Buying a new or used vehicle

Introduction

Buying a vehicle is a big financial decision and there can be many traps. Make sure you do your research before you buy.

This guide gives you information on contracts, deposits, finance and insurance for buying a new or used vehicle.

Contracts and deposits

There is no cooling-off period for vehicle purchases in the Northern Territory (NT), meaning you can’t change your mind once you have signed a contract to buy.

Do not sign anything until you are sure you want to buy the vehicle. If you are just looking or thinking about buying there is no paperwork involved.

Contract forms

Read all documents carefully and do not sign anything unless you are certain that you will be buying that car.

Information and contract for the sale of second hand vehicle

This form may be used when buying from a licensed motor vehicle dealer. This is a legally binding contract.

Contract excluding condition that motor vehicle is of standard fit for registration

This is a contract for buying a vehicle from a licensed motor vehicle dealer that is not fit for registration. It must be signed in front of the police or an officer from Consumer Affairs.

Notice to purchaser: sale excluding statutory warranties

This is a contract for excluding statutory warranty. By signing this contract you are agreeing to waive your right to warranty. It must be signed in front of the police or an officer from Consumer Affairs.

Think about this one carefully before you sign. It may mean the price of the vehicle is cheaper, but you will have to pay for any faults the vehicle may have.

Deposits

A motor vehicle dealer will usually take a holding deposit when you sign a contract. Make sure that you only pay the minimum amount and you get a receipt for this money.

If you have decided to buy a car but you need to have finance approved first, then have this written in the contract as 'subject to approval of finance to the purchaser's satisfaction'.

If this is written in the contract and you can't get a loan approved, you may be able to cancel the contract and have the deposit returned to you.

Remember that signing a contract is legal and binding. If you change your mind and want to cancel the contract, you could lose your deposit.

A car dealer cannot retain more than 10% of the total selling price of the vehicle.

For more advice, contact NT Consumer Affairs.

Finance and insurance for your vehicle

If you need to borrow money, you should shop around for the best deal. Check the interest rates offered by different banks, credit unions, finance companies and other lenders.

You don't have to use the finance company offered by the seller.

Always check the terms and conditions of a finance or insurance product as there may be large penalties for defaulting on payments.

Work out a budget

Find out how much you can borrow and work out how much you can afford to pay back each month.

Make sure your budget includes money for all of the following:

  • registration
  • stamp duty
  • fuel
  • repairs
  • insurance.

Get insured

You should take out insurance cover as soon as you buy a vehicle so you are insured against accidents. Generally the higher the cover, the more it will cost you.

You should also shop around for the best insurance deal.

You don't have to use the insurance company the car dealer recommends.

If you have agreed to have the car as security over a loan, then you will have to take out comprehensive insurance for the term of the loan.

Insurance types

There are three basic types of car insurance.

Comprehensive insurance

Covers damage to your car, damage to other people's cars and property, damage to your car caused by fire and theft of your car.

Third party, fire and theft insurance

Covers damage to your car by fire and your car's theft, as well as any damage that your car causes to other people's cars and property but not any damage sustained by your car.

Third party property insurance

Covers you for any damage that your car causes to other cars and property but not any damage sustained by your car.

When choosing an insurance policy you should consider all of the following:

  • if damage caused when someone else drives the car is covered
  • what is excluded or not covered by the policy
  • how much is the excess - this is the amount of money that you need to pay when you make a claim
  • if you can pay the premiums by monthly instalments so the cost can be spread over the year.

Buying a new vehicle

Before you buy a new car, you should make a checklist of the features you want. You can check road tests in magazines and talk to others who have bought similar vehicles.

Make a checklist

Your list should include all of the following:

  • price range
  • size
  • accessories - eg: bullbar or towbar
  • type of vehicle - whether you want a sedan, station wagon or ute
  • fuel economy
  • resale value
  • warranty period and reliability.

Prepare a budget

You should prepare a budget to check the full costs of buying your vehicle.

There can be extra costs such as registration and dealer delivery charges not included in the advertised price. These are called on-road costs.

If you need to borrow money you will need to check if you can pay back the cost of the car and running costs. 

You should shop around for the best deals on finance and insurance and not just rely on the recommendations from the trader.

You may be able to get a personal loan from a bank or credit union at a cheaper interest rate.

You will also need to take out insurance, so you will need to get quotes from insurance companies.  

Always check the terms and conditions before signing any paperwork.

Read more about contracts.

Trade-in your old vehicle

If you have a vehicle you want to sell, you can use it as a trade-in on a new car, but you may get a better price by selling it privately. Check the value on websites such as Redbook.

A dealer should have room to move on the advertised sale price with a trade-in.

Be wary of high trade-in offers. The price of your new car may be increased to cover the difference.

If you do not have a trade-in you should be able to negotiate a discount on the advertised price.

Before you hand over your old car, agree on a specific delivery date for the new one and make sure you can afford the changeover cost.

You should also:

  • make sure the car is clean
  • replace or repair worn items such as a cracked windshield or bald tyres.

Read about leasing a car.

Signing the contract 

There is no cooling-off period for vehicle sales in the Northern Territory (NT).

Once you sign a contract it is legally binding and by law you have to go through with the purchase.

Make sure you understand the terms and conditions before signing and delete any sections from the contract that you don’t agree with.

You and the dealer should both initial any changes. Don’t sign any form or contract with blank spaces.

Make sure you confirm the delivery date.

If you have signed a contract and paid a deposit and you change your mind, the dealer can keep the deposit.

Always think about the deal carefully before you sign.

Extended car warranties

Extended car warranties can be bought from licensed motor vehicle dealers. These warranties extend the period of cover beyond any manufacturer's warranty that applies.

Before buying an extended car warranty read the policy carefully, as many of these warranties are only valid if you observe strict servicing conditions and generally only cover specific items.

Check out exactly what is covered and under what circumstances claims will not be accepted.

Find out more about warranties.

When your vehicle arrives

Check your new vehicle thoroughly before you sign to accept delivery.

You should check all of the following:

  • any extras you ordered are included
  • it has a spare tyre, tool kit and jack
  • if there is damage to paintwork or faults in the electrics.

New cars have extensive warranty periods, so if you do have a problem after delivery you should speak to the dealer.

Buying a used vehicle

This page has information for people looking to buy a used car in the Northern Territory (NT).

You can buy a used car in any of the following ways:

  • through a licensed motor vehicle dealer
  • from a private seller
  • at an auction.

Before you buy

When looking for a car, you should do all of the following:

  • decide how much you can afford and set a price limit
  • check advertisements to get an idea of what you can expect to pay - websites like Redbook can also help you to find out the market value of a vehicle
  • visit as many car yards as possible so you can compare deals.

Where and how you can buy

Find out different ways you can buy and what you must do before buying a used vehicle.

All NT motor vehicle dealers selling to the public must have a licence.

Their licensed motor vehicle dealer number should be clearly displayed at their premises.

Buying through licensed dealers may be more expensive than buying from a private seller but you have greater protection under the law.

These protections include all of the following:

  • if a car is less than 10 years old and has less than 160,000km on the clock - it is covered by a mandatory three-month or 5,000km statutory warranty
  • if a motorcycle is less than five years old and has travelled less than 30,000km at the time of sale - it is covered by a mandatory three-month or 5,000km warranty
  • you will have a clear title which protects you against repossession if anyone owes money on a car and ensures it is not a stolen vehicle.

If a car is more than 10 years old or has more than 160,000km on the clock, it will not be covered by the statutory warranty but still needs to be in roadworthy condition if it is registered when sold.

Signing away your consumer rights

The dealer must comply with the statutory warranty unless you sign a specific form, called a form 12.

If you sign a form 12, you will no longer have any rights if the vehicle is faulty.

Think carefully before signing this form, even if the dealer offers you a better price. This may end up costing you a lot more money in the long run.

If you sign the form, it must be witnessed and read out to you by either:

  • a member of the NT police or
  • an officer authorised by the Commissioner of Consumer Affairs.

Holding deposit

You may be asked to put down a deposit while you have a car mechanically checked or organise your loan.

Make sure you get a receipt which states your deposit is refundable ‘subject to finance’, otherwise you can lose the deposit if you don’t buy the car.

Find out more about contracts and deposits.

Extended car warranties

You can buy extended car warranties from licensed motor vehicle dealers. These warranties extend the period of cover beyond any statutory warranty that applies.

Before buying an extended car warranty, read the policy carefully. Many of these warranties are only valid if you observe strict servicing conditions and generally only cover specific items.

Check out exactly what is covered and under what circumstances claims will not be accepted.

Find out more about warranties.

If you choose to a buy a vehicle privately, be aware that you have less protection as the Australian Consumer Law does not cover private sales.

When you see a car you're interested in buying, you should follow all of the steps below.

Step 1. Get a professional inspection. It will cost extra but can save you an expensive mistake.

Step 2. Make sure the vehicle is not:

You can check this by:

  • calling the Personal Property Securities Register (PPSR) on 1300 007 777 or
  • going to the PPSR website.
    • You will need the vehicle identification number (VIN) or chassis number to check the register.
    • There is a small fee for this service.

Step 3. Check the car over yourself, or get a family member or friend who knows about cars to check it for you.

Checking the car yourself

You should check all of the following:

  • seatbelts - check for wear and tear
  • headlights, brake lights and indicators all work
  • air-conditioning and horn work
  • windscreen wipers and instrument gauges work
  • look at the body and see if there are any bumps, ripples, mismatched colours or panels out of alignment, which can mean the car has been in an accident
  • look for rust - check under the carpet
  • if the hoses are soft and spongy they may need to replaced
  • check the suspension by pushing down on one corner and letting go, if it bounces more than once it has worn shock absorbers
  • check the radiator water is clear or green and check the radiator fins for rust or crumbling
  • the oil should be between the dipstick markers and black in colour, if it is milky or grey there may be water in the oil which can indicate a serious problem
  • the transmission oil should be cherry pink, if it is a dark burnt colour it could mean that the transmission has severely overheated
  • start the car and let it idle, listening for rattling or knocking in the engine compartment - if you rev it and there is smoke it could indicate engine problems
  • take the car for a test drive and check its performance while driving in a straight line, braking and taking off - if it is a manual, make sure it moves away smoothly and the clutch doesn’t slip.

Buying a vehicle through an auction is similar to buying through a private seller.

Check the vehicle out as thoroughly as possible because the Australian Consumer Law does not cover anything purchased at an auction.

Be sure you are prepared to pay the cost of any repairs.

Test driving a vehicle

A test drive will let you get a feel for a vehicle and find any obvious problems.

You should examine it and take note of any defects, from stone chips to stalling. Have your car buyer's checklist ready to take notes.

Check the speedo for mileage, and the manufacture date on the compliance plate. This may come in handy if you negotiate over price later.

Insurance and test drives

Before taking the vehicle for a drive, check it is covered by comprehensive insurance. If you have an accident that's your fault and the car is comprehensively insured you will have to pay an excess. 

An excess is the amount of money that you must pay when making a claim on an insurance policy.

If the car is not comprehensively insured and you have an accident that is your fault, you will have to pay all the repair costs.

Most licensed car dealers and traders will have a comprehensive insurance policy that covers all their cars during test drives.

However, the law doesn't force car dealers and traders to take out insurance so you need to check with them before taking a test drive.

If you have an accident

If you have an accident that is your fault while on a test drive then the dealer's or trader's insurance company will insist that you pay the excess.

The excess payable on a comprehensive policy is dependent on the age and experience of the driver and the age of the vehicle.

In some cases, it can be as high as $1,750 for a driver under 19 years of age.

Some vehicles will attract a higher excess.

You should check with the dealer or trader all of the following before taking a test drive:

  • whether the vehicle is covered by a comprehensive insurance policy
  • if you are covered by this insurance policy if you have an accident
  • how much the excess is.