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Posts Tagged ‘Depreciation’

Buying A Used Car In Australia – Two Factors You

0 July 23rd, 2010

Buying A Used Car In Australia – Two Factors You Must Consider Carefully Before Buying A Used Car

If you are going to buy a used or second hand car, what will be your main concerns? What are the most important factors to consider if you wish to buy a used car?

I find myself asking these same type of questions when I was faced with a limited budget and a need to change to a newer, but used or second hand car to cut down on initial investment costs.

I have read from one car club for motoring enthusiasists that it should be the age of the car. Briefly, this car club recommended that I spend the most time to look out for a car that was about 3 years old to get the best value out of a used car which still looks good and has depreciation factored into it.

But essentially was that the main factor I should be concerned about when hunting for a good used second hand car?

Are there more important factors I should rightly spend more time to look at if I am looking for a used or second hand car?

Indeed, I was not too surprised when I read a report from the Monash University Traffic Research Centre and supported by the RACV, Traffic Accident Centre and several other motoring clubs that for anyone looking for a used car, the most important criteria in determining the selection of a used car is not its age, but is the safety the used car provides the driver and the people on the road!

In the world’s largest crash study conducted in 2006 (and updated recently in mid July 2007), results assessed the performance of 305 vehicle models in more than 1.7 million crashes in Australia and New Zealand from 1987 to 2004.

From the study, it is now possible to have a good understanding of how each car model correlated to its age would perform with regards to its crashworthiness (how much protection the vehicle provides the driver in a crash) and aggressivity (how badly the vehicle is likely to harm other road users, including pedestrians and cyclists, in a crash).

By means of this study, if you are looking for a used car in Australia and New Zealand, it will be possible for you to have a general assessment of the protection the used car model will provide you as well as the potential harm it can cause to other road users in a crash.

Dr Newman who led the study reported that of the 305 vehicle models assessed, 87 provided an above average level of driver protection and 72 provided a below average level of driver protection in a crash.

With this report, it is now possible for you to check the make of your car and the model against the report to have a quick understanding of its car crashworthiness and aggressivity.

Further if you are in Australia and if you agree that the aspect of car safety is or paramount importance to you, then before you make a decision to buy any used car, check the make of your car and the model against this Used Car Safety Ratings (UCSR) report.

From this report there are clear indications of some superior makes and models that are standout cars, and where safety is your consideration, it will be wise to give a lot more consideration to these cars when you purchase your next used car.

Buying a Car Can Turn You Upside Down

0 July 9th, 2010

It’s expensive buying a car and it only gets more so as time goes on. Over time, the price of new cars has increased faster than the rate of inflation. This isn’t entirely due to greed on the part of automakers; cars are also more complicated and useful than they used to be. Sure, they were cheaper in the 1960’s, but they didn’t include air conditioning, air bags and video systems. Convenience and safety comes at a price.

With the increase in price comes an increase in the length of time people are taking to pay off their cars. Few people pay cash; most people take out loans and pay over time. The average car loan, which used to be repaid over a period of three years, now averages about six years in duration. That’s a long time to pay for a car, especially if you have no plans to own it for that long.

Taking six years to pay for a car has its advantages, as the payments are lower than they would be over a shorter loan term. Such a long loan does have a significant disadvantage, though – you can find yourself in a negative equity, or “upside down”, situation. This can be a serious problem – if you should total the car in an accident, your insurance company will only pay you the value of the car, and not the amount you still owe.

A buyer is described as being upside down when he or she owes more on a car loan than the car is worth. It’s easy to find yourself in an upside situation, and it can occur under any of the following circumstances:

Insufficient down payment – Cars depreciate as much as 25% the minute you drive them off of the lot. If you haven’t provided enough of a down payment to cover that depreciation, you may find yourself upside down immediately.

Trading in too often – Buyers like to trade cars in and roll their outstanding balance into a new loan. These unpaid debts can contribute to negative equity.

Too long a loan – Five and six year loans often lead to negative equity. You can often avoid it by keeping the length of loans to three years or less.

In order to avoid a potential problem in the event of an accident, you should contact your insurance provider to make sure that you have “gap insurance.” Gap insurance will make sure that you are protected should you have an accident while in an upside down situation. Without gap insurance, you may find yourself still making car payments even though you no longer have a car. That is the last thing any car owner wants.