4 tips for budgeting and buying your car right

4 tips for budgeting and buying your car right

Story brought to you by Savvy.

When buying a car, you may not know where to start, but the best way is by making a budget and sorting the finance ahead of time. It could save you a lot of money in the long run. Here are some surefire tips to make sure you budget right and nab a real bargain.

What do you need vs what do you want

When looking for cars it's important to make a list of what you absolutely need in a car versus what you would like to have. Your car is your second biggest purchase next to a home, so it has to fit what you and your family needs above all. Do you need more space or more towing power for a caravan? Are infotainment centres a priority when the kids could use tablets? Will you need more seats for when bub two or three arrives? By cutting down on expensive options with more bells and whistles and focusing on what's important, you can make a more level-headed decision.

Savvy Managing Director Bill Tsouvalas says that making the list and sticking to it helps streamline your search.

"Knowing what you absolutely need is better than clicking on sites like CarsGuide aimlessly. It can make your search precise and much, much quicker," he says.

Using a car loan calculator

A car loan calculator is a tool to help you figure out how much a car loan may cost each month, fortnight, or week in repayments. This can figure out how much different loans will cost and whether they fit your budget.

A car loan calculator can show you different repayment figures depending on variables such as how much you want to borrow, your loan term, the interest rate of the loan, and your deposit.

Savvy's car loan calculator has three critical parts. These are how much you intend to borrow (loan amount), the loan term (in years), and the interest rate. You may also get results for monthly, fortnightly, or weekly repayments. This gives you an approximate amount you would be up for in repayments - remember you need to factor in fuel, insurance, and servicing too.

"Remember to look for comparison rates, not just base interest rates," Mr Tsouvalas says.

"Comparison rates include most fees and charges included in the percentage, so you get a complete picture of the cost of a loan. This will make your calculation that much more accurate."

When should you visit a dealer?

You should visit dealers in your local area - which can be handy if they offer free servicing at the dealership - either during end of financial year or at the end of the calendar year. June and December are when most cars are sold, according to the Federal Chamber of Automotive Industries, because dealers usually have sales on to clear older models.

"When a dealer has cars ready to drive away on the lot, it means they own them and are paying interest on them. They have to shift them quick or it's burning a hole in their pockets," Mr Tsouvalas says.

"You should also refrain from making a trade-in on an old car at the current dealer. If they yield to you in the price negotiation, they'll be way firmer on the trade-in price. Sell your car privately and net the extra profits. It's not as convenient, but you'll be better off."

Remember to visit during the end of a month as dealers thrive or wither according to their monthly sales figures.

Getting the upper-hand - car loan pre-approval

You can gain an upper hand in negotiation by applying for your car loan in advance, known as pre-approval. Much like the ordinary car loan application process, a pre-approval grants "conditional" approval for a loan, usually up to a certain amount. You then have a month (sometimes up to three) to buy a car. This is the maximum amount which you cannot go over (unless you want to pay out of pocket.)

"This gives you a lot of influence when haggling with a dealer," Mr Tsouvalas says.

"If your seller can't meet your max dollar amount, you have to walk away. For dealers, a marginal sale is better than no sale at all."

Story brought to you by Savvy.