The car is “an invention which makes people go fast and money faster”, the great American alto saxophonist Jimmy Lyons once said.

His remark is as true now as when he said it. The good news is, burning cash on a used car can be eliminated with some careful planning.

Youngsters contemplating the purchase of their first car can get a good deal on a budget of between $5000 and $10,000.

But they need to understand that this is only the beginning of a very expensive undertaking.

Once the car has been purchased, ongoing expenses can be unrelenting.

Fuel is often the least of your financial worries. Rego, green slips, third party or comprehensive insurance, maintenance and repairs can leave a huge dent in your pocket.

But the biggest financial disaster occurs when you buy a lemon.

The key to avoiding this can be summed up in one word: research.

Also be prepared to bargain. Never accept the advertsied price as the final price.

Choosing it

Owen Johnstone, a spokesman for the NRMA, says car buyers need to consider “the sort of motoring they’re going to be doing”.

Probable passenger numbers, open road or city driving and fuel consumption are all factors in choosing a car.

Have a look around and see what options there are, Johnstone advises. “A good starting point is to take a drive down Parramatta Road to get a feel for the market,” he says.

Michael Hohl, a spokesman for the Australian Consumers Association (ACA), says “the best place to look is the Trading Postto get an idea of what you can get”.

Three significant factors are safety, reliability and cost.

SAFETY

The centre tests cars for crashworthiness (keeping the driver safe) and their impact on other drivers.

For example, the centre, which started testing in 1987, found Range Rovers made between 1982 and 1994, were good at keeping their drivers safe but were bad for other drivers.

Conversely, driving a 1988 Daihatsu Charade is riskier than average, but better for people outside the car.

The results are available in brochures from the NRMA or the Roads and Traffic Authority (RTA), or from the centre’s website.

Relibility

Despite this, a model’s reputation on reliability can warn of a car that spends more time off the road than on it. The ACA’s magazine, Choice, publishes an occasional reliability survey of its readers.

The latest survey, published in September 2001, shows that Falcons and Commodores made between 1990 and 1993, for example, are less reliable than Mazda 121s, Subaru Liberty FWDs or Nissan Pulsars.

Dream run Andrew Cibej and Georgina McSpadden are the month-long proud owners of a 1990 Saab 900i. The car was advertised in the Trading Postfor $7500 by a private vendor, although Cibej says they paid $6424 for it after registration and defect-fixing costs were deducted. They were looking for a Saab because “they’re quirky and have a bit of style”, he says. After looking at the car, they left a $1000 deposit with the vendor, subject to the cost of any repairs deemed necessary by an NRMA inspection. The car was financed with a loan from the Qantas Staff Credit Union. “It’s a joy,” says Cibej. “It performed very well on its first shopping trip. I couldn’t fill the boot.”

Cost

A car’s cost is not just its purchase price. Liz Darby, from the Department of Fair Trading (DFT), says additional costs, such as inspection, insurance, registration and stamp duty (usually 3 per cent of the purchase price), “can add upwards of $1000 to the cost” of a car in this price range.

A car’s running costs are also important. “A large six-cylinder fourlitre car’s fuel consumption is much higher than a Japanese two-and-a-half litre car,” says Hohl, while for some cars spare parts can be expensive and difficult to find.

To get an idea of a particular model’s market value, a number of websites list price ranges from recent sales for almost every model on Australian roads, such as www.redbook.com.au, the Herald’s drive.com.au and choice.com.au.

If finance is an issue, research that too. To compare the interest rates for the different personal loans and car loans go to www.cannex.com.au.

Buyers “should at least know the rates at various banks and credit unions so if a dealer offers it, [they] know if it is a good deal”, advises Hohl.

Never buy extras, such as extended warranties, on the spot without doing your research first.

BUYING IT

DEALERS

Dealers play down the difference. There is “not a great deal in it”, says the chief executive of the Motor Traders Association of NSW (MTA), James McCall, while Johnstone says “dealers always provide a bit of a margin and can be negotiated down a bit”.

By law, if a car is less than a decade old and has done less than 160,000 kilometres, a dealer has to give a 5000-kilometre or three-month mechanical warranty. “In [this] price range it’s not a bad thing to have,” says Hohl.

Licensed dealers are also obliged to guarantee that no money is owing on the car, it has not been deregistered due to parking fines or previously declared a wreck, says McCall. If a car turns out to be stolen, the purchase price must be refunded by the dealer or, if no longer trading, the Motor Dealer Compensation Fund.

Dealers are convenient. They usually sell a range of cars and tend to be located in the same vicinity such as Parramatta Road, where a plethora of cars can be viewed without criss-crossing the city.

Buying a car from a dealer also gives a purchaser time to consider, inspect and drive the car, says McCall. Buyers need to be careful before agreeing to buy, says Darby, who suggests people leave the car yard for even a short while and talk to someone else about it.

“Don’t sign unless you’re 100 per cent sure,” Darby says, adding that DFT centres can give free advice on purchase contracts.

Extended warranties offered by dealers are “sometimes not worth the paper [they are] written on”.

A 24-hour cooling-off period now applies, but only when a dealer has “facilitated” credit to buy the car, says Darby, and a buyer has to pay a fee if they pull out.

Privately

Buyers can do basic mechanical checks ( Choice and the NRMA both publish hints) to eliminate obvious problem cars. After that, Hohl says, buyers “should get an NRMA inspection”. Inspection reports list defects and repair estimates and are usually done within “a small number of days”, says Johnstone.

Private buyers also must check if money is owing on the car, says Hohl. In NSW, the Register of Encumbered Vehicles Service (REVS) offer phone or web checks, using the car’s registration number, vehicle inspection number or chassis number and engine number, usually found on a plate between the engine’s fire wall and the passenger compartment. For $10, the state agency will guarantee that no money is owing on it. Numbers on the registration papers should be checked against those on the car to guard against buying a stolen car.

“If anything [is] suspicious, if numbers look scratched, ask the seller and if there’s no really good explanation, keep away,” says Hohl.

The RTA offers a service to check the car’s registration and whether it has been listed as written off.

Unroadworthy Chris Beham paid $6000 for a shiny metallic blue 1975 Volkswagen Superbug from a Blacktown dealer a year ago. Soon after, Beham noticed problems. The handbrake sprung loose, the boot wouldn’t open and there were electrical problems. Beham says about five months later, a friend discovered that “the floor was held together by rust”. The car was not inspected before he bought it, although it was after the rust discovery. The NRMA declared it unroadworthy. After intervention by the Department of Fair Trading, the dealer is buying back the car for its purchase price. Beham, who hasn’t yet replaced the family’s second car, says pre-purchase inspections are now a rule.

Auction

While auctions can be cheaper, there are significant risks. Many bidders are in the car industry and a rookie should only buy at an auction “if you know a lot about cars”, says Hohl. “It’s a big risk but you can get really good deals and an auction house has to guarantee there is no money owing.”

Auctions give few, if any, chances to test drive cars or arrange vehicle inspections, although the NRMA will visit auction houses. Allen recommends looking for repossessed cars or fleet vehicles that have a good history. Former government-owned cars have a good reputation, but Allen and Johnstone say they are usually more than $10,000.

As for auction strategy, Allen advises “first time, look; second time, buy”, while Darby says “know your terms and set your price” before you go to the auction.

She “strongly suggests [a buyer] takes someone who knows the mechanics of cars”.

Running it

There are four main types of insurance. Compulsory third party insurance (green slip) only covers injuries to other people; third-party property covers damage to other people’s property (usually cars); third-party fire and theft policies also cover fire damage to, or theft of, the owner’s car; while comprehensive insurance covers all of that as well as crash damage to the owner’s car.

After compulsory third party insurance, the third party property cover is the cheapest.

A guide to car insurance is on the website of the Australian Securities and Investments Commission.

Comprehensive insurance may add between $500 and $600 a year to the running costs of a car in this price bracket, Hohl says.

If that is too much, he says owners should “definitely look at third party property insurance”. Car insurance is risk rated, which means the higher you are at risk of an accident, the higher the premium is going to be.

Young drivers, unfortunately, are regarded as more accident prone than the general community.

However, your premiums will drop as you accumulate no-claim bonus points for safe driving and leave aged-based penalties behind.

Another post-purchase action is to have the car inspected, if that hasn’t already been done, to discover if anything needs attention because “preventative maintenance is always cheaper”, says Johnstone. An inspection will reveal potential problems before they need expensive repairs.

Read the owner’s manual, he says, to become familiar with simple things such as where the jack is and at what the tyre pressures should be.

New owners must also arrange a transfer of registration at the RTA within a fortnight of buying the car.

Search engines

Cannex: www.cannex.com.au

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