchased from a dealer or privately.
Dealer sales are bound by purchase agreements, so be careful to ensure everything is in place here. You’ll want to check that the purchase details are correct, and be wary of leaving cash deposits to secure a sale, as they may not be refundable. Do your homework on dealer extended warranties and breakdown insurance too, as they are often not necessary.
The priority when completing a private car sale is to lodge the change of ownership paperwork promptly. Remember, this documentation needs to be completed by both the buyer and seller, is less than $10 to action and can be done simply online. The paperwork must be completed within seven days of purchase – the previous owner does not want to be landed with your speeding tickets or parking fines!
How can Nectar help?
There is a lot to think about, but the financing of your vehicle doesn’t need to be difficult. Check out Nectar’s handy loan calculator to see how much you could borrow. Keen to apply for a personal loan to finance your car purchase? Get started with Nectar for an instant quote. Borrow better, faster and realise your car ownership dreams today!
*Nectar’s lending criteria and responsible lending checks apply.