Buying A Car: A Step-By-Step Guide

Buying a car is a huge financial commitment. So, it’s essential to choose a vehicle that suits your lifestyle and budget. However, the endless options for models and features can make it hard to know which one is right for you.

Our step-by-step guide below will provide you with tips for buying your next car and getting the best value for your money.

On this page:

• What car should I buy?
• What should I look for?
• Where should I buy a car?
• Do I need insurance?
• Consider getting pre-approved financing

Originally published in June 2021.

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What car should I buy?

Congratulations—you’ve decided to buy a car! But what now? Well, the first thing to consider is figuring out a budget and then deciding which models are affordable within this budget.

Budgeting

Your budget is the total amount of money you’re willing to spend on a car. If your budget is relatively low, it could be beneficial to consider buying a second-hand or demonstrator model. If your budget is higher, then you can be more flexible with what you want out of your car. Remember to factor in registration costs, car insurance, and other upfront costs associated with buying a car, as well as the various ongoing costs like maintenance and fuel.

Read our article on the average costs of owning a car for an in-depth breakdown on just how much a car can truly cost.

Car financing

If you don’t have the money to buy a car outright, you might want to consider applying for a car loan. These loans can be used to buy either a new or second-hand car. Before you apply, research the loan terms on offer and decide whether a fixed or variable interest rate suits your financial situation better.

Before placing an offer on a car, make sure your financing has pre-approval from the lender. This will ensure you avoid a delay in securing the car you want.

Comparing models

Your budget will determine your financial flexibility when choosing a car model. If your budget is high, you may want to look at luxury brands like Mercedes Benz and Porsche. These models generally have higher levels of comfort and safety along with the latest technology.

A lower budget means looking at cheaper yet more reliable brands, like Mazda and Toyota. While these cars won’t have the same level of sleekness as luxury brands, they’re generally much more affordable with fuel and will safely get you from A to B.

New, demonstrator, or second-hand model

Once you’ve decided on a budget, you should figure out if you want a new car or are happy with a second-hand model. Choosing a second-hand car can save you thousands of dollars, and you might be able to find a more luxurious model at a cheaper price. Alternatively, you may want to consider a demonstrator model. These cars are technically still new but have been lightly used by dealerships for test drives and other purposes. They tend to have a very low odometer reading and are cheaper than brand-new models. 

This can be a smart way to get a more luxurious car at a good price. However, keep in mind that demonstrator model prices vary significantly depending on the brand and dealership.

What should I look for?

Understanding what you want from your car is a great way to start planning your purchase. Consider which features are non-negotiable and which ones you could live without.

For example, you might want to use your car for family camping trips on school holidays. For this, you’ll need a vehicle with plenty of storage space and roof racks.

The following are common features that people look for when buying a car:

Seat numbers

If you’ve got a bigger family, you’ll want a car with more than five seats. In that case, you should look towards an SUV or a people-mover van. Even five-seater sedans and hatchbacks can sometimes be a tight squeeze with a full car.

If you’re buying a car for pleasure, such as a sports car, you should consider whether the two-seater layout is better for you.

Fuel efficiency

Smaller hatchbacks are usually cheaper to refuel and have a higher fuel efficiency rate. Larger cars, like four-wheel drives and utes (also sports cars), can chew through fuel at a much quicker rate. Also, with the surge in popularity of hybrid and electric cars, this could be a factor in your upgrade if fuel prices are a big factor.

Where the car will be used

If you do a lot of off-roading, consider a larger four-wheel or all-wheel drive car. On the other hand, a smaller hatchback or sedan would be suited to someone commuting to work in inner-city traffic.

Technology

Most new cars come with impressive technology, such as Bluetooth, reverse cameras, and dashboard screens. However, some technological features may increase the cost of the car.

If you buy a second-hand car, you may not have a high-tech vehicle. As such, you may need to fork out extra money to install a reverse camera or Bluetooth device if you want one.

Roadside assistance and other features

If you’re buying a new car, benefits like roadside assistance could be included for a certain time. These incentives can save you hundreds of dollars yearly compared to buying from a third-party company.

To make sure you get the best deal, you should thoroughly research the model you want before committing. This includes understanding the built-in features and those that cost extra. This will ensure you aren’t taken for a ride and end up paying more than you wanted to.

Inspecting a second-hand car

As second-hand cars have had previous owners, it’s essential to do a thorough inspection. You can get a professional inspection done by a reputable mechanic or your state’s motoring club (like the RACQ or RACV). This ensures that the car is mechanically sound and has no defects.

You should also buy a second-hand vehicle report before buying the car. This can be done through the Personal Property Securities Register (PPSR) for a minimal fee. This check is super important as it tells you whether the current owner still owes money on the car. 

If they do, and they don’t pay it off before you buy, you may end up having the car repossessed by the lender if they default on their loan. This car history check also provides the stolen status, and any write-off history.

Additionally, you can also do your own physical inspection of the vehicle. This includes checking:

• If there’s any hail or accident damage;
• Interior lights and exterior brake lights are working properly;
• The air conditioning and other components are working correctly;
• Whether the tyres need replacing soon;
• There are no cracks or chips in the window glass or mirrors.

If you take a second-hand car for a test drive, you should also check that the gears, pedals, and engine are working properly. This includes checking for unusual engine noises and making sure the speedometer is in working condition.

Where should I buy a car?

New cars

If you’re buying a new car, you’ll most likely do this through a car dealership. If there’s a specific brand you have in mind, it can be a good idea to visit your local dealer and test-drive some of their models.

There are lots of tips and tricks to remember when car shopping. These include:

• Buying at the end of the month or financial year (car salesmen are more likely to throw in free extras or cut down costs at this time to meet sales deadlines);
• Researching all details of your desired model;
• Test driving multiple models to see which you like;
• Being aware of unwanted extras and costs;
• Checking the model’s fuel consumption.

Second-hand cars

If you choose to buy a second-hand car, there are many places you can buy from. The most common places are outlined below:

Car sale websites	There are plenty of websites you can browse to find your next car, and many that help compare which sites are most reliable. Some popular car sites in Australia are CarSales and Car City.  These websites let you search cars by year, model, colour, odometer reading, price, and location. They also allow users to instant message sellers, and rganise inspections and price negotiations rather than having to go through the website.
Car yards	Car yards give you the freedom to inspect the cars on offer physically. This offers convenience for people, especially those on a tighter budget. Car yards are also known for lowering their prices if you negotiate a cheaper deal.
Car auctions	Car auctions are held both online and in person. The cars offered at these auctions are usually significantly cheaper than other second-hand cars for sale. This is because they will most likely have some damage, whether it be normal wear and tear or minor scratches and dents. Apart from this, though, the cars are usually in good mechanical condition.

Do I need insurance?

Car insurance is arguably one of the most important insurance policies you can get. For the cost of a few hundred to a few thousand dollars a year, comprehensive car insurance is designed to protect you financially in the event that your car is damaged, destroyed or out of action for a while.

Car insurance also isn’t just a ‘nice to have’. If you’re applying for a car loan with Jacaranda Finance, or indeed most other lenders, then chances are you‘ll need a comprehensive car insurance policy. Otherwise, your application may be rejected, as a comprehensive car insurance policy is the only way the loan balance can be recovered if the car is written off.

Make sure you compare your options online to find an affordable insurance policy that suits your needs. Read our article on why you need car insurance to learn more about how it works.

Consider getting pre-approved financing

If you’re borrowing money to buy your car, it’s highly recommended that you get pre-approval from a reputable lender before you actually start shopping for a car.

Pre-approval means a lender will look at your application and conditionally approve you for a loan up to a certain amount. At Jacaranda Finance, we make it possible to receive pre-approval on the same day you apply for your car loan². By applying in just a few minutes¹, we could conditionally approve you for a certain amount, giving you the confidence to go out and buy the right car for you without wasting time.

You can even check if you qualify for a loan beforehand without impacting your credit score at all!