When it comes to buying a car, it’s vital to analyse the total cost of ownership, rather than focusing on the sticker price alone. That way, you’ll be able to make an informed decision about the best way to proceed.
1. New vs used
An important decision is whether to buy new or used. A new vehicle is likely to be more reliable and fuel-efficient than a used vehicle, but will also have a significantly higher upfront price and will experience significant depreciation in the early years of ownership. Conversely, a used vehicle will be significantly cheaper and less affected by depreciation, but is more likely to incur higher maintenance and fuel costs.
2. Make and model
Another key choice involves the vehicle’s make and model: opting for more features, reliability, safety, comfort and prestige is also likely to mean accepting a higher price. Timing is also important: a vehicle may be discounted if the model is about to be discontinued (perhaps because it’s being replaced by an updated version). Assuming it will still be easy to access spare parts, buying this kind of car might be a smart move.
3. Maintenance
One criteria that often gets overlooked by car buyers is ongoing maintenance costs. Everyone knows that you have to pay for ongoing servicing; but what few people realise is that the cost can vary markedly from manufacturer to manufacturer. That’s because some car makers produce vehicles with more accessible spare parts than others or less-intensive work required. This could be the difference between visiting a standard mechanic or specialist or spending more to replace parts.
4. Insurance
Insurance is another ongoing cost. More expensive cars generally incur higher insurance premiums than less expensive ones. Safer and more reliable cars also tend to be cheaper to insure.
5. Fuel-efficiency
You should also consider the fuel-efficiency of different vehicles, because this can vary significantly from model to model. A less efficient car might cost you hundreds of dollars more per year to run. You can also consider if an electric vehicle or hybrid could work for you.
6. Depreciation
Similarly, for people who buy a new vehicle, the rate of depreciation can vary significantly from model to model. If you believe you might re-sell the car at some point in the future, think ahead to what its resale value would be likely to be in five or 10 years.
7. Car loan
Finally, the way you finance your car purchase will also have a big impact on the total cost of ownership. A broker can compare loans from a range of providers to find a competitive deal that is suited to your situation. Only speaking to one lender or a dealership for finance limits your options and could mean you end up paying more than you need to.
Thinking about buying a car? Your Loan Market broker can compare the market for you and help you get pre-approval for your loan.
