If you’ve decided to buy a used car but haven’t chosen a specific vehicle yet, there are still some important decisions to make. In this article, we’ll help guide you through them by looking at four key factors:
- Budget
- Make and model selection
- Vehicle evaluation
- Finance
Budget
Before purchasing a vehicle, it is important to assess your budget and determine how much you can realistically afford. When considering finance, you need to look at the interest rate (including additional fees such as all administration fees) and the length of the repayment period. A lower interest rate is obviously better as it reduces borrowing costs, but so is a shorter loan term as it means less interest paid over the life of a loan, that is not always possible. Of all the money you repay a lender, you want as much as possible to be for the loan itself and not the interest accrued. However, it is important to choose a repayment period that fits comfortably within your monthly budget.
You also need to take into account all the other costs associated with owning your intended vehicle: regular servicing and maintenance (including the potential for serious failures), the insurance needed to cover the vehicle and other operating costs. Of course, this is a tricky one because you won’t know what kind of car you can afford until you have finished this calculation. So, start with a rough estimate.
Be conservative when drawing up your budget. Unexpected expenses can come up when you least expect them so it’s important to leave some room financially.
Also consider additional costs that can impact your affordability, including:
- Fuel costs and consumptions
- Licensing and registration fees
- Tyres and general wear-and-tear and out of warranty expenses (which can vary depending on the vehicle)
- Roadworthy certification
Choosing make and model
Think of what you can afford and what you might need in terms of size, interior space, features, and fuel economy. Then, draw up a shortlist of suitable options for cars.
Do your homework
Once you have your shortlist, familiarise yourself with the cars and their reputations. Read reviews and look at reputable sites to get an idea of average prices of the models you are interested in. It also helps to search forums to see if there are any common problems with these vehicles.
As you move from research to actually viewing vehicles, it’s important to stay cautious. Always verify the seller before proceeding and avoid paying any deposits before seeing the car in person. Be wary of deals that seem too good to be true.
Research maintenance
Learn the price of commonly replaced parts as well as what a typical service will cost if the car is no longer under a service or maintenance plan. Also consider your location and whether you have easy access to a service centre or at least a place where you can get parts.
Finance
A common option is to fund the purchase through vehicle finance. Fortunately, , there are options available to buyers, although your access to these depends on a few factors:
- The age of the vehicle
- Whether you are buying from a dealer or a private seller
- Your credit score
Car loan
A car loan is a good option for someone buying a car from a dealer. However, many lenders impose age limits on cars financed through vehicle finance. As with any loan, a deposit will significantly reduce the cost of a car loan.
Some banks will also give loans to people who want to buy a vehicle from a private seller, but these types of loans are typically harder to qualify for and usually involve higher interest rates. If you find yourself needing a loan for a privately owned vehicle, you might want to consider the next type of loan.
Personal loan
If you decide to buy an older car from a dealer, your only option will be to apply for a personal loan and then pay cash. The same goes if you decide to buy a privately owned vehicle that doesn’t qualify for the kind of loan described above.
A personal loan usually has a higher interest rate because it is unsecured, which means there is more risk for the lender.
Buying a used car requires careful planning, but with the right research and financial discipline, you can find a reliable vehicle that fits your needs and budget. Take your time, compare options, and don’t rush into a deal. Making the right choice now can save you significant costs in the long run.