9 tips to avoid a lemon when financing a used vehicle

So, you're looking for a second hand vehicle?

Posted October 2016 by NZCU Baywide

Purchasing a used vehicle

So, you’ve just applied for a loan for a new car. Exciting! Yet instead of splurging on the flashest set of wheels you can find, like many New Zealanders you’ve decided to buy a used vehicle instead. It’s a wise decision. You see, there’s nothing wrong with a used vehicle. In fact, you can pick up a used vehicle that looks great, runs well and will last for years, all while saving yourself some money

So long as you know what you’re looking for.

This doesn’t just apply to used cars, either. Whether you plan to buy new or used, purchasing a car can be a daunting experience. How do you know you’re getting a good deal? More importantly, how do you ensure you don’t buy a lemon? Aside from knowing your rights, the key is to go into the buying process prepared, which is why today we’re helping take some of the pressure off and make the process easier with our 9 easy steps to buying a used vehicle.

1. What do you need?

Before you begin searching for a car, you need to know exactly what it is you’re looking for in your next vehicle. As well as what little extras you’d love to have.

Do you have a family with a few kids to get between sports practice and sleepovers with friends? If so, you probably won’t be looking at a single cab utility. On the other hand, if you’re a trades person who needs to tow a trailer or cart work gear around, a tiny hatchback doesn’t make much sense either.

Make a list of the features you’re looking for in your next car, and stick to it!

  • What will your car be used for?

  • Is it just to get you and your family around town?

  • Will you be using it for work, too?

While you’re at it, look into:

Remember; most cars can get you from A to B, but doing so safely, securely, and comfortably is another thing entirely. So now that you have a list of requirements in hand, you’re ready to start.

2. Set yourself a budget

We all have a budget. Some of us might have a lot to spend, while others will be wanting to get the most bang for their buck. Either way, it’s important to decide on a realistic budget for your next vehicle. With many New Zealanders struggling to manage their debts, splashing out for the sake of it probably isn’t the best idea. So work out how much you can afford to spend. Write it down. Then stick to it.

Tip! When setting your budget, be sure to get quotes on your existing car for a trade in. Remember to include this in your budget.

3. Find the best car finance deal

The finance arrangement you choose for buying your car can be just as important as the car you choose to purchase, and in just the same way as it is important to shop around for the best deal on a car, you need to shop around for the best deal on a loan.

When it comes to financing your car, compare your options. Weigh up the terms of the finance and interest rates. Include any fees. And don’t forget to improve your credit score and ensure you’re in the best financial position before you submit your application. The better the terms, the better the car you’ll be able to afford.

To be in the best place to negotiate on your new car, you need to be able to seal the deal and have your money ready to go. To do this, you need to get your personal loan approved and funded before you start the search, then you’re ready to buy as soon as the right one comes along.

4. Do the legwork

So far you’ve:

  • Decided on the features you require from your next car

  • Worked out how much you can afford to spend

  • Applied for and received your financing

Now it’s time to find the car that best suits your needs. You can go through your local car dealership or browse any number of websites that sell used cars online in New Zealand, such as:

When shopping for your car, be sure to compare as many vehicles as you can which boast similar features to what you’re looking for. Remember, price is only one factor, so don’t just compare prices.

While you’re at it, make sure you research any known issues with a given car make or model. Some deals can be too good to be true, and some makes or models may suffer from known issues that a quick Google search would have alerted you to. So stay informed. Carry out some research. Look at the fine print. A cheap car can be a great bargain, but it can also come with a number of issues that will cost your more in the long run as you have to pay for expensive servicing and repairs.  

All of these checks are even more important when buying privately, as a private seller doesn’t have the same obligations to you as a registered trader does.

5. Take the car for a spin

Now that you’ve done your homework, you should have a list of potential cars that suit your needs. Now comes the fun part: taking them for a test drive. When you finally sit down behind the wheel, be sure to check for the following things (among others):

  • Is it comfortable?

  • Can you easily adjust the seats and steering wheel, read all the different gauges and see across the dashboard?

  • Do you have enough visibility and can you adjust the mirrors easily?

  • Check right around the exterior for tyre quality, dents and scratches, or any other obvious defects

  • Check the registration label and warrant of fitness, which should both be visible on the windscreen of the vehicle - ensure they are both current

  • Make sure, particularly if buying through a private seller, that the vehicle’s insurance covers you driving, otherwise an accident could leave you with a nasty surprise

  • Make sure it feels right for you when driving it

  • Walk away - even if you think it’s the one, you don’t have to do a deal right there and then, no matter what the seller tells you

6. Carry out a background and mechanical check

This is especially important when you are buying a car privately. Make sure you obtain a Vehicle Information Report, which will tell you a lot of the important stuff like:

  • Who currently owns the car

  • Has it ever been reported stolen

  • If the current owner still owes money on it or whether a bank has security over it

  • Whether is has been marked as flood damaged or having had a tampered odometer

  • Its fuel rating

  • Any unpaid road user charges

This report will help you make an informed decision about the car, and ensure you’re not caught out by any nasty surprises. The last thing you want is a repo man knocking on your front door a week later, informing you that they’re taking your new car.

From here, you should arrange for an accredited inspector to give the car a full mechanical check. Through this process they’ll be able to uncover things that you might have missed or may not be aware of.

By doing so, you’ll ensure you’re not caught out buying a dud. The investment required to let a professional uncover any serious defects the car might have is a far better option when compared to the stress you can face if you find a problem once you’ve already signed on the dotted line.

Make sure you let them know of anything you thought might be a problem on your test drive. If the inspection uncovers a serious fault, remember that you don’t have to buy the car - you can, and probably should, walk away.

7. Do your paperwork

The less-than-exciting part of buying a new car is the paperwork. However, in order to protect yourself, it is incredibly important to get your agreement with the seller in writing.

Make sure that your written agreement covers the basics, such as the agreed price, how it will be paid, the names of the parties and their signatures. The agreement should also include a declaration that the car does not have anyone else with a claim to it and also that it is subject to successful qualified inspection. Don’t trap yourself into buying the lemon we mentioned above!

8. Don’t forget to insure your car

As soon as you sign on to buy the car, before you drive it anywhere, you need to make sure that it has the necessary insurance. Failing to insure your car straight away, even before closing the deal, places you at risk of losing your car as soon as you drive away from the seller.

You might also want to consider an alarm or an immobiliser if the car doesn’t already have one. These will form an extra layer of protection against thieves getting a hold of your investment, and possibly lower your insurance premium at the same time.

9. Transfer the car ownership

You don’t officially own your car until you transfer the ownership to your name. To do this, you will need to complete a MR13B form and take it to the New Zealand Transport Agency.

You can do this change of ownership with the NZTA online, which is much easier than taking in the paper form. The seller will need to complete a form MR13A and you, as the seller, will need to complete the MR13B.

When transferring the ownership, you will need to provide proof of your identification such as your driver license or another form of approved ID that contains your full name, date of birth and signature.

It is best to get this done straight away, but by law you have seven days at most to do so. This prevents both you and the seller having to wear each other's fees, charges or traffic fines. Your new Certificate of Registration (rego) should arrive by post within 10 working days. Keep the rego certificate in a safe place along with the rest of the vehicle's documents.


Enjoy your new car!


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