Checklist: Buying your first car

So you finally got your driver's license and you’re ready to buy your own car. But before you start your journey of being a proud owner of your very own vehicle there are a few things you should tick off first.

Buying your first car 7-step checklist

Let’s start with a basic list and then dive into the details:

• Step 1: Understand your financial situation and what you can afford
  
• Step 2: Decide between a used car or a new car.
  
• Step 3: Compare different car loan options to find one that works best for you.
  
• Step 4: Put in a car loan application 
  
• Step 5: Have your application approved
  
• Step 6: Go to the dealership and get yourself a set of wheels.
  
• Step 7: Go cruising on the open road!
  

Saving up and budgeting

The average cost of getting a new car is about $39,445 ( as per Royal Commision data) excluding any additional fees and costs like insurance. This might not be doable for everyone to buy upfront, that’s why many car buyers choose to take out a car loan.

However, before comparing car loans to finance your vehicle, consider saving up a bit so you can reduce the size of your loan. If you’re someone with bad credit, there is a chance you’ll be asked for an initial deposit for the car loan.

Also consider how much you can afford when it comes to repayments. Buying a Porsche sounds cool, but if the car is more than what you make annually, maybe it is best to put the Porsche on hold until your salary grows. You still want to live comfortably while paying off your car loan. And it’s okay if buying a brand new car isn’t feasible, there are plenty of older models that might be as good as a new car.

Try Mozo’s budgeting calculator to help with the number crunching.

Deciding between old and new

Depending on your budget and your borrowing power, opting for a used vehicle with a lower purchase price might be a good option--especially if you are a first time car buyer. There are a variety of lenders who offer used car loans. 

Let’s look at some pros and cons.

Buying a used car:

• Pro: Tend to have a lower purchase price than a new car model.
  
• Pro: If you buy a used car through a dealership, it is likely that it has been checked and repaired. 
  
• Con: Depending on the age of the car, there is no guarantee it will last you.
  
• Con: Typically what you see is what you get, meaning there are less choices on colours and features.

If buying a used car isn’t for you, then you can still find a new car for a good deal. With hundreds of new car loans available there is likely to be one that suits your budget and needs.

Buying a new car:

• Pro: You have a freedom of choice when it comes to specs, colour, options and the engine.
  
• Pro: Typically comes with a form of manufacturer’s warranty.
  
• Con: New car depreciation can be a killer, as the value of your car rapidly decreases in the first few months after you buy it.
  
• Con: Tend to be more expensive when compared to a used car.

Ongoing costs to consider

Owning a vehicle comes with a couple of ongoing costs, and some will never go away:

• Rego payments
  
• Car insurance
  
• Car loan repayments
  
• Petrol and fuel costs
  
• Maintenance and servicing

It is important to consider all these extra costs in your budget. The last thing you want is to have to sell your vehicle because you find yourself unable to afford the extra costs.

Getting a car loan

When you’re at this stage of your car buying journey, ask yourself what type of loan you want. Here are a few questions to consider:

• How does it compare to other competitors in fees and interest rates?
  
• How much is the application fee?
  
• Can you make extra repayments or pay off your car loan without any fees or penalties?

Once you’ve answered these by using Mozo’s car loan comparison tool, it’s time to gather the documents you need for your lender’s application.

Depending on your lender you might need different things, but usually you’ll need documents such as:

• Bank statements
  
• Tax returns
  
• Statement of your income from your employer
  
• Drivers license
  
• Passport
  
• Medicare card
  
• Monthly expenses including rent and mortgage payments
  
• Amount of credit available to you (re: credit card credit, whether used or not).

If you are still a bit nervous about getting your first car or car loan check out Mozo’s car loan guides.