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Used Car Buying Guide

Name: Used Car Buying Guide
Creator: Savvy
Published: 2020-12-07T08:43:44+10:30

It’s crucial to know what to look for when purchasing a used car. You can find out all about it with Savvy in our comprehensive used car buying guide.

Published on December 7th, 2020

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Australia's used car market presents a wide range of options, catering to diverse needs and budgets. Indeed, according to the Australian Automotive Dealer Association (AADA), over two million used cars were sold in Australia in 2023. However, navigating this marketplace isn’t always easy if you aren’t familiar with the process. That’s where Savvy's used car buying guide can help you out.

We’ve broken down key information and tips when it comes to buying a used car to help you make the best call for your needs, from what to research ahead of time to the questions you should ask your seller and more. Find out all you need to know about buying a second-hand car with us today!

First of all, why buy a used car?

Buying a used or second-hand car is one of the best and most accessible ways to get on the road. It’s especially great when you don’t want to spend too much on buying something new. Buying a used car, even if it’s less than a year old, works out to be much cheaper than purchasing a fresh-off-the-lot new car.

This may be great for people on a budget, those who don’t drive often or for someone who is looking for their first car as a teenager or young adult. If you’re an enthusiast, buying a used car is also one of the many ways you can expand your collection. Some used cars may have after-market modifications which are more suited to your tastes.

Where can I buy a used car?

There are three avenues through which you can buy a second-hand car – a licenced motor car trader (or dealer), in a private sale or at an auction.

Licensed dealer

Buying from dealers are a safe option because all cars sold are given a “cooling off” period if you change your mind (depending on where you live), are guaranteed to be debt-free and in some cases are “certified used” with an extended warranty. You will also get to inspect and test drive the car in most cases. Dealership purchases can bring more peace of mind that the car you’re buying is in a roadworthy condition.

Private sale

Private sales don’t have the same protections as dealers, but depending on who you buy from, you may get to test drive and inspect the vehicle close up. Since you’re dealing with the seller personally, they may know the history of the car better than a dealer or auctioneer. However, it’s your responsibility to research the car’s history to avoid paying for a car that isn’t what you thought you bought.

Auction

Auctions are good for saving money, but in some cases, you will not be able to test drive or inspect the vehicle before you bid. Some auction houses are less reputable than others and may not even provide a proper roadworthy certificate. Auctions are best if you know exactly what you’re looking for or are a long-time motoring enthusiast.

Dealership vs private seller: which is better?

There's no one-size-fits-all answer to whether a dealership or private seller is better for buying a second-hand car in Australia. Both options have pros and cons, and the best choice depends on your priorities and budget.

Dealership

Pros:

Convenience: easier buying process with all the documents handled by the dealership, meaning there’s less paperwork than when you buy a car privately.
Greater peace of mind: dealerships perform inspections and offer warranties on some used cars, providing more reassurance and quality control than buying privately.
Trade-in: you might be able to trade in your old car towards the purchase of a new (used) one at a dealership.

Cons:

Price: used cars at dealerships are generally more expensive than those sold by private sellers due to dealership overheads and potential profit margins.
Negotiation: additionally, because of this, there’s often less room for negotiation on the price compared to private sellers.
Pressure: some salespeople at dealerships might employ pushy tactics to make a sale and try to convince you to add certain extras.

Private seller

Pros:

Price: buying from a private seller is generally cheaper than buying from a dealership, as private sellers aren’t looking to factor in profit margins.
Negotiation: there’s often more room for negotiation on the price, potentially leading to a better deal.
Unique finds: you might find rare or interesting cars not readily available at dealerships that pique your interest as a buyer.

Cons:

Risk: the onus is on you to inspect the car's condition and history to avoid buying a lemon.
No warranties: statutory warranties aren’t required for cars purchased from private sellers, so any issues after purchase may fall on you.
Paperwork: you'll need to handle the transfer of registration and ownership paperwork yourself when buying a car privately, as well as rely upon your seller having all the information available.

Think about the type of car you need

Deciding what type of car best suits your needs is another crucial step. Consider your daily driving habits: will the car be used for commuting, errands or road trips? How many passengers will you typically be carrying? Do you need ample boot space or is fuel efficiency a top priority?

Answering these questions will help narrow your search and help ensure you're looking at vehicles that align with your lifestyle. For instance, a fuel-efficient hatchback might be ideal for city driving, while a roomy SUV might be better suited to a growing family or outdoor adventures.

Know the key questions you must ask

You should approach the car purchase armed with key questions to ask your seller, as these can help you work out what state the car is in, as well as whether the seller is being honest. Some of the main ones to ask include:

Can I check the car’s service and repair paperwork? A seller who isn’t forthcoming with this information indicates there may be something to hide.
How many owners has the car had? The more owners a car has had, the harder it is to keep track of all the information you may need.
Why are you selling the car? This will provide you with a clear insight into the seller’s mindset. An answer like upsizing for a growing family is better to hear than a vaguer answer.
Does it have any existing damage or has it been repaired? Look for upfront and honest answers here. This can usually be verified by an independent inspection.
Has the car been written off or stolen? This information can be checked independently, so you may wish to walk away if the seller isn’t honest.
Is there any finance owing on the car? The same applies here: if they don’t disclose a loan debt, it’s probably time to move on.
Is the car still under warranty? It’s good to know whether potential faults can still be covered by your car’s warranty.
Has the car been modified? Aftermarket modifications are important to know about, especially if they don’t comply with Australian law.
How many kilometres are there on the odometer? The fewer kilometres the car has been driven, the better.

Additionally, having a request to take the car for a test drive or inspected by a mechanic turned down may also be a sign of something not being quite right.

Check the car’s servicing and repair history and registration

Before committing to buying a second-hand car, reviewing the vehicle's service and repair history is vital. Here's how you can check a car's history and registration in Australia:

Ask the seller for service records: the seller should have the car's service booklet and/or paperwork for past maintenance work. These documents can provide valuable insights into the types of services performed, kilometres driven at the time of service and any major repairs undertaken.
Check your state or territory government site for registration information: all states and territories keep records of vehicle registration and CTP insurance, so you’ll be able to search your government’s site to see whether it’s currently registered and insured.
Engage a professional service: some Australian organisations offer comprehensive car history checks for a fee. These reports can include details on past registrations, written-off status, odometer readings and sometimes even service history information gleaned from authorised mechanic databases.

Find out if the car has finance owing

On top of checking your vehicle’s history, it’s essential to know whether the car you’re looking to buy is still under finance. There are ways to do this for free or for a small fee, including the following:

PPSR check: the Personal Property Securities Register (PPSR) is a government register which keeps track of whether assets are debt-free, written off or stolen. As of March 2024, this service costs $2 to use.
Ask the seller: a step you could take before this is to ask the seller directly. Honest sellers will be upfront about the debt and may seek to arrange with you who’s responsible for covering it. However, if they say there’s no finance owing, it may be worth a PPSR check.

A clean PPSR report indicating no finance owing provides peace of mind, knowing you're purchasing the car outright and won't face any ownership complications in the future. There may otherwise be a risk of having the car seized if there’s still a debt attached that you weren’t aware of.

Consider your budget and research used car prices

Knowing how much you can comfortably afford upfront prevents you from getting swept away by an enticing but ultimately expensive option. Unexpected repairs or ongoing costs can be a drain on your finances, which can cause stress if the initial purchase price stretches your budget. You should also budget for costs such as registration and, if you’re taking out a car loan, interest and fees.

Once you have a budget in mind, you can go about researching models within that range. Doing so can help you avoid being overcharged for your car and negotiate more effectively with your seller. Consider the age, size, mileage and any additional features with similar cars on the market right now to give you a better idea of what you should be paying.

With this in mind, you can make an informed decision on whether the car being sold is at a reasonable price. You should also go to the dealer, private seller or auctioneer (that is, if the auctioneer allows you to) and inspect the car, inside and out.

Keep an eye on potential running costs

Beyond the purchase price, it's vital to consider the ongoing costs of operating your car. For example, factor in fuel efficiency and how much it’ll cost to fill up the tank regularly. Research insurance rates, which can vary depending on the car's make and model and your age and driving history.

Remember to budget for routine maintenance such as oil changes and tyre rotations. Understanding these ongoing expenses ensures you can comfortably afford not just the car itself, but also the long-term financial responsibility that comes with vehicle ownership.

Making sure you have enough room in your budget for ongoing costs before you buy can save plenty of stress down the line, according to Savvy Managing Director Bill Tsouvalas.

“It’s easy to get tunnel vision and look past a comfortable budget for your household if you come across a car you like”, he said.

“You’ll always have petrol, diesel or charging costs associated with your car, as well as servicing and potential repairs, so think about these carefully before you choose your vehicle.”

Bill Tsouvalas, Managing Director - Savvy

What to check when buying a used car in Australia

Inspecting the vehicle thoroughly is another crucial step. Here's a breakdown of some key areas to check yourself, alongside information on getting a professional inspection:

DIY checks

Exterior: keep an eye out for misaligned panels, uneven gaps between body parts, or overspray on the paint, as these all indicate prior repairs. The same applies for rust bubbles or fresh paintwork. It’s crucial to do this in good lighting, as darkness or rain could make scratches and dents less visible.
Under the bonnet: look for leaks, loose hoses, build-ups of engine oil or excessive corrosion and rust. Check the engine oil level and colour; clean oil is preferable. Dirt in the engine and other residue throughout this area of your car could point to leaks, which may be costly to fix.
Engine: start the engine and listen for any unusual noises like knocking, ticking or grinding. While the engine is running, check for excessive smoke coming from the exhaust. You should start the engine cold wherever possible, as this will give you a better indication of whether the car is in working order.
Tyres: another area to consider is the amount of tread left on the tyres. If there’s too much wear, you could be up for new tyres soon after you make your purchase, while uneven wear could point to wheel misalignment.
Interior: inspect the seats, carpets and upholstery for rips, tears or excessive wear. Test all the electrical features like lights, air conditioning and power windows. Ensure the dashboard has no warning lights illuminated.

Getting a professional inspection

While a thorough self-inspection is valuable, consider getting a qualified mechanic to perform a comprehensive independent inspection. This can uncover hidden issues you might miss and provide valuable insights into the car's overall condition. Many mechanics in Australia offer pre-purchase inspection services for a fee.

Take it for a test drive

A test drive serves multiple crucial purposes when buying a used car in Australia. Firstly, it allows you to assess the car's overall driving experience. This includes factors like comfort, handling, responsiveness and how well the engine performs.

Don’t just test it in “normal” conditions: arrange a test drive in a low-traffic area or private lot so you can check how it runs non-typical situations, such as bumps and tight corners or its performance over 100km/h.

Secondly, a test drive provides an opportunity to check the functionality of various features. Let it sit to hear if the engine rattles or struggles during idling. You should also test electrics and mechanical functions, such as:

The radio/audio system
Steering-wheel alignment
Brake wear and tear
Air conditioning/climate control
Smoking or sputtering exhausts
Power windows and other accessories
Headlights, indicators, hazards and fog lamps

If any of these don’t work or don’t work as intended, you’ll be able to figure all that out before you buy instead of getting a nasty surprise.

Organising finance

After you’ve agreed on the price, deposit and date of collection, you should organise your finance. If you already have the money without the need for taking a loan, you should ask if you can pay with a bank cheque, cash or any other method you prefer.

Use a repayment calculator

If you’re unsure about how much you can afford, using a repayment calculator is a trusted and easy way to figure out what you can expect to pay each month, fortnight or week.

0% p.a. finance

Many dealers offer finance when you buy used or certified used. You should be careful, though; many low or “zero” percent finance rates may actually cost you more in the long run.

Bank loan

It’s a common misconception that you need ask a bank for a loan. There are many lenders and brokers out there which you can find online. You should also consider checking your credit file to sense your borrowing position.

Compare your options

Above all else, it’s important to consider as many finance options as possible when it comes to getting a loan for your car. This will help you secure the most affordable deal available to you with more confidence. At Savvy, we’re partnered with over 40 lenders nationwide to help you do just that.

Getting car insurance

After you’ve chosen your car and have your finance lined up, you’ll need to take out a comprehensive car insurance policy. You’ll need to know what make, model and year the car is before you get started.

Car insurance: if you’re on the road, you need car insurance in case of accidents, theft or property damage. All lenders will require you to take out comprehensive car insurance as a term of the agreement, but you can choose whether to go with their policy suggestion or pick your own.
Loan Protection insurance: Loan Protection insurance can help cover you if circumstances arise which prevent you from doing so. This may be caused by extended illness, injury or sudden retrenchment or redundancy at work.
Tyre & Rim insurance: most comprehensive car insurance policies don’t cover broken rims or blown out tyres. Tyre and Rim insurance covers all tyre and rim damage, but it’s important to consider whether this policy is worth the investment.
GAP insurance: GAP or Motor Equity Insurance covers the “gap” if your car is written off and the payout is less than your amount owed on the loan. Some policies cover excess payments and replacement vehicle costs.
Vehicle warranty: some dealers and brokers offer an extended vehicle warranty, which may cover basic repairs, mechanical failures or scheduled servicing within a set time period. Ask a dealer or broker for more information.

It’s important to note that comprehensive car insurance is the only mandatory option as part of a car loan agreement. Consider whether the others are worthwhile to have in place before you agree to purchase a policy.

Paperwork, stamp duty and other boring stuff

Once you’ve inspected the car and had a test drive, now comes the boring stuff. First, you should sign a statement that includes the agreed price, deposit and date of collection. Once that’s done and you’ve got your finance and insurance ready to go, you’ll need to transfer the car registration and pay stamp duty.

If the car is not currently registered, you’ll have to register the car at your state or territory road and traffic authority. You must pay stamp duty when purchasing a motor vehicle. It doesn’t matter if the car is new, used, bought at a dealer or privately, you will have to pay stamp duty of some kind (unless you qualify for an exemption).

A dealer will collect your stamp duty along with other charges when buying a new, certified used or used car. In a private sale, you must calculate the stamp duty yourself and pay it to your state’s revenue office.

Used car buying checklist

Download your used car buying checklist

If you're looking to head out to view a used car, you can bring this checklist with you to ensure it meets all your needs.

Car purchase cooling off periods by state and territory

Used cars can come with cooling off periods when you purchase from a dealer, meaning you can change your mind on the car you buy. These varying depending on where you live in Australia and are as follows:

State/territory	Period	In writing?	Fee charged	Other conditions?
ACT	Three days	Yes	Greater of $100 or 1%	N/A
NSW	One day	Yes	Lesser of $250 or 2%	Finance must be arranged with dealer
QLD	One day	Yes	Up to $100	N/A
SA	Two days	Yes	Lesser of $100 or 2%	Fee comes out of deposit of up to 10%
VIC	Three days	Yes	Lesser of $100 or 1%	N/A

The Northern Territory, Tasmania and Western Australia do not have any used car cooling off periods legislated (as of March 2024).

Used car warranties by state and territory

Additionally, all states and territories require dealers to offer statutory warranties on used car sales. The cars that can qualify for these warranties must meet certain criteria in relation to their age and kilometres driven (and, in some cases, price). The requirements are as follows:

State/territory	Warranty period	Car age limit	Mileage limit
ACT	First of three months or 5,000km	Ten years	160,000km
NSW	First of three months or 5,000km	Ten years	160,000km
NT	First of three months or 5,000km	Ten years	160,000km
QLD	Class A: first of three months or 5,000km Class B: first of one month or 1,000km	Class A: ten years Class B: over ten years	Class A: 160,000km Class B: over 160,000km
SA	1. First of three months or 5,000km for cars purchased for over $6,000 2. First of two months or 3,000km for cars purchased for between $3,001 and $6,000	N/A	N/A
TAS	First of three months or 5,000km	Seven years	120,000km
VIC	First of three months or 5,000km	Ten years	160,000km
WA	For cars purchased for $4,000 or more: 1. First of three months or 3,000km 2. First of one month or 1,500km	1. Ten years 2. Between ten and 12 years	1. 150,000km 2. Between 150,000km and 180,000km

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Thomas Perrotta

Thomas Perrotta is the managing editor of Savvy. Throughout his time at the company, Thomas has specialised in personal finance, namely car, personal and small loans, although he has also written on topics ranging from mortgages to business loans to banking and more. Thomas graduated from the University of Adelaide with a Bachelor of Media, majoring in journalism, and has previously had his work published in The Advertiser.