Warning: the following piece of (factual) information may cause an upset stomach or, in some cases, projectile vomiting.
If Jeff Bezos purchased 21,739 2019 Bugatti Chiron Sports (at $4.6 mill a piece), he would still have $100 billion. Jokes aside, that kinda does make you a bit sick to your stomach, doesn’t it?
Anyway, we don’t all have a net worth of $200 billion, and as such don’t have the luxury of buying whatever car we want, whenever we want it. If you’ve been thinking about buying a new (or new-to-you) car, here are some considerations to think about before taking the plunge.
Outright or financed?
Using money from your savings to buy a car (outright) can be beneficial in that you won’t have to pay any interest at all, and there are no monthly repayments to think about either. But before you choose to buy your new car outright, the key question is whether it will affect your cash flow substantially. If you have to clear out your entire savings account to buy it, you have nothing left in case the s#*t hits the fan in a few months’ time and you need some cash for the clean-up.
Financing a car comes in many different forms; leasing and novated leasing, personal (unsecure) loans, car (secured) loans, chattel mortgages… there are certainly a few ways to go. With interest rates as low as they are right now, financing seems to be the favoured option with Aussies currently, and if you’re thinking of going the same route we reckon it’s not a bad idea (especially when you go through the champs at Stratton Finance).
When you go with financing, you keep some coin in the bank just in case there’s a SNAFU at some stage and you need emergency dosh. Plus, one single payment per month means budgeting is nice and straightforward.
What’s your budget?
You need to be completely realistic when it comes to determining how much you actually can afford when you’re buying a new car. Assuming you’re like the majority of other Australians and are planning to finance, it’s important to first work out your disposable income - let’s suss out how that’s done in a few simple steps:
- Open up a spreadsheet doc and in one column list all your monthly expenses (groceries, loan repayments, bills, etc), with the value of each in the next column. For annual expenses, divide by 12 to get the monthly cost - we want to be comparing apples with apples
- In a new column, list all of your income sources and in the following column put in the values against each
- Add up the total expenses and the total income, then deduct total expenses from income
- Bada-bing, bada-boom - that amount is your disposable income!
Note we’re not advising to use your entire disposable income figure as the budget for your new car. Use what you believe is a fair amount that you’re able to afford.
Have you considered ongoing costs?
Going back to your budget, have you remembered to include things like servicing, fuel costs, insurance, tyres, and rego costs? Get a (rough) estimate for each of these and work out the monthly costs, then add them to your expenses list.
New or used?
There are pros and cons to both.
Buying new, you’ll have more financing options, have peace of mind with warranty, get the latest and greatest tech and won’t have as many wear-and-tear repairs and maintenance issues (lots of brands are even doing free servicing for the first few years these days, too!). Oh, and you’ll have fart-free, booger-free interior to enjoy, too.
Buying used means you’ll be paying less for the vehicle, insurance will most likely be more cost-effective and depreciation is slower.
At the end of the day, though, choosing to buy new or used will come down to your own personal circumstances.
Minimise the purchase price of your new or used car with carconnect
If you’re ready to hit the market for your new car but are dreading the whole experience, you’re in the right place. At carconnect, we pride ourselves in helping Aussies skip the BS and will work with you to find the right vehicle for you at a great price price.
All you need to do to get the ball rolling is search for the make and model you’re interested in, then pop in a couple of details about yourself. Then, tapping into our massive network of dealers all over Australia, we’ll present you with the best prices available. Choose the one you’re happy with, sort out payment and in no time at all you’ll be behind the wheel of your new beast!
For any questions you may have, please don’t hesitate to call the carconnect team on 1300 880 008 or use our online enquiry form to shoot us a message and you’ll hear something back shortly.
Note. None of the information in the above article should be considered personal or financial advice. You should seek advice from a professional such as your accountant who has an understanding of your personal situation prior to taking on financial products.