Getting your first set of wheels is pretty exciting. However, it’s not as simple as buying the first car you see. You need to consider what you’ll be using it for, how to protect your vehicle, and what you can actually afford. So before you make the big purchase, here’s what you need to keep in mind.
Step 1. Match your car to your lifestyle
Whether you’re buying new or second hand, living in the city or out in the bush, it’s important to buy a car that’s right for you. Sure, it can be tempting to fork out and buy your ‘dream car’, but this can be an impractical and expensive approach.
Let’s start with your budget. Before making a list of all your favourite models, it can be easier (and more realistic) to start with what you can actually afford. You need to consider expenses such as the down payment, fortnightly or monthly loan repayments, cost of insurance and maintenance.
You don’t want to buy a really cheap car that will cost you more than its worth to maintain. By the same token, you don’t want to buy a car that leaves you scrambling each month to pay it off. So to avoid breaking the bank, make sure you’re across your finances.
The other thing to consider here is what you’ll use the car for, which should go hand in hand with your budget. If you live in the suburbs, but enjoy getting off the beaten track on the weekends, a 4WD or an AWD could be your best option. If you spend most of your time zipping around a crowded city, then a smaller hatchback might fit the bill.
To help narrow down your options, consider other factors like the safety features of the car, and what engine and power requirements you need. Ultimately, buying a car that’s practical can be less stressful in the long run, and save you a lot of money.
Step 2. Select car insurance that works for you
An important part of buying your first car is getting properly covered. Compulsory Third Party insurance (CTP) is required by law, but there are optional covers that are worth considering to secure your vehicle. Consider the options available to you while also keeping your lifestyle in mind to ensure your insurance is serving your needs.
If you meet with an accident damaging a third party’s property will you be able to cover the costs? Will your car be left in an area where it can be stolen? If your car is damaged by fire, hail or floodwater can you afford to have it repaired so it won’t impede your lifestyle?
These are the questions you need to ask yourself before settling on insurance. If you drive often for your job or to pursue personal interests a comprehensive insurance policy will most likely be your best option to cover yourself.
But what if you don’t drive that much? Insurance can be expensive, and paying more than you should can put a strain on the finances. That’s why it’s worth considering the Pay As You Drive option.
You get all the benefits of comprehensive car insurance, but you only pay for what you plan to use. It’s becoming a more popular way to approach insurance. In fact, Pay As You Drive Car Insurance has grown to 50% share of new policies in FY16/17 from 43% FY15/16.
Step 3. Ongoing costs for looking after your first car
Once you’ve calculated how much you can spend and have found the car you want, it’s important to know what the ongoing costs are. The basics here include registration, insurance, and maintenance costs.
To legally drive your car, it needs to be registered. Registration needs to be paid every year, and the cost will depend on your car’s market value and where you live. As mentioned earlier, you’ll need to keep your car insured. While Pay As Your Drive is a great option, there are different types of insurance that cover different things.
At a very minimum, you’ll need to have compulsory third party insurance. Among other factors, the costs of insurance depend on your age, driving record, where you live, and whether you owe money on it.
Repairs and maintenance also play a major role in ongoing costs. Whether your engine needs fixing or you’re due for an annual check up, it’s important to factor these costs in. If you didn’t buy your car out-and-out, the other major ongoing cost is loan repayments. The amount for these will depend on how much money you borrow and the type of car loan you take out.