The Ultimate Step by Step Guide to Choosing and Purchasing Your First Car

You’ve put in the work, saved up the money, done your lessons, passed the test, and now you’re ready to buy your first car. Congratulations! Purchasing your first vehicle is a decision that takes a lot of forethought and investment, and sometimes, not all of the important parts are immediately apparent.

Before you even begin thinking of what kind of car you’d like to drive, you’ll have to examine your own situation, budget, insurance, and personal needs. While sourcing, you’ll have to have a working knowledge of safety and fuel economy,  whether to buy a second hand or a new car from a private seller or a dealership, as well as also being able to sort a good deal from a sour one.

If all of this seems overwhelming, know that you can approach it from sizeable, manageable chunks. You can use this resource as a primer to get you started, as we’ll be covering all the major points that you need to tick before putting the keys in the ignition.

At the end of this, you’ll have the knowledge that you need to put a plan into action. There’s tough work ahead, but you’ll be on the road before you know it.

Sorting the ‘needs’ from the ‘wants’

First car buyers can sometimes get caught up in getting the ‘perfect’ vehicle. This can be a healthy mindset to a degree, since you’ll be potentially driving it for a while and you won’t want to buy it without preparation. Ultimately, however, your car should first and foremost reflect both what you can afford and what you need out of it.

Everybody wants to start off with a sleek, fast model that goes quick and looks good doing it. If you’ve got a spare $200,000 sitting around, and a hundred or so more for insurance, then a new Lamborghini might be just the car that does that for you. For those of us with a more realistic budget, you should think about what you really need out of a car.

Start off by considering the following:

  • How much can I afford to pay?
  • How long am I going to drive it each week?
  • How far am I going to be taking it?
  • What kind of conditions am I going to be driving under?

An apprentice tradie is going to need a drastically different car to an inner-city teacher, and somebody who travels long distances all day is going to want a different car to somebody who uses it to dart down to the shops occasionally.

Part 1: Figuring out your budget

As anybody who’s worked in finances before will tell you, the first and most important step is to determine your budget. This will dictate the limits on your car and the sort of places you should be looking, as well as helping you focus on getting the right model for your situation.

In this section, we’ll be taking you through the assortment of things that you’ll need to budget for, as well as a couple of slip-ups many young drivers make.

As a starting rule, we’d recommend trying to keep automotive costs down to about 10% of your income. You can balance this a little, especially if you live at home still (and don’t pay rent), but any more than that and you run the risk of not having the money to pay for other important things.

The purchase price

The initial purchase price seems like the only real decision that matters, but it’s just the tip of the iceberg. Check out Part 2: Choosing a car if you’d like some good advice on choosing a car model that’ll fit your budget, or Part 3: Sourcing a car if you’re stuck on the new versus second hand debate. Right now, we’re going to discuss figures.

For a young driver, you have two options:

  • Purchase the car outright. This removes any ongoing costs, and is definitely worth it if you’re going second hand or going for an older model. However, it’s a much larger startup fee. We strongly recommend this option for young buyers, as it prevents you from over-committing on the cost of a vehicle and being unable to pay it off in the future. You might have the means to repay now, but you never know what the future holds.
  • The second option is to pay it off over a period of time as a loan. When buying through this method, you should always place down a minimum of 20% of the cost of the car immediately, and don’t ever commit to a repayment scheme that goes for longer than four years OR goes over 10% of your income (and remember that car costs aren’t just limited to the repayment!)

Registration, petrol, maintenance, and insurance

The cost of a car isn’t always just the initial purchase price. Registration will initially cost you around $25, dependant upon your state. On top of this, Stamp Duty will (as a rule of thumb) set you back $30 per $1,000 cost of the car.

As a first car owner, you unfortunately fall into one of the highest risk assessments for automotive insurance, and so your insurance premiums are going to be higher than average. If you’re female, or above 25, you’ll be slightly better off (as 18-25 year old males statistically run the most risk of car accidents), but not by a significant amount.

This might seem unfair – after all, it doesn’t take anything from the individual into account – but insurance companies operate off of scale and statistics, and their premiums reflect this. We’ll be going over this in more detail in Part Four: Insurance, but expect to pay a minimum of $500 for Compulsory Third Party Insurance, and over $1,000 for Comprehensive.

On top of this, even the most trustworthy car model can break down. A failure to upkeep your car can be a huge safety risk for yourself or others; no car is worth risking your life to keep on the road, so you’ll need to budget in some emergency repair money (as well as not falling into a few first buyer traps, such as cheap imports).

Finally, there’s the question of petrol. If you sink all of your money into your car repayments, you could run the risk of not having the money necessary to fuel it! For that reason, you’ll need to budget in a healthy supply of petrol money every week, dependent upon the model and petrol type of the car.

Part Two: Choosing a car

Once you have even a rough idea of your budget, you’ll already be able to cross a few things off the list and circle a few potential avenues. Next up is finding the right car for you.

This is where those early questions come in: what do you need out of a car?

If you’re a city driver, won’t be putting it under any difficult conditions, or won’t need it often, take our advice: don’t splurge on a big car when you can make do with a smaller one.

A big car conveys additional costs in insurance, petrol, running fees, tyres, servicing — you name it, it costs more. Conversely, a small car can save you hundreds, if not thousands of dollars in its lifetime on the exact same track.

However, if you need a big car (such as needing to transport things, or driving off-road), you’ll have to budget and find the right one for your price point.

Safety first

One of the biggest mistakes first time drivers make is looking for a car that’s initially very cheap at all costs. This has it’s own immediate and obvious benefits, but the risk of injury in a rickety old rust-bucket might not be worth it in hospital bills alone.

For this, you should prioritize cars that have a proven track record. Car reviews are an important tool, and simply googling for any potential car type with something like ‘safety review’ or ‘model review’ should be enough to get a general consensus.

There are also plenty of forums and sites that will help new drivers find the perfect car for them. Hunt around the internet for these, and take their advice to heart. There’s no ‘perfect’ car, but there are a lot of good rules of thumb.

Fuel economy

This is the other big one for a first car. Getting a gas-guzzler won’t do you much benefit overall, no matter your situation. Unless you need a big diesel four-wheel drive for heavy off-road work, or a big hauler for some heavy duty jobs, stick to a fuel-efficient little zipper that won’t drain your finances with every turn of the ignition.

Easy does it

Pick a car that’s easy to drive.

This is time-worn advice, and will do you well. For a first time driver, you should make a priority for a simple car without too many complications. Again, small is your friend here, as many large four-wheel drives can be unwieldy and clunky vehicles to manage.

However, this can be a very tricky decision to make for a completely unrelated, albeit important question: manual or automatic?

A Manual conveys a few benefits of its own: firstly, they’re usually slightly cheaper, and secondly, learning to drive manual doesn’t cut you off from having an automatic in the future (whereas the opposite is true).

Automatics have a much, much easier adjustment period for new drivers, and are less clunky to drive overall if you’re still getting your feel for it. However, this ease tends to come with a slightly inflated price tag, and a fair amount of people choose to drive manuals regardless.

Ultimately, the preference is yours, but it’s a decision you should put thought into rather than rushing ahead with.

‘Cheap’ imports and unique cars

Take the word of anybody selling a cheap import with a grain of salt. Imported cars are a nightmare for first time buyers; they often have outrageous maintenance costs, and premiums are often inflated to account for this.

The same goes for cars that are rare or unique. If you want flair, our best advice is to soup up a bog standard model; aftermarket parts will be readily available for a lot cheaper, and ultimately, you’ll look just as good at the end.

Part Three: Sourcing a car

There are two big questions to ask here:

  • Do I want a new car or second hand?
  • Do I want a private sale, or a dealership?

New versus old

For a first time buyer, it’s best to start small. For that reason, we usually recommend a second-hand car for your initial purchase.

Getting a new car has a few appreciable benefits; it’s obviously new and won’t have existing defects, you’ll have a guarantee of not having wear and tear, and it’ll feel more ‘yours’ than a pre-loved model.

However, a new car is going to be massively more expensive, lose a lot more of its resale than an already second-hand model when you go to sell it, and isn’t necessarily any better than a well-maintained alternative.

If you’ve never looked for one before, it might be worth bringing a friend who’s owned a couple of cars along with you when looking at second-hand vehicles, and always ask for a test-drive first. They’ll usually have a good eye for the sort of things that might pop up as problems in the long-term, and spot the indicators of wear and tear.

If you can, get as much documentation when buying an older model as you can. Service records and the like can prove that it hasn’t been languishing in a garage, rusting away beneath the surface, or can tell you if it has any persistent faults.

Dealer and private

This one is a little less cut and dry.

A lot of people get their first cars from family or friends, who might sell a car for a little cheaper than they might otherwise to somebody they know. If you’re not lucky enough to run into this situation, however, then you’re going to have to search around for options.

Dealerships come with the obvious advantage of reputability; their shop is their credibility, and most places will give you some kind of guarantee of service and make sure that their vehicles are more than road-worthy. If you’re considering a dealer, try to find one that’ll put that in writing with some kind of provision of minimum service, or refund for obviously extant mechanical issues.

When buying from a dealer, you’ll often be pressured into signing quickly. Don’t rush into it! Take your time, browse around (at multiple dealers), and find the right car and place for you. Remember that a dealer is required by law to give a warranty on a less than 10 year old car with less than 160,000km on them.

Dealerships can also be somewhat more expensive than a private sale. When buying from a dealer, you’re paying for the cost of the car, the dealer’s take, and the extra transaction cost of running the shop. Buying from a private sale is money into pocket, especially if you’re buying the car outright. Make sure to check the fine print or overall worth of any optional extras while you’re there, too.

A private sale should be approached with an air of hesitancy. Prices are often more negotiable, which means that you run the risk of getting ripped off but also the potential for a great bargain. Make double and triple sure that you have all necessary paperwork: the registration, a pink slip that’s less than a month old, and proof of ownership.

Failure to provide these things is a sign of a ripoff waiting to happen, and you shouldn’t trust anybody who’s hesitant or unwilling to provide them. Ultimately, you won’t be getting a warranty with them, so make sure that you fully trust the deal and the quality of the car before committing to buy.

Part Four: Insurance

Insurance is complicated, and we’re giving it it’s own section separate to budgeting just to properly account for how complicated it is.

To start off, there are a few different types of insurance. Compulsory third party, third party property, third party property (fire and theft), and comprehensive.

Compulsory Third Party is obviously compulsory for all people, and covers any injury to people in an accident. This is to prevent a situation where somebody needs medical bills and doesn’t have insurance for them.

Third Party Property insurance covers damage to other cars involved in the accident (you’re the first party, anybody else is the third). It’s optional, but strongly recommended, as the compulsory insurance will still leave you liable for any damages to property.

Third Party + Fire and Theft is the same as the above, but also covers liability for accidents and malicious accidents that happen to your car or as a result of your car.

Comprehensive insurance covers all of these besides compulsory third party (which you always have), and additionally covers damage to your own car in an accident (1st party insurance).

Comprehensive insurance is extremely important to have, and a major mistake new drivers make is to settle only for Compulsory Third Party (CPT). This is a terrible idea, as it means that not only your car is at risk, but you might have to pay a huge amount of money for anybody else’s car that you hit.

Even if you’re a great driver, accidents happen. You might even be found at fault for something that might have seemed unavoidable at the time, or it might be your word against another driver. In that situation, you don’t want to be caught without insurance.

Driving down cost

So why are we making such a strong point about insurance in a first car buyers guide?

Simply put, choosing the right car will make your insurance dozens of times simpler, as there are a few systems in place that reward specific options more than others. Gaming them will not only drive down the cost of your car, but will generally help you in the long-term too as they tend to be common-sense and practical applications.

Firstly, the cheaper the car, the cheaper the insurance. Insurance is paid out on the cost of the vehicle, so buying a car within your budget not only saves you money on the car, but on your ongoing costs also.

Secondly, a car with a reputation for safety will ensure that your premiums aren’t so premium. Keeping a working alarm going in a reliable car will drive down your costs significantly. This also applies to mechanical reliability, as cars that are often in need of repair are at a higher risk of accidents due to failure on the job.

Lastly, modifying your car can carry a hefty cost in insurance. All modifications require reporting to your insurer, who may adjust prices according to the new specs of the machine rather than the base model.

Feeling confident?

Being able to drive is exciting enough, and going through the process of buying your own car can be even more exciting for first-time drivers. However, it’s important to take things slow, do your research, think about what you need from a car, and consider all your options before diving in. Happy driving!