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Car ownership DC SASS

Facts about car ownership

Our Financial Counselling is a non-judgmental, independent, confidential and free service provided to inform, support and advocate for students experiencing financial difficulty. Contact us to arrange a free appointment.

Purchasing a car for the first time?

Buying a car is exciting but it is also a big decision – you will likely own it for a long time and it has to meet your needs. It can also be a big financial commitment, so it pays to do your research.

MoneySmart has a great App – MoneySmart Cars which assists you to work out the real cost of purchasing and running a car, identify hidden costs, explore alternative ways to buy a car and stick to your budget.
Before you go out looking for a car to buy, work out how much money you have and how much you can afford to spend to buy a car and to keep it running. If you are going to pay cash, set up a savings plan, if you are going to borrow, its important to shop around for the best car loan you can find.

If you are going to borrow to finance your car purchase, it is important to look closely at loans.

Secured or unsecured loans?

Most car loans are secured. Your car will typically be the security for the loan. If you don’t pay the loan on time, the lender can repossess your car and sell it. With an unsecured loan, you don’t have to provide your car as security, but the interest rate will be higher, and you might not be able to borrow as much. Unsecured loans are mainly for used cars.

Beware balloon payments…

Some car loans offer a ‘balloon payment’ (also called a residual payment). This option means you pay off part of the loan as regular repayments, and then pay the final amount as a lump sum (this is the balloon payment) at the end of the loan.
This may look like a good deal as your monthly payments will be smaller. But you'll have to repay the lump sum with interest, so the total cost of the loan is higher.

When you buy a car there are other costs you need to think about such as:
  • stamp duty
  • registration
  • car insurance
  • running costs, like petrol, maintenance and servicing
Pre-Purchase Inspection

Before you purchase a car that is not brand new, consider getting a pre-purchase inspection. It is wise to have used cars inspected by a qualified specialist before the final negotiation for purchase. A professional inspection will tell you what might be wrong with the vehicle and also what's right with it. A pre-purchase inspection typically costs anywhere from $100 to $200, depending on whether you take the car to the specialist or whether they travel to the car.

License

If you have a licence from interstate or outside Australia, you are allowed to drive on this licence for 6 months after arriving in Victoria or Australia. If your licence is not in English you must carry an English translation.

Stamp Duty

Stamp Duty and transfer fees have to be paid at the time that a car in transferred into your name. It is calculated according to the purchase price of your car - $8.40 per $200 of the market value or part there of Transfer & motor vehicle duty fees : VicRoads.

Registration

Vehicle registration connects a car to its owner. Each state requires you, by law, to get your car registered with your state’s transportation agency (VicRoads in Victoria). If you allow your registration to lapse or don’t register your car, you could face large penalty fees and vehicle impoundment, so you don’t want to ignore this.
A registration check through Vic Roads in Victoria will give you information about your car’s registration history. It will tell you if your car is registered to drive on Victorian roads, when the registration expires, confirm the make and model of the car you are considering buying. This information helps you to be sure you are driving a legally registered and insured vehicle. You can get a registration check by visiting the Vic Roads website and entering the cars licence plate number or VIN.

In Victoria, a portion of your annual car registration fee covers you if someone is injured or killed in an accident. This is known as Compulsory third party (CTP) insurance. This insurance does not cover you for property damage. So, if you have an accident, this won’t cover the cost of repairing your car or someone else’s car.

Insurance

Accidents can happen even if you’re a good driver. Driving conditions, unforeseen road events, and sudden emergencies can all contribute to the cause of an accident. When buying car insurance, take time to compare the cost and understand what is (and is not) covered by different policies. When deciding which type of insurance will suit you, think about whether you can live without your car if it's written off or stolen. Also consider if you can afford to pay for the damage to someone else's car if you have an accident.

- Third party property insurance — covers damage to other people’s property, including cars, when an accident is your fault.
- Third party property, fire and theft insurance
— covers property damage, and your car if it's stolen or damaged by fire.
- Comprehensive insurance
— covers repairs to your car and repairs to other cars, even if the accident is your fault. It also covers your car if it's stolen or damaged by fire, flood or vandalism.
With comprehensive insurance, you can choose how your car is valued. The value is the amount you'll get if your car is written off or stolen:

- Agreed value
— a fixed amount that's decided by you and your insurer.
- Market value
— the amount your car would have sold for, at the time of the accident.
If you use the market value, you don't know how much you'll get if you claim, and you can't change the amount. If you use an agreed value, you'll pay a higher premium. You may also have to pay an excess when you make a claim. The excess is the amount you agree to contribute towards the cost of a claim. The premium and excess you pay will depend on your policy and on other factors, such as your age. For example, a driver under 25 may have to pay a higher excess. This is because people under 25 are involved in more accidents.

Remember…
  • Get a few quotes for insurance for the car you want to buy to see if it is more expensive to insure than another type of car.
  • Security features - Immobilisers, alarms and 24 hour tracking devices reduce the risk of theft and therefore the cost of your insurance.
  • Repair costs - Insurers also consider the general cost of repairs, so if parts of your car are rare or expensive to locate you will be expected to pay more for insurance.
  • Performance enhanced and modified cars - These are generally more expensive to insure because of the increased risk of theft and speeding.
  • Modifications - Any modifications you make need to be reported to your insurer so that they will come under your policy otherwise your coverage and liability may be seriously affected when you try to make an insurance claim.
How can a financial counsellor help?

Financial Counsellors help people who are experiencing financial difficulty. They are skilled professionals who will guide you through your options and help you plan your way out of debt. They may be able to assist you by:

  • Doing a full assessment of your financial situation, including regular income and expenditure, assets and
    liabilities, to help you fully understand your position, create a budget and put a plan into place
  • Providing advice on how to negotiate with your creditors, government agencies or other providers
  • Negotiating directly with your creditors in certain circumstances
  • Providing advice about what options, rights and responsibilities you may have
  • Referring you to other services you may need, such as legal services, crisis food and accommodation
    services, and health services
What can a financial counsellor provide information about?

They can provide information and advice about:

  • Credit and debt-related matters
  • The rights of debtors
  • How to lodge complaints with various ombudsman schemes if you feel you are not being treated fairly and
    whether you should have been given a loan in the first place
  • Working out a realistic payment plan for debts
  • How to access other specialist support services, including gambling, family support, personal counselling,
    legal aid and emergency relief

It’s then up to you to make the decisions about how to manage your situation with the advice you’ve been given.

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