Buying your new car – how does it work?

by under on 17 Dec 2009 11:45:42 AM17 Dec 2009

Perhaps the most daunting aspect of buying a new car in Australia or anywhere- particularly for first-time buyers - is going through the process of the sale itself. Car dealers have a reputation for being slippery and slick, making the prospect of dealing with one face-to-face overwhelming.

The best weapon you can have to help you through the car-buying process is knowledge. If you walk into the car dealership armed with information about what to expect, you are likely to feel more confident and be taken more seriously.


As you gather research to find the best new car for you, talk to friends and search online to get a better idea of exactly what will happen at the car dealership. A good understanding of the process – including both your responsibilities and the car dealer’s - can help protect you from any nasty surprises.

Here is a quick guide to help get you thinking.

What is the process?

For the consumer, the process of buying a new car should always begin with research. Give yourself ample time before the car purchase to talk to friends and investigate online or in magazines so you can make a considered choice about the vehicle that best suits your needs.

The next step is to determine how much you should be paying for your new car – the internet is a useful tool here. Some websites will provide you with car invoice prices (the amount the dealer actually pays for the car), which will be a nice advantage when you start negotiating.

It is a good idea to choose any options and extras before you start visiting dealerships, so you can include them in your research on overall price.

Obtain quotes from several dealerships in your area and document them, leaving your nearest dealer until last. Many dealers receive incentives from manufacturers for sales in their nearby area, so the closest to you will be eager to secure local business.

Take your chosen car for a thorough test drive, over a variety of roads, to make sure you feel comfortable. Check the car’s features, steering and visibility, and before you head off, ask about your legal liability in the event of an accident on your test drive.

When you have finalized your choice of new car, it is time to negotiate. Focus your negotiations on the ‘drive-away’ price, which is the total amount you will pay to own the car and get it on road, including compulsory charges and extras. Set a limit for yourself and stick to it - don’t be persuaded to pay more than you can afford.

Once you’ve established a price, you will be asked to sign a contract. You should make sure everything you’ve agreed on is recorded in writing, and read the document very carefully.

Before you accept delivery of your new car, inspect it carefully to ensure everything you’ve paid for has been included, and there are no scratches or dents. It is important to determine the vehicle’s true age – often cars that are presented as ‘current models’ have actually been manufactured the previous year. The date of manufacture is recorded on the ‘build plate’, which is attached to the car by the factory.

What do I need to sign?

When you have finished your negotiations and are happy to go ahead with the purchase of your new car, the dealer will prepare an ‘agreement for sale’ document. This is a legally binding contract, so you should make sure you read and understand it before you sign.

All costs, including statutory fees and extras, should be clearly itemized, and there should be no blank spaces in the document. The contract should also specify a delivery date, as well as the colour of the vehicle and any options or accessories.

If you have not yet arranged finance for your new car you can still sign the contract, but it is good idea make sure the document states that the sale is dependant on you obtaining finance from a specified company. You may choose to wait for finance approval before signing an agreement for sale – that way you know exactly how much you can spend.

When should I arrange insurance?

From the moment you drive away your new car, insurance is entirely your responsibility, so you should organise insurance before you complete your purchase.

Some insurance companies will issue temporary insurance to cover your new car while you arrange permanent cover. Arranging a new policy or transferring your old one is easy and can be done over the phone or online.

Like every step of the car-buying process, when it comes to insurance, there are options to choose from. Third Party Property insurance, the cheapest type of policy, protects you from financial liability if your vehicle damages another person’s property. For a little extra cost you can protect yourself further with Fire and Theft cover.

Comprehensive car insurance will offer the most secure cover, protecting you financially in the event of damage to your own car and theft, as well as the property of others. It is the most expensive option, but will certainly offer the best peace of mind.

It is important to keep in mind that some financial institutions have specific requirements regarding car insurance, which you will need to fulfill if you are borrowing money. You may need to provide your finance company with a comprehensive insurance certificate so they can finalise your loan.

What extra charges can I expect?

It is important to remember that advertised price of your new car may not include some significant extra expenses. There are several compulsory charges you can expect to pay on top of the purchase price of your new car, including registration, stamp duty and number plate fees.

Most of these charges are fixed and non-negotiable, but you might be able to haggle your way to a better deal on the delivery fee, which is the amount charged by the dealership for preparing and delivering the vehicle.

Try not to be tempted by other extras offered by the dealer, such as rust-proofing or paint protection – they are likely to be overpriced, and most new cars don’t need them anyway.

A good strategy for dealing with the sting of extra charges is to concentrate your negotiations on the ‘drive-away price’ of your new car, which is the total amount you will pay to purchase the vehicle and get it on the road. At the very least, you won’t be caught out by unexpected charges, and you might even find that you end up making some big savings overall.

What paperwork should I bring?

Technically, the only things you need to bring when you’re buying a new car are your driver’s license and a method of payment.

However, it is a good idea to gather some other information and bring it with you to make it clear that you’re not going to be ‘taken for a ride’. If you can show evidence that you have done your research, you are likely to be taken more seriously.

You should bring with you some new car purchase quotes, from the internet and from other dealerships. The internet will also help you find invoice pricing data, which will give you an idea of the dealer’s profit margin and help you in negotiations.

If you are considering purchasing an extended warranty, or obtaining insurance or finance through the dealer, you should bring detailed quotes for these extras. Most people will find that it is less expensive to organise new car insurance and finance elsewhere.

Will I get to drive my new car home that day?

A brand new car is a significant purchase, and most people will be keen to get their hands on it straight away. If the exact car you want is in stock and is registered, and you can pay in cash or by bank cheque, you will be able to drive your car away immediately.

Most of the time, however, the dealer will need time to order your new car from the manufacturer and prepare it for you. Whether you choose to collect the car yourself or have it delivered to your home, you will probably be charged a ‘dealer delivery fee’, so make sure to factor this into your negotiations on price.

If your new car is ordered from the manufacturer, you should ensure that there is a delivery date deadline specified in the contract – ‘ASAP’ will not be clear enough.

Whether you receive your new car immediately or have to wait, you should establish the true age of your new car before accepting possession of it. There can often be a big difference between the date on the ‘compliance plate’ – which indicates the car’s model year - and the date on the ‘build plate’ – which shows when the car was actually built. A car’s build date will affect its resale price, so any car manufactured in the previous year should be offered at a discount.

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