Should you buy a new car?
There are very good reasons for buying a new car: top-notch safety, modern equipment, a peace of mind warranty and more.
The old saying that a new car loses thousands of dollars of its value the moment you drive it off the lot is true. But there’s more to a new ride than losing money – there are very good reasons for buying new.
Take, for example, the Holden Spark LS (automatic) – one of the cheapest new vehicles available, listed at $18,490. This small city car has the highest five-star ANCAP safety rating. Safety equipment includes six airbags, ISOFIX child seat anchors, stability and traction control, and ABS with electronic brake distribution and brake assist. Other equipment is modern, but modest: an Apple CarPlay- and Android Auto-compatible colour touchscreen, Bluetooth, air-conditioning and a remote control key. You also get a three-year (100,000km) warranty, a three-year service plan and three years of roadside assistance.
So, new-car benefits are top-notch safety, modern equipment, a peace of mind warranty and low upkeep costs (for the first three years, at least). You’ll also be able to personalise your ride by choosing the colour and adding optional equipment. The big trade-off is depreciation: by buying new you’ll need to accept a big loss when it comes time to sell the Spark on.
As you like it
One reason for buying new is being able to get your ideal car, down to your favourite colour and perfect mix of options. Most brand websites have a “configurator”, which lets you create your perfect virtual car. At the end of the process you’re usually given a price.
However, these options can easily add thousands of dollars to the final price. While some extras are worthwhile and make a difference to comfort, driving pleasure and safety (such as LED headlights) and others make the car more desirable when it comes to sell it (think metallic paint), you should ask yourself if that piano-black interior trim really is worth $500.
By buying new you’ll enjoy the latest active and passive safety enhancements.
New cars are safety tested by the Australasian New Car Assessment Program (ANCAP). It’s an independent organisation “providing consumers with transparent information on the level of occupant and pedestrian protection provided by new vehicle models … as well as their ability – through technology – to avoid a crash.”
ANCAP crashes and assesses new cars and awards them between one and five stars. Five stars means the car achieved high standards in crash tests and has advanced safety assist features. The ANCAP test criteria evolve to reflect improvements in safety and developments in crash-avoidance technology. This means a car awarded five stars a decade ago won’t be as safe as one awarded five stars today.
To buy your new car you’ll need to visit a dealership. These dealers are independent businesses that have a contract to sell cars from certain brands. For example, Capital City Motors in Wellington are the local franchise holders for Ford and Mazda.
At the dealership, you won’t find the virtual model you created on the website configurator. Dealers hold an inventory of new cars – that’s the stock you see in the showroom and get to test drive. If you really want your ideal car, the dealer will need to order it. You’ll have to wait to receive it, perhaps a few months, as it needs to be built to your specification and shipped in.
Alternatively, you can accept a compromise with a car available from the dealer’s stock. You are unlikely to get the exact colour and options you want, but you could get close. The advantage to you is the price. You’re in a good negotiating position – the dealer will have already paid for the car and it’s taking up space in their showroom.
It’s worth shopping around dealerships to find existing stock close to your ideal car – you can often search dealer stock on the manufacturer’s website.
Tip: Look out for manufacturer-supported “special editions” or option package offers. You’re likely to get a “loaded” car for much less than the cost of the individual options this way. Towards the end of a model year, you might see “run-out specials” packed with options, intended to clear out vehicle stocks.
“Vehicles are hardly ever sold for their recommended retail prices” – that’s according to the Motor Industry Association, the organisation representing the new-car industry. Dealers can negotiate any price they like with a buyer, and you’d be a fool not to haggle hard. You’ll not just appreciate the effort through a reduced purchase price, you’ll also benefit when you come to sell as it’ll offset the depreciation.
Income for a dealer and its salespeople doesn’t just come from squeezing maximum profit from every sale. A dealer may get bonuses from the manufacturer for hitting sales targets, or incentives to sell particular models. It’s likely the salespeople work on commission.
When looking for a new car, take advantage of big advertised sales. They’re often supported by manufacturer rebates – a discount that doesn’t affect the dealer’s bottom line. Manufacturers may also have zero- or low-interest financing offers available.
In 2000, Honda introduced a price promise, “all new car buyers will get the same good price on a new Honda, no matter who they are, where they live and what time of the month they buy”. It means Honda dealers don’t negotiate the price. Toyota has also ditched the dealer model and now sells directly through “agents”. They call it “Drive Happy”. Toyota agents don’t hold stock or get commission, and there’s no haggling. This results in the list price of its cars being reduced considerably. Toyota and Honda reckon consumers get a better experience and are more likely to get the car they want, rather than the car the dealer wants to sell to them.
Mats cost how much?
Tip: You might think a new car comes with floor mats as standard. Nope, they are usually an option and come at quite a cost (for example, front and rear carpet mats for the Holden Spark are a $220 option). They’re supplied by the dealer and add to its profit. You should use them as a negotiating point – the same goes for anything else dealer-fitted, such as tow bars or roof racks.
The price you negotiate isn’t what you’ll pay to drive your new car away – the dealer will add “on-road costs”. These are a sly form of drip pricing. There is no regulation about what they can include, or how much a dealer can charge. They typically add at least $400 and can be more than $1000.
Some of the costs are fair enough: vehicle registration and number plates, a warrant of fitness and a tank of fuel will cost about $400. However, dealers can also include items you might think would be covered as part of the sale, such as cleaning, grooming and a pre-delivery inspection.
You should ask what the on-road costs include, and reject any you don’t think are reasonable. If you are paying more than about $400 to get your new car on the road, question it.
Peace of mind is a reason many choose to buy new. New cars should be cost-free for the first few years, apart from regular servicing and costs to replace wear-and-tear items like tyres.
New car warranties vary, but expect a minimum of three years or 100,000km. The warranty lasts for the time stated or kilometres driven (whichever comes first). Some manufacturers offer extended warranties that kick in once the initial warranty has expired. These may be limited to major systems (such as the powertrain). For example, Mazda has a three-year, unlimited-kilometre, comprehensive warranty, then a further two-year “Major Component and Safety System” warranty.
You should get your new car serviced at a franchised dealer, otherwise the warranty may be voided. Servicing, typically every 12 months or 15,000km, should be straightforward and inexpensive. A service package may be included for the first few years, or you could negotiate this as part of your purchase. For example, Holden includes three-year routine servicing (parts, labour and lubricants) with all new models.
While you’d hope you didn’t need to use it, new cars are increasingly coming with roadside-assistance plans of three to five years.
Buying a car
Should you buy new or used? What should you look out for when buying from a dealer, and what are you rights? We’ve tackled the big questions around buying and owning a car.