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

woman driving her first car bought with car loan

Once you’ve made the decision to get your first car, all you want to do is hit the road.

Buying a car comes with a whole host of fees that might be unexpected for a first time buyer. These can include:

  • Purchase price
  • Delivery fee
  • Vehicle inspection
  • Stamp duty
  • Car loan application fee 

If all of that seems a bit daunting, we get it. That’s why we’re here to break it down and make those expenses easier to understand.

Upfront car costs: What you can expect to pay

Whether you’ve set aside your savings to purchase a car, or need the help of a car loan, the costs can be confusing.

The big cost that you’ll be anticipating is the purchase price (which you may also see referred to as the list price or sticker price). This will vary, depending on whether you’re looking at a new car or a used vehicle. While second-hand cars may cost less on initial purchase, they may cost more to service and have a shorter lifespan. That said, second-hand cars don’t carry waiting periods and are currently in high demand, so they’re much more costly than they once were.

If you’re buying a car from the dealership, the listed price could be inclusive or exclusive of things called “on-road costs”. These are the expenses you will need to pay on top of a list price in order to get on the road. What you want to know about is something called the “drive-away price”. That’s the base price, plus all the costs needed to let you do what it says: drive away!

Some of the other costs that might not be included are:

  • Dealer delivery fee - If you buy a car from a dealership and choose to get it delivered, it’s likely you’ll be charged a dealer delivery fee - usually not included in the sticker price.
  • Vehicle inspection & car history report - If you’re buying a used car, it’s a smart idea to get a vehicle inspection and a copy of the car’s history report before you make the purchase. While these both come at an extra cost, they allow you to get a full idea of how well the car runs. For vehicle inspections, get in touch with your local mechanic or your likely car insurer. To find a car’s history report, head to the Personal Property Securities Registry (PPSR). Here you’ll find out things like if the previous owner still owes money on the car, its approximate worth, the odometer reading, write-off history and if it has ever been stolen.

Used car tip: If the car history report or vehicle inspection come back with any red flags, be prepared to walk away. Buying a dodgy car isn’t worth it and can cost you a lot in the long run.

  • Stamp duty - This is a one-off cost you pay to the government when you purchase a car. Stamp duty costs differ from state to state and are calculated in relation to the purchase price of the vehicle you are buying. There may be some exemptions in certain states for electric vehicles (like in NSW).
  • Car loan application fee - Saving up for a car can be tough, but car loans can help to alleviate that stress. Make sure to compare car loans to find the best option for you. Depending on the car loan you apply for, you can pay a wide range of fees and interest rates - green cars often have the lowest interest rates, application fees can range from no money to several hundred dollars. We'll talk more about paying back your car loan below.
features to look for in a car loan

Ongoing car costs: What you'll pay regularly

Along with those initial costs, a car can be a pretty expensive purchase to keep up with. Make sure you’re aware of the payments that continue with your car ownership, which can include:

  • Rego payments
  • Car insurance
  • Car loan repayments

Depending on what sort of bill you are paying, these could come around annually, monthly, fortnightly or even weekly. That means it’s important to incorporate these costs into your regular budget. Let’s break down some of those costs a little more:

Registration

Car registration (or “rego”, the more Australian phrasing) is a cost that you need to account for once a year. This is the cost of your car being legally on the road.

The requirements differ from state to state. For example, some states include things like compulsory third party insurance (CTP) in the price of rego, while others like NSW, require drivers to take out a separate policy - we’ll go into more detail on CTP below.There are some other things to consider if you are registering a used car. You may be required to conduct a safety check, such as an e-Safety check or a pink slip. This can be done at a certified mechanic and is an additional charge on top of registration. 

Alternatively, you may buy a second-hand car with some rego remaining, in which case you only need to pay registration once the remaining rego runs out.

Car insurance 

We’ve briefly mentioned CTP, as it is compulsory and covers your legal liability for any injury or death you have caused to others, but to protect yourself and your vehicle you may want to look into further car insurance. You may also want to consider pay-as-you-drive car insurance if you are an infrequent driver, which could work out cheaper.

Here’s a rundown of the different types of car insurance:

  • Compulsory Third Party (CTP) - CTP is, as the name suggests, compulsory. It covers you for legal liability for injury and death for which you are responsible when driving a vehicle. In some states, CTP is included in the cost of a vehicle’s registration. Others will require you to buy it separately. Most providers offer similar pricing for CTP insurance, so pick an option with a reputation you trust.
  • Third party property car insurance - This is an optional level of car insurance that’s cheaper than comprehensive car insurance but still provides some extra protection. It covers you for at-fault accidents where another driver’s property has been damaged but does not cover your car for an at-fault accident.
  • Comprehensive car insurance - This is the highest level of car insurance, and covers you for damage to your own car as well as accidental damage to other people’s property.

When it comes to making a claim on your insurance, issues can arise if you haven't provided truthful information when buying your policy. It’s crucial to be honest when building your quote as this will make the claims process a lot quicker and easier. 

There are also plenty of ways to snag a discount on your car insurance policy. These include multi-policy discounts, online discounts, restricted driver discounts, family discounts, loyalty discounts and fuel efficiency discounts. It could be worth your while to explore the options and see what you are eligible for. 

It may also be worth opting into roadside assistance. While it does add an extra cost to your policy, it means that professional help is only a call away if you ever find yourself in a sticky situation.

Car loan repayments

If you used a loan to pay for your car, that’s going to come into play! You’ll have to pay off your car loan, so make sure that you budget for a loan that suits your lifestyle.

Like your insurance payments, you can often choose a monthly, fortnightly or weekly repayment schedule on your car loan. To find out how much you’d be paying in regular repayments, take a look at our car loan repayment calculator

Car loan repayment tip: Consider taking out a loan that allows you to make extra repayments on top of your regular ones. That way you may be able to pay down your loan sooner - and with less interest!

Don’t forget these other car costs!

The truth is there are plenty of other things you need to pay now and again when it comes to your car. These include:

  • Petrol 
  • Tolls 
  • Fines 
  • Servicing and maintenance 
  • New tyres
  • Parts and repairs  
  • Modifications

While things like the sticker price of a car, loan repayments, registration and car insurance can all come with solid price tags, there are also other smaller costs that can add up over time.

Things like petrol, tolls, fines, servicing and repairs are all expenses that come straight out of your pocket. It’s important to incorporate these costs into your daily, weekly or monthly budget so you aren’t left in the dust.

Check out these handy tips to keep costs down:

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.

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Polly Fleeting
Polly Fleeting
Money writer

Polly is a personal finance writer specialising in loans and credit cards and general consumer banking. She has a degree in Journalism from the University of Technology, Sydney.

Sara Borman
Sara Borman
Money writer

Sara has a Communications degree and has contributed to academic and literary publications in the US and Australia. She aims to bring an accessible point of view to credit cards and loans for Mozo readers.

* WARNING: The Comparison Rate combines the lender's interest rate, fees and charges into a single rate to show the true cost of a personal loan. The comparison rates displayed are calculated based on a loan of $30,000 for a term of 5 years or a loan of $10,000 for a term of 3 years as indicated, based on monthly principal and interest repayments, on a secured basis for secured loans and an unsecured basis for unsecured loans. This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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