If you’re in the market for a new family car, you may be overwhelmed with all the deals and models and finance options on offer. But how can you finance your next family vehicle without paying too much? We’ve put together a guide to help you make the most of your family’s dollar.

What do you need?

This is your starting point: what does your car absolutely need? With that in mind, how much can you spend? Do you need or want more storage? Do you prize fuel economy over performance? Will baby number two or three need bigger back seats?  With all this in mind, you can make a short list of cars within your budget. You should also read family-friendly reviews, like our real-world review of the Mitsubishi Exceed.

Can you lease your car?

Leases are like cars you essentially “own” for a period of time (usually two to three years) which you then have to hand back to your dealer or lease lender.  Car leasing is a good option if you want more flexibility than ownership. If you buy a four-seater today and want to expand your brood down the line, you’ll lose money in the process as your car’s value has depreciated. How much does a lease cost? Well, it depends on the make, model, the interest rate, and how long you intend to lease the car for. You can use a leasing calculator to give you approximate numbers.

Novated leasing explained

Simply put, novated leasing is an arrangement where you sacrifice some of your pre-tax salary in exchange for a car. Novated leasing is a three-way agreement between your employer, a lender, and an employee (you) to use a car through a lease agreement. The car is considered a Fringe Benefit by the Australian Tax Office. Due to accounting methods for expenses, the FBT is reduced to zero. That means you can use the car throughout the novated lease period and offer to purchase the car at the end for the residual value or sell it. The idea is that the salary sacrifice bumps you down a tax bracket, and you pay less tax. However, you must keep novated lease cars in good condition or the lender may not take the car back. If you’re a government employee, you can read more about salary sacrificing here.

Buying new or used?

The age old question – should you buy brand new or used? The major difference is this: brand new has a higher upfront cost but buying used may have higher ongoing costs. Buying new means you get a factory fresh, safe, and reliable vehicle. Older cars may be in poor condition – even if you do all your best tyre kicking and test driving. They also have no warranty. You also need to check if the car is a write-off or stolen using the Personal Property Security Register.

You can split the difference between a new car and a used car by buying certified used. A certified used car is a dealer-sold, factory refurbished vehicle that comes with a manufacturer’s extended warranty. Not exactly new, but much less of a gamble than buying used. For pricing trends on new and used vehicles, you may want to check out the data at Carloop.

Avoiding unnecessary extras

Dealers may entice you with unnecessary extras such as infotainment systems (if you already have an iPad, why do you need that?) metallic paint, leather seats, and other “nice to have” stuff that isn’t necessary to how your car functions. Stick to your needs list and most importantly – your budget.

Figuring out safety features

Your next family vehicle needs to be as safe as possible – one thing you should never skimp on. When researching your possibilities, take a look at How Safe Is Your Car for safety ratings and features. You can balance safety with price and other factors in that case.

Calculating on-road and running costs before buying

You can calculate on-road and running costs using data sources such as the Australian Government’s Green Vehicle Guide which can tell you the average fuel consumption of your shortlisted cars. Other costs can be averaged out using the Australian Automobile Association data reports, which gives you statistics on servicing, insurance, licensing, and other relevant points.

Saving money on finance

As car prices are higher than normal due to the global semiconductor shortage, you can save on the “back end” by taking advantage of lower-than-average interest rates. If you use a car loan broker, you could save more money than just accepting whatever personal loan rate your bank gives you. Brokers access more loan products by tapping into a lending panel – that means multiple lenders are vying for your business instead of just one. If you have a decent (5-10%) deposit saved up, even better: lenders “reward” families with “skin in the game” with lower than average interest rates.

Timing your buying right – when is the best time to buy?

You can get a bigger bargain on cars if you time your buying right. According to the Federal Chamber of Automotive Industries most cars are sold during EOFY or the end of the year: that’s because dealers are having their biggest sales. If you aren’t able to hold on that long, going to a dealership at the end of the month may give you a bit more wiggle room to deal. Remember two things: dealers have quotas to keep; and they always want to make a sale. A bonus tip: a model that’s already on the lot means it’s burning a hole in the dealer’s pocket. Be amazed how much you can save (reluctantly) taking a dealer showroom car “off their hands!” Similarly, at times when stock volumes are low, buying the ex-demo vehicle can be a good way to secure a good deal.

Don’t fall for the zero percent trap

Yes, interest rates are at record lows at the moment: but that doesn’t mean they’re at zero. The shorter the loan term, the higher the interest rate is (relative to the amount.) Sometimes, dealers offer “zero percent finance” or very low finance rates such as 1%p.a. Sounds too good to be true, because it is. Often these come with high hidden fees or “take it or leave it” prices – no haggling to be had. In most cases, you’ll save more by arranging your own finance.

Remember, this information is general in nature and not a substitute for financial advice. Consult a financial professional before making any kind of decision.

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