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So, you’ve got your shiny new P plates and you’ve got nothing but rubber to burn? Of course, the rubber is the least of your worries — it’s all the other stuff you need to pay for before! Becoming a newly minted motorist can eat up a lot of your cash when you’re just starting out. So, what are the hard truths when you’re a newly licenced driver? Here’s some bitter pills to swallow — but it’ll do you a world of good!
Start saving as early as you can
Thinking you’ll get a car loan for tens of thousands and drive away in a sporty little coupe the next day is not a realistic goal. New drivers are higher risks due to a lack of experience; and usually having little or no credit history. So even before you’ve got your L plates, you’ll need to save as much as you can for a car. You’ll need it for a deposit, a full up-front payment, or reserves for on-road costs. Which can mount up.
On-road costs are … costly
There are quite a few on-road costs before you can move your car even an inch. On-road costs are a combination of government charges and in some cases, dealer fees. The first compulsory fee, whether you’re buying from a dealer or private seller is stamp duty. You need to pay this to the state revenue office. The next compulsory cost is CTP (compulsory third party) and registration. You pay this to your state road authority. Other costs are fuel, insurance, tyres, and scheduled servicing. You need to factor all this in to buying your car — and insurance could cost you more as you’re a higher risk with little experience. Rego, CTP, and comprehensive car insurance that’s below a Rating 1 could cost you between $1,000 and $2,000 a year.
Swallow your pride and shop within your budget
Finding a car within your price range can get a bit ugly as you’re lopping off options with five figures as you browse online classifieds. But you need to buy what you can really afford, especially when you’re just starting out, as personal finance expert and Savvy Managing Director Bill Tsouvalas says. “You need to set a strict budget because the reality is banks and lenders will be reluctant to lend to you and dealers and private sellers alike will prefer more established buyers. It’s a harsh reality of life, but you’ll need to temper your expectations if you’ve just got your licence — but that doesn’t mean you have to settle on a bomb that’s dripping oil and has one headlight out!”
Getting a car loan to avoid sour realities
Though Bill says that lenders and banks are a bit more wary about giving big loans to newly minted drivers and older cars, it is still possible. Getting a car loan can help you avoid paying outright for a clunker that’ll break down halfway between the dealer and home. You’ll be able to include later models in your budget.
“If you have a substantial deposit, perhaps over 20% or so, banks and lenders will say you have enough skin in the game to help you over the line and even get a competitive interest rate. If you need to splash out a bit more on a later model with a good service history and fewer owners, do it; it’ll save you way more in the long run. It also means you’ll get more years out of the car than buying a bomb and doing it all over again two or three years down the line.”
Less grunt means more value
Though a lot of us wish we could cruise down the highway in a V8 muscle car, they’re not only expensive to buy but expensive to run and register. An easier way to help both the environment and your hip pocket is to simply buy a car with a smaller engine. A four-cylinder may have less power, though for the most part, you will find yourself driving from A to B solo and without a heavy load. Therefore, bigger cars with bigger motors are often times simply unnecessary. It is an easy decision to make: if a smaller car is less expensive to register, insure and repair, then go for it. If one of your big goals for this year is to start flying solo with your own set of wheels, then following this advice should set you on the right track sooner.