Driving your new car, especially if it’s your first car, will feel much sweeter if you’ve bought it outright or paid off most of it. Work out how much you need to buy your car and develop a savings plan to help you get there.

How much will you need?

You probably have a car in mind and may have an idea of what it will cost, you might also compare prices of different makes and models. If you are going to borrow to buy a car, consider buying a cheaper car with a smaller debt.

As well as the cost of the car you will need to pay:

  1. Registration transfer fee. This is different for each state and territory and costs about $20-$45.
  2. Stamp duty. The stamp duty you pay will depend on which state or territory you live in, around 3% is common. This means a $5,000 car, stamp duty would cost around $150, a $10,000 car would cost around $300.
  3. Car insurance. You will need compulsory third party (CTP) car insurance (also known as a green slip) in some states, which covers injuries you may cause to other people in a car accident. In addition, we strongly recommend comprehensive car insurance, which covers damage to property and injuries to you. CTP can cost more than $600 and comprehensive insurance varies significantly depending on factors like the make and model of the vehicle, the age and experience of the drivers, where the car will be kept, and your insurance claims history.


Case study: Elaine calculates the cost of her car

Elaine is 18 and has her eye on a small second hand hatchback with an asking price of $8,000. The registration transfer fee will be $35, stamp duty will be $240. The registration is almost due for renewal and this will cost $962, including compulsory third party insurance. She opts for comprehensive insurance for $1873 per year, bringing the total cost of her new car to around $11,100.

Do your research

If you need a car and are thinking of buying one, check out whether you should buy or rent a car. Work out what is more cost effective and what would work for you by going to the ACCC guide on buying or renting a car

If you decide to buy a car, work out how much that is going to cost so you can add that to your budget. You can work out costs by going to the The MoneySmart cars app. Consumer rights and responsibilities apply to purchasing a car. The ACCC buying a car guide provides vital information on your consumer rights when purchasing a new car.


Car loans

Paying for your car outright will always be cheaper than financing your purchase, but if you do decide to take out a loan make sure you shop around and are aware of the better rates available in the market. Comparison websites will give you a good idea of what’s available, but they don’t cover every lender, so you might also check the websites of other lenders and motoring organisations not appearing on the various comparison websites.

Get your savings into gear

Save, save, save

A car may be one of the first big purchase you make. If you are young, you may have few expenses, but you may also have limited income.

If buying a car is a priority, make a savings plan based on how much you can afford to save, being realistic about your budget and the timeframe for achieving this goal. Our Pennysaver app may help you keep on track.

If you don’t already have one, consider opening a separate savings account so you won’t be tempted to use the money for other things.

Nothing is more exciting than getting behind the wheel of your own car. Put a savings plan into gear and get ready to take to the road.

Buying a second hand car

A new car loses considerable value in the first few years. It will start to decrease in value the minute you drive out of the showroom. You can save a lot of money by buying a second hand vehicle, but there are a few extra things to consider.

Go to your state or territory’s roads and traffic authority for helpful information on what you need to do when buying a car privately. It’s also important to call your insurer before you buy to find out everything they need to know about the car.

  • Registration and insurance. When working out the cost of the vehicle and how much you need to borrow, don’t forget to factor in the cost of transferring the registration into your name, vehicle insurance and CTP cover.
  • Roadside assistance. If you’re driving a vehicle that’s no longer under warranty, consider becoming a member of a roadside assistance program.
  • Register of Encumbered Vehicles (REVS) check. When you’re buying a car privately, always do a REVS check to make sure the car you are thinking of buying is not carrying a debt (and could be repossessed) or was previously written off in an accident. REVS is a free service run by State and Territory governments.
  • Mechanical check. Spending a small amount of money to have a qualified mechanic go over the vehicle thoroughly could be money well spent if it saves you from buying a lemon.