If 2023 is the year you pimp your life with a four-wheel charriot, you've come to the right place.
How to save for a car is no easy feat—there's a lot of base questions you need to answer for yourself. First and foremost, do you actually need a car? If the answer is yes, you can start fleshing out what you need a car for; maybe you're looking for a fresh whip to spin you around the city or maybe you're keen to get out of the big smoke and head off-road in a used 4x4.
The greased lightning possibilities are endless however, once you decide, there are a lot of costs involved when buying a car (new or used).
To help get you started and make saving a little easier, here's everything you need to consider before buying a car.
Holding Deposit
This is usually 10 per cent of the purchase price for new cars or $500-$1000 for used cars.
Mechanical Inspection/Pre-Purchase Inspection
For used cars—ranging from $99 (local mechanic price) up to $349—RACQ/RACV/NRMA for a master check.
Optional Extras
Optional extras like window tinting could set you back between $299-$699 depending on if you use local tint shop or the dealership and spec level of the tint.
Floor mats between $100-200, paint protection around $695, fabric/leather protection around $695, tow bar $995-$1495 and roof racks $695.
Car Insurance
This has a wide range but can be around $500 per year for a driver with a perfect record, no claims bonus and loyalty bonus on a car valued around $30,0000 or up to $3500 per year for drivers under 25 years old with an at fault claim or two in the last 5 years. High value/Luxury cars can be even more.
Roadside Assistance
Some new cars include roadside in the purchase price but if they don’t or if you're buying used roadside assist through RACQ/RACV or NRMA, it can cost between $99-$349 per year depending on your level of cover.
Car Servicing
Some new vehicles come with a capped price servicing that ranges around $250 per service, otherwise expect to pay between $200-$600 per service. European cars and performance vehicles can have much higher cost for parts, brake pads, tyres etc.
Most vehicles need to be serviced every 15,000km and it's highly recommended to service at least once every 12 months. So, for an average vehicle driving 15,000-30,000km per year you can expect to pay for one to two services per year.
You may need a fresh set of tyres every 60,000km (ranges between $1000 to $2500), brake pads and rotors every 60,000km (range between $800 to $2000) and a new battery every three years (between $250 for a normal cranking battery to $550 for an AGM stop/start battery).
Cost Of Financing
At this point of time and taking into consideration interest rate rises, the average interest rate for a new car is 6.99 per cent and 7.99 per cent for a used car.
Bear in mind interest rates can be much higher if the buyer has a low credit score (up to 20 per cent interest) or if they don’t shop around.
Always check rate offers online before signing anything and remember rates can be misleading depending on set up fees/loan structure. It's important to compare the total amount repayable not just the rate.
Online lenders are usually cheaper than big banks and often cheaper than dealership finance.
Finance establishment fees are usually in the range of $250-$500 for the lenders establishment fee, PPSR registration fee etc. If you finance through a finance broker they will also charge a brokerage fee which is usually in the range of $550-$990 on top of the lender establishment fees.
If you finance through the dealership they will usually charge an origination fee which is much the same as a brokerage fee and will also be in the range of $550-$990. This brokerage or origination fee is usually added to the loan amount and it is essentially an upfront commission for the broker or dealership which is paid by the customer. Loan fees can reach up to $1500 if financed through the dealership or a finance broker inclusive of their brokerage/origination fee and the lenders establishment fees. These are all added to the customers loan amount. Lenders will usually also charge a monthly account keeping fee in the range of $5-15 per month depending on the lender. Add this to your monthly payments.
Keep in mind, a $30,000 vehicle on a five year loan at 7 per cent interest can range from $610-$632 per month depending on the set up costs with the total repayment ranging between $36,600-$37920.
Delivery Or Transport Costs (Interstate Purchases)
From places like Brisbane to Sydney or Sydney to Melbourne, you're looking at around $880 but transport costs can be much higher depending on the destination ie. between east coast cities and WA or to or from somewhere like Cairns.
Registration Costs
Often included in drive away pricing but depending on your state is $450-$550 for 6 months or $800-$950 for 12 months for a standard four cylinder vehicle. Expect to pay more for six and eight cylinder vehicles.
Stamp Duty
Often included in drive away pricing but if you buy used or privately expect to pay (depending on your state) two per cent of the purchase price for hybrid vehicles, three per cent for four cylinder vehicles and up to four per cent for eight cylinder vehicles eg. a four cylinder Toyota Corolla purchase price at $30,000 at three per cent stamp duty will set you back $900.
Roadworthy Certificate/Blue Slip
In some states this is included with any used vehicle purchase but in other states or in some private sales this is the responsibility of the buyer and can cost between $80-$200 for the inspection and more if any repairs need to be completed.
Kurt Bennett is the General Manager of Long Term Car Rental which was founded by Koala Cars.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.
Need to get a jump on saving? Here's all the easy budgeting tips that actually work.
Image credit: Urban List