Buying a car? Take the driver’s seat at the dealership
You've decided you want a new or near-new car. How exciting. So exciting, in fact, that it’s easy to get carried away and spend more than you intended. Especially when the smooth-talking salespeople at the car dealership know all the right things to say to help you do just that.
Don’t be tempted by all the extras they promise to throw in for a “great deal”. For most of us, a car is the second biggest investment we’ll make (after our house). It’s money you should be spending wisely. Chances are you don’t need those extras. Even if the dealer says they will take your driving experience to the next level.
Doing some legwork beforehand, understanding how dealers try to upsell, and learning to negotiate can save you thousands.
First, let’s address the biggest waste of money – consumer credit insurance, better known as junk insurance. This is one add-on you definitely don’t need.
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry handed down its final report in 2019. It found that millions of Australians had been persuaded to buy insurance that was either unnecessary or worthless.
This came on the back of an investigation by the Australian Securities and Investments Commission (ASIC) in 2018. It found these add-ons to be expensive, poor value and of little benefit.
Commonly packaged with personal, home or car loans, as well as credit cards, we’re often told they are means of protecting ourselves if we are unable to make a repayment.
Others, like Melbourne’s Courtney Ward, were told it was something they had to pay if they were going to get a car on finance. The $784 bulk sum she paid in 2015 was just lumped in with her loan. So she ended up paying interest as well.
Consumers unaware they are paying for nothing
While financial institutions were ordered to set aside $10 billion to repay consumers who bought junk insurance, many are unaware they paid for such products. They don’t find out they are worthless until they have a problem.
Tracy-Ann Fuller thought the add-on insurance products – also known as “car yard insurance” - she was “rushed into” at a car dealership were part of the financial package. It wasn’t until her claim for tyre and rim damage was rejected that she realised she had spent the extra money for nothing.
She is the lead plantiff in a class action brought against Allianz and Allianz Life, which covers car and motorcycle customers who bought Allianz products through a dealership. These include loan protection insurance, motor equity insurance (also known as GAP insurance, shortfall insurance or value protect insurance), extended motor warranties and tyre and rim insurance.
The Consumer Action Law Centre offers a free online tool, Demand a Refund, to help those who have paid for junk insurance recoup their money.
The centre urges consumers to be wary of dealers trying to pressure you into extra products that you haven’t asked for and don’t need: “Don’t forget that you might already have rights under the Australian Consumer Law if something goes wrong with your car! These exist even if you don’t buy a warranty.”
Drive your dollar further
So now you know what to avoid when you’re filling out that paperwork, here’s some ways to get the best deals when shopping for that new (or newish) car.
Know your limit – It's exciting buying a car, but don’t be tempted to go over budget. When you’re working out what you can afford to spend, factor in the running costs of a vehicle, such as the cost of insurance, petrol etc. Set your limit before you set foot in a dealership.
Buy a ''soon to be old'' car - There are bargains to be had when dealers are looking to make way for the latest models. The pandemic slowed down the shipment of new cars. But although the deals might not be as good as pre-COVID, it’s still worth casting your eye around. Second best is often close enough to best.
Look at comparison rates – If you’re looking to finance the car’s purchase, the dealership isn’t necessarily the best place to do this. Get their offer and compare with other lenders. Don't forget to check for any add-ons in the fine print.
Do a little extra work - Dealerships have wiggle room on these, so have a list of extras (such as reverse cameras, window tinting) that would sweeten the deal. Then don’t be afraid to negotiate. On the flipside, don’t be tempted to up your budget for extras you can’t afford.
Read extended warranty fine print - Make sure that you understand what is covered, and more importantly, what is not covered. Know your rights under Australian Consumer Law. And, as above, do not fall for junk insurance.
When is the best time to buy a new car?
If you’re not rushing to get your new wheels, it pays to look at the right time of year.
Last month of the quarter - Dealers have sales targets to reach. You might be the remaining sale they need to receive their bonus. So they might even be prepared to take a loss on the car to get them over the line.
End of financial year - Mid-year promotions often see cars sold at a low drive-away prices or heavily discounted finance to bump up sales. Dealers also need to make way for new stock, as this is typically when most new models arrive.
End of year/New year – This is also another case of in with the new, out with the old. In this case, though, it’s the year. Dealers don’t want to be selling too many cars into the new year that have the previous year’s plates. Having said that, if they do end up with too many come January/February, the early plate clearances present another chance to get a bargain. And remember the car will still only be a year old.
Model runout - If you know that a model you’ve had your eye on for a while is about to be superseded, particularly if it’s been around for a few years, chances are you’ll be able to negotiate a good deal. The arrival of the new model will likely add to the depreciation of your superseded one. So bear that in mind when you’re negotiating.
A few more checks before you get behind the wheel of your new car
If you’re buying a new or newish car at a dealership, you’re unlikely to be as concerned about its condition. But it’s important to do a few checks and balances so that you don’t get caught short further down the road.
Check for recalls
Know the statutory warranty
Most new cars have a warranty of 12 months or 20,000km, whichever happens first. Although many offer much longer warranties. Generally, new cars come with a manufacturer’s warranty that exceeds the statutory warranty.
For used cars, the warranty depends on the vehicle’s age and odometer reading:
- Three months or 5000km, whichever happens first, for cars with less than 160,000km or manufactured fewer than 10 years prior to sale
- One month or 1000km, whichever happens first, for cars with more than 160,000 km or manufactured more than 10 years prior to sale
Statutory warranty repair requests must be advised in writing.
Understand the extended warranty
Many extended warranties require servicing to be completed within specified intervals, which is not always transferable on used cars. Read the fine print to understand what’s covered before you buy the car.
Repairs outside of warranty
Once your car is out of warranty, you may think you are no longer covered. However, cars requiring premature repairs through no fault of your own may still be covered under Australian Consumer Law. Check forums for reports of a similar fault. Then contact the manufacturer to request a free repair.
We hope we haven’t taken any of the joy out of buying your new set of wheels. It should be an enjoyable experience long after you leave the dealership, though. So these tips could save you more than a little mileage in the long run.
If you’ve encountered a problem with your new car, don’t be driven to distraction. Lodge your complaint with us and we’ll help you handle it.