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How to buy a car in New Zealand

Wednesday 8 April 2015, 12:25PM

By Harold French

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For most of us, buying a car is an exciting and somewhat daunting process. The first step in that process is understanding what you can afford; while there is no hard and fast rule, an easy point of reference is the ‘20%’ rule: no more than 20% of your income should go to car payments.

Even better, before you go looking for a suitable vehicle, know what your budget is in advance: some companies, like GE Money, will provide pre-approved finance – the process of getting that approval typically requires you to disclose your earnings and expenses to provide a view of affordability independent to your personal assessment.

While the paperwork involved in getting pre-approved finance might be a little dull, it soon gives way to the excitement of looking for a vehicle.

If you are buying a brand new car off the showroom floor, you’re in luck: it is quite difficult in this day and age to find a ‘bad’ car (market competition and regulations combined mean poor quality products generally don’t make it to market). Do be aware, however, of ANCAP safety ratings and do some investigation of the running costs of the vehicle you choose; the NZTA provides a very handy tool to make that assessment (just as good for new or used cars!).

However, for the greater majority, a used vehicle is a far more attractive and realistic proposition. More attractive, because with the depreciation of new cars, you get a lot more bang for your buck (being careful means you don’t get more ‘banger’ for your buck); realistic, because your ideal car might be priced within reach, requiring fewer compromises over a new one.

Unless you know a lot about cars, buying from a private seller isn’t recommended. That’s because you have very little recourse should something go wrong; as Consumer makes clear, the Consumer Guarantees Act and Fair Trading Act don't apply – and even if legislation does apply, it can be difficult and expensive to resolve disputes after the fact of a sale.

There is no shortage of car dealers in New Zealand; choosing the right one probably starts with identifying those which stock the sort of vehicle you are after as a first step. From there, you need to assess the reputation of the dealer. With Trade Me a practically de facto method of finding a car (or anything else) these days, that’s made somewhat easier as you can check the feedback ratings to see if other customers have had a good experience. Also essential is to be sure the dealer is an MTA (Motor Trade Association) member; this professional body oversees a code of conduct and standard for the industry.

Always make use of a service like CarJam to check the vehicle history and, most importantly, to see if there is any money owing on it. It should go without saying (but we’re going to say it anyway) that the car should have a warrant and rego; a recent warrant is preferred.

Back to finance: while you may or may not have pre-approval, it is only after you’ve found the wheels of your dreams that you are going to have to start paying for it. Cars are expensive, not only to purchase but also to run. The selection of the right finance company for you should be on the basis of the company’s reputation and, very importantly, on the competitiveness of the interest rate it is prepared to give you. Paying too much interest means – you guessed it – owning your car is more dear than it has to be.

With the competitive environment in the New Zealand market,  there are a number of sound options for finance, and often, a good interest rate can be combined with an easy (and quick) approval process. For example, www.gemoney.co.nz provides vehicle loans from around 12% per annum; the interest rate you pay will depend on the type of security (property, movable or immovable as collateral) you can provide as well as some other factors, including credit history and income.

A final word of advice when choosing a finance company: look for one which provides a range of financial services, not just the car loan (and seek out a reputable lender, too). By building up a sound credit history with that organisation, you can easily access those other services, such as personal loans, credit cards and insurance.