Getting a Car?

On October 11, a reader named Mel posted a query about cars for new migrants on a recent post of mine: Errands. Actually, I already responded to the comment, but I just want to elaborate on it further here.

Mel wrote:

May I ask your opinion on purchasing a car upon arrival in Melbourne. I think it’s practical to get a 2nd hand but my husband prefers brand new. However, since we have no credit history or credit card for that matter, how can we go about in applying for a car loan?

In our case, we didn’t buy our own car until my third year in Australia. We found that we could get around just fine by taking the public buses. And that was in Canberra. Here in Melbourne, the public transportation is even better. By that, I mean there are more choices: there’s the bus, the tram and the train. I’ve discussed about the topic of getting around Melbourne in greater detail in an old post if you wanted to know more.

For the sake of discussion though, I’ll just assume you really need a car when you get here. I agree that getting a second hand car is more practical as it would indeed be cheaper than a brand new one. However, like your husband, I preferred a brand new car, so, that’s what we got. But, mind you, we’ve been here for a good three years when we bought our car, so, we’ve already settled down a bit and we had spare cash in our savings to get a car.

In the case of a new migrant, there might be more important uses for the savings. Unless you and your husband have jobs right off when you arrive in Australia, you’re going to need your savings to get you through the first few tough months of job hunting. And then, there are also other necessities like furniture and appliances for your apartment to worry about.

We went with a brand new car because we were pretty sure we won’t be replacing the car for the next five years or so. We knew (and hope) that a new car would last at least that long before we start getting major problems with it. Of course, a brand new car does not guarantee that we won’t have problems with it. But, in my mind, we would less likely have major problems with a brand new car in the short term than if we got a used car.

However, if you’re strapped for cash, then you have no option but to go with a second hand car. But don’t worry though. Second hand cars sold here tend to be reliable. You can have the car inspected by automotive insurance people before you purchase a car so that you know you’re not getting a lemon. Anyway, it’s in their best interest that the car you’ll be insuring with them isn’t going to break down too often after all.

You also asked about car loans. As you may already know, I don’t work for banks and loaning institutions, so I could only guess as to whether you’re actually going to get a car loan or not given your situation.

I do believe though that as long as both you and your husband have stable permanent jobs, you won’t have too much of a problem getting a car loan especially if you aren’t asking for a big amount.

I also suspect that the banks are really just checking for bad credit history. Since you don’t have a credit history yet, you wouldn’t be flagged as having a bad one, right? However, I suggest you get a savings bank account and, if possible, a credit card when you get here so that when the loaning institution makes a check on your finances, it would see that you exist in the system.

In our case though, we didn’t go with a car loan. We tried but got denied a car loan only because I was a contractor back then. Apparently, it was more important for the banks that both Raquel and I were permanently employed than having a good credit history.

Fortunately, we had enough saved cash to buy our car outright. We were also able to afford the car partly because we didn’t go for those expensive SUVs. I frankly do not understand the need for those types of vehicles in the city. If I lived in the bush, sure. But in the city, it’s just not efficient. Our Toyota Corolla is smaller and cheaper than an SUV, but, at least, it doesn’t consume as much petrol and easier to park. And even though it was small, five people could still comfortably ride in it.

Well, I was glad the bank turned down our loan application because we actually saved on not having to pay for the interest on the loan. As you know, a car depreciates over time. By getting a loan, you’ll end up paying more for something that actually loses value over time. By saving money for an outright car purchase, you’ll end up paying much less overall for a car.

In the end, I urge you to consider everything before you go buy a car. Do you really need it for the time being? Would having a car make your life significantly easier? Whatever the case, I hope I was able to provide you with helpful information.

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Published in: on October 20, 2005 at 2:15 pm  Comments (2)