Buying a car: A first time buyer’s guide to getting new wheels

That exciting moment has arrived - you're ready to buy your first car. While the prospect of hitting the road in your own vehicle is thrilling, the path to car ownership involves more than just picking out your dream ride.

For first-time buyers, the array of costs and considerations can feel overwhelming. From upfront expenses to ongoing payments, there's quite a bit to wrap your head around. Don't worry though, we're here to break down everything you need to know about getting your first set of wheels.

Whether you're planning to use your savings or thinking about a car loan, understanding the initial costs is crucial. The purchase price (also called the list price or sticker price) is just the beginning of your car-buying journey.

When shopping for your first car, you'll need to decide between a new car and a used car. While new cars come with the latest features and full warranty coverage, used cars typically offer better value since they've already experienced their steepest depreciation. 

Here are some top costs to learn about first:

• Drive-away price -  This is different from the listed price you might see advertised, as it includes all the necessary costs to legally get your car on the road. Here are some crucial upfront expenses to consider:

• Dealer delivery fee - If you're buying from a dealership, this fee covers the preparation and delivery of your vehicle. It's often not included in the advertised price, so be sure to ask about it.

• Vehicle inspection & car history report - For used cars, these are essential pre-purchase checks. While they add to your initial costs, they could save you thousands in the long run. Get a qualified mechanic to inspect the vehicle, and obtain a report from the Personal Property Securities Registry (PPSR) to check for any financial obligations, past accidents, or other red flags.

• Stamp duty - This government fee varies by state and is calculated based on your car's purchase price. Some states offer exemptions for electric vehicles, so it's worth checking if you're considering going green.

• Car loan costs - If you're financing your purchase, you'll likely encounter application fees and other loan-related charges. These can vary significantly between lenders, so it's worth shopping around. Green car loans often come with lower interest rates and reduced fees.

Once you've got your car, there are regular costs you'll need to budget for. 

Let's look at the main ongoing expenses:

Registration

Your annual registration is a non-negotiable cost of keeping your car legally on the road. Requirements and costs vary by state, with some including Compulsory Third Party (CTP) insurance in the registration fee, while others require separate CTP coverage.

For used cars, you might need to get a safety inspection (like an e-Safety check or pink slip) before registration. If you're buying a used car with the remaining registration, you'll only need to pay once the current registration expires.

Car insurance

While CTP insurance is mandatory and covers injury or death to others in accidents, it doesn't protect your car or property damage. 

Consider these additional insurance options:

Third party property insurance covers damage you cause to other people's property but doesn't cover your own vehicle. It's a more affordable option than comprehensive coverage.

Comprehensive car insurance offers the highest level of protection, covering both your car and damage to other people's property. While it's more expensive, it provides peace of mind, especially for newer vehicles.

Pro tip: Look for insurance discounts through multi-policy bundles, online quotes, restricted driver options, or fuel efficiency benefits. Adding roadside assistance might increase your premium slightly but can be invaluable if you break down.

Car loan repayments

If you've financed your car, you'll need to factor in regular loan repayments. Most lenders offer flexible payment schedules - weekly, fortnightly, or monthly. Consider choosing a loan that allows extra repayments without penalties, as this can help you save on interest and pay off your car sooner.

Beyond the major expenses, there are numerous day-to-day and occasional costs to consider. These include fuel, toll charges, regular servicing, tire replacements, and unexpected repairs. 

Build some buffer into your budget for these variable expenses to avoid financial stress down the track.

Smart ways to manage these costs include:

• Using fuel comparison apps to find the best petrol prices
• Planning your routes to minimise toll roads where practical
• Keeping up with regular maintenance to prevent major repairs
• Building an emergency fund for unexpected car expenses.

By understanding and planning for all these costs upfront, you'll be better prepared for the realities of car ownership. Remember, the key to successful first-time car buying is doing your research and making sure all expenses fit comfortably within your budget.

Find out more about the costs involved with buying a car, or applying for a car loan. If you are looking for a loan, check in with Mozo's best car loans.