The science of saving for your first car

Buying your first set of wheels is as exciting as it can be daunting. What can you actually afford? Should you buy old or new? Should you save or borrow? Where can you find the best deal for new car finance? It’s a lot to take in, so your best bet is to take a planned approach starting with some big decisions.

1. Old or new, which is for you?

We can’t all get shiny Mercedes-Benz SUVs as our first cars, ala 16-year-old Kylie Jenner. Think about what you need from your car, and what you want, and your first car will usually be somewhere in between. A work vehicle? Something economical, that doesn’t burn through fuel (and your wallet)? A small car that’s easy to reverse parallel park? One that has room for baby seats in the back? Research both new and used prices.

Keep in mind that some new car loans limit how old the car can be. For example, our New Car Loan which allows you to borrow the full purchase price of the car plus on-road costs and insurance up to $75,000 (no deposit needed), gives you the freedom to pay out the loan early without extra fees and gives conditional pre-approval. But this New Car Loan is only available for purchase or refinance of vehicles up to three years old. (The age of the car is determined by the build date.)

Should you buy a new or used car? 7 things to consider… read here >

2. To save or to borrow, that is the question.

If this is your first car loan, your best plan of action is to have at least some savings (aim for minimum 20%) to ease some of the pressure of servicing the loan, and to get into good saving habits to set you up for regular repayments. And having proof of good savings habits can also help you secure a loan if you don’t have full-time employment. Obviously, the more you save the less you need to borrow.

Are you a good candidate for car finance?

To get a car loan, you need to be employed and have good credit history (which means no bad debts like previous loans, phone bills, credit card debt, etc. hanging over your head). You need to be able to show you have a stable job, ideally full-time. If you have casual, part-time or contract work, you can provide evidence from your employer to your lender that you have had consistent work for 12 months.

Do you need a guarantor?

Not always. For example, our New Car Loan doesn’t take loan guarantors, but if you need mum or dad to help with your loan there are other options.

Isn’t it easier to just get finance from the car dealer?

Nope. This will come down to your research. It’s worth asking (they’ll usually offer the information without you asking – that’s the beauty of commission-based sales!), but do resist any salesy push to sign on the spot. You could end up getting trapped in a loan that you can’t pay out early and will end up costing you more than it should.

3. How to save for that car like a superstar.

So, now that you’ve picked the wheels you want (or at least narrowed it to a few similar-priced options), you’ve researched your registration and insurance costs, estimated what you’ll need for servicing and petrol to keep it on the road, and you’re now imagining yourself sliding into the driver’s seat. It’s time to get started saving.

Work out what you want, what you really really want (to borrow).

How much is the car you want to purchase, less any deposit you plan to have, plus any additional expenses you need to cover? (Eg. if the car is $20,000 and you have $0 deposit you’ll need $20,000 finance plus on-roads like registration and insurance. If you have $4,000 saved as a deposit you’ll only need to borrow $16,000 plus the extras.)

Saving tips.

Motivate your money manager within and watch your savings grow.

  • Set clear goals – and stick to them. Align your savings with your income. Paid weekly? Set a percentage aside each week.
  • Manifest it – you’ve probably heard people talk about manifesting what they want. Whether you think it’s a load of fluff or not, manifesting is simply the law of attraction. If you believe it you will achieve it.
  • Vision board – the easiest way to begin manifesting? Create a vision board with images of the car you want, your savings goals and other visual triggers to keep your eye on the prize.
  • Use budgeting tools like SmartBudget to make bill paying and money saving easy.
  • Enjoy life – remember to allocate yourself a little spending money so you can treat yourself occasionally. Saving is something you should do always, so it needs to be sustainable.

4. Don’t be scared to ask for advice.

Research your finance options online, ask friends who’ve borrowed about their experiences, talk to your parents and ask financial institutions what they can offer you. Buying your first car is a big deal, so do everything you can to enjoy it and not regret it!

Each case is unique, and we pride ourselves on offering Genuine Advice, Every Time.

Click here for information on our New Car Loan.

Read How to apply for a car loan.