Story sponsored by Savvy Car Loans.
According to Roy Morgan's 2017 Image of Professions Survey, car salesmen are the least trusted people in our society.
In fact, they rank even lower than stockbrokers, ad execs, politicians and talk back radio hosts. This is because most of us realise - often from personal experience - that buying a car can be a real minefield.
Not only is it a depreciating asset but if you buy a lemon or get saddled with high interest payments from predatory finance, you can end up getting more than you bargained for, literally!
However, buying a car doesn't have to be a bad experience. It doesn't even have to be a costly one. In fact, if you abide by a few simple rules, you can avoid the hassles you so fervently abhor altogether.
Here are our top tips for car buyers:
1 - Look for a car in the Goldilocks zone...
There are advantages and disadvantages to buying both new and used cars. So, let's start with the positives.
If you buy a new car, you can generally get finance at a lower interest rate than you would with a used car. It is also covered by a manufacturer's warranty and is less likely to cost you money in repairs.
But - and it is a big but - cars depreciate in value very quickly, especially in the first three years. So, if you decide to sell the vehicle, there's a good chance that you will end up owing more than the car is worth.
Conversely if you buy a car which is too old, it will cost you more in interest, more in servicing and repairs, and the resale value will be less... not to mention you increase your risk of buying a lemon.
So, what should you do? Aim for the sweet spot in the middle. Buying a near new car, a demo model or a car which is less than three year old is going to work in your favour. In fact, if it is still within its warranty period it will be viewed very favourably by all financiers. So...
2 - Shop around for finance...
When it comes to getting finance you need to shop around. A lot of people make the mistake of walking into their bank when looking for a car loan and just taking whatever deal is on offer.
The problem is: they're probably not offering you the best deal they can! And, if you're prepared to look to the open market, you'll likely find that out quite quickly.
As the CEO of one of the country's top financial brokerage firms - Savvy - I can let you in on an industry secret: financiers want your money just as much as you want there's.
If you're prepared to shop around or engage a company like Savvy, which has access to the countries biggest and most reputable financiers, you can get a good deal.
Whatever you do, just...
3 - Beware of dealer finance...
Most car lots have a finance office onsite and frequently offer you deals that sound too good to be true... that's because most of the time they are.
Quite often you'll see promotions where they are offering zero per cent or one per cent interest rates if you buy through them but - and I can't stress this enough - you need to crunch the numbers before you sign up for these types of offers.
They can work out in your favour but you need to take a very close look at the details because predatory lending is rife.
You need to see what the repayment term is because what a lot of lenders will do is sign you up to a short term low interest loan and if you don't pay it off within two years, for example, it will revert to being a high interest loan of upto 40 per cent, not to mention all of the potential hidden fees and charges.
The other thing to remember is: when you sign up for dealer finance, you're giving away your negotiating power. Which brings us to our next point...
4 - Don't give away your negotiating power...
It doesn't matter if you're buying a new or used car, the salesman will always start by asking you how much your salary is and how much you can afford in repayments. Based on that, they try to sell you a car.
So, if you apply for dealer finance or you literally lose negotiation power on price. You'll just end up paying full price and miss out on any factory discounts or other promotional deals that are at the dealer's discretion.
Whereas, if you get pre-approval from a reputable financier, you know how much you can actually afford to spend and you don't have the option of going over budget.
So, if you're approved for $15,000, you can only buy a car worth $15,000, and if the dealer wants to sell you a vehicle they need to come down to meet your offer, not the other way around.
I can't stress strongly enough how important pre-approval is. It is based on your credit profile, it is based on how much you can actually afford in repayments, and you will always be buying within your means.
The best thing you can do when buying a car is be empowered with the facts, which brings us squarely to our next point...
5 - Do your homework before you walk on the lot...
This is another important point. It seems like common sense but most people who get themselves into trouble do so because they've skipped this step.
You need to know both what you're buying and - equally important - what you require before you hand over your money.
This includes checking the ANCAP safety rating on all potential vehicles, figuring out what make and model you prefer, looking into what features are available, figuring out what you really need and knowing how much the vehicle is actually worth.
This knowledge will help prevent you from being swindled or impulse buying when you see some fantastic new feature on the lot (which is very easy to do, I mean, come on, heated seats on a cold Canberra morning? How do you say no to that?).
Equally important - perhaps more so - is doing your homework when buying a second hand vehicle through private sale because that's where the real landmines are buried...
6 - Don't get stung in a private sale...
Like with dealer finance - and anything else in life - if something seems too good to be true, take a closer look because your instincts are usually correct.
If someone seems to be in a real hurry to get rid of a vehicle, you need to be discerning about their possible motivations.
Before you buy ANY VEHICLE private sale you need to do REVS check to make sure it is not an encumbered vehicle.
This means that you need to make sure there isn't currently finance owing on it. Because if there is and you buy it, the car isn't legally yours! Meaning you can end up in the hole for $10,000 and literally have nothing to show for it.
You also need to make sure it's not a repairable right-off or defective because if it is, there's not always great deal you can do about it, especially if you've bought if from some scam artist on Ebay that you have no way of tracking down.
So there you have it...
If you keep those those six basic principles in mind when buying a car it's likely to be a fun and rewarding experience.
Just remember, do your homework, buy within your means, shop around for finance, avoid deals that seem too good to be true, don't give up your negotiating power and if you need some advice, come and speak to an expert.
Story brought to you by Savvy.