Australia has an extremely competitive car market. Dozens of brands compete, and new car sales are strong, topping over a million new cars sold in 2010, according to figures from VFACTSi . A new car is traditionally one of the most significant purchases an individual will make, up there with a new home or apartment.

So what should you look for when buying a new car? One of the most important things to consider is how you will be using the car. It makes no sense to look at a two-door coupe if you'll be needing to carry three children. And while buying a large 4WD might appeal on some levels - they're easy to see out of, and have lots of room for those three kids - they're also heavier on petrol and tyres.

Rank Brand and model Vehicles
1 Holden Commodore 45,956
2 Toyota Corolla 41,632
3 Toyota Hilux 39,896
4 Mazda 3 39,003
5 Hyundai i30 29,772
6 Ford Falcon 29,516
7 Holden Cruze 28,334
8 Toyota Camry 25,014
9 Mitsubishi Lancer 23,076
10 Hyundai Getz 21,547
Table: Top Ten Models (Source: 2010 new vehicle sales, VFACTSi)
Rank Brand Vehicles
1 Toyota 214,718
2 Holden 132,923
3 Ford 95,284
4 Mazda 84,777
5 Hyundai 80,038
6 Nissan 62,676
7 Mitsubishi 62,496
8 Honda 40,375
9 Subaru 40,025
10 Volkswagen 38,016
Table: Top Ten Brands (Source: 2010 new vehicle sales, VFACTSi)

Once you've figured out how you'll be using the car, it's time to narrow the selection down to body style, and then manufacturer. Those three kids might fit in a wagon, but would a people-mover, such as a Toyota Tarago, make more sense as they get older and want friends to come along for the ride?

A new car is one of the most significant purchases we make.

Emotion weighs heavily in selecting a new car, and choosing the manufacturer is no different. However, it makes sense to consult a resource such as Glass's Guide to see how much a vehicle is going to be worth in the market place after a few years. Some cars hold their value better than others, and a reputable guide can help you decide how much depreciation you are willing to wear.

Increasing numbers of buyers are also choosing their vehicles based on green credentials. The federal government's Green Vehicle Guide provides a star-ranking system for the fuel efficiency of a particular car, and also gives you the ability to compare up to three different models at once. It's also worth noting that new cars have a fuel efficiency sticker placed on the windscreen, but like all new car research, it pays to know the facts before stepping foot into a dealership. See Allianz's guide on buying a green car for more information.

Buyers can also review the safety credentials of the car they are thinking of buying. The Australasian New Car Assessment Program (ANCAP) independently crash tests cars offered in the Australian market, ranking them on a five-star scale. The lesson that can be learned from consulting ANCAP is that although modern cars generally perform well in crash situations, not all are created equal.

Once you've narrowed down the field, take a test drive. You may also want to think about these issues: does the car fit into your garage? Is there enough room to open the doors alongside the driveway? Will your sports equipment fit in the back? And what about a pram if you're expecting a new addition to the family? It's also worth considering how easy it is to load the car – a high boot lip will make loading in the shopping – or that pram – that bit harder.

You may also need to negotiate finance. Many vehicle manufacturers have their own finance arms, but it pays to compare their rates with the rates on offer from regular lending institutions. Tapping into the equity of a home loan is another popular way of financing a vehicle at a low interest rate, as the loan is effectively charged at a home interest, rather than personal or vehicle loan, rate.

It pays to compare financing offered by dealers with regular lending institutions

Having said that, many manufacturers offer competitive deals on finance, particularly during run-out time, which occurs at the end of the financial year and at the end of the calendar year. A car manufactured in 2011 – and you can check this by looking at the compliance plate mounted on the firewall in the engine compartment – will always be a 2011 car, even if it’s sold by the dealer in 2012. Older cars have less value, and so manufacturers try to clear out the year’s models before the calendar year turns over. It’s a good time for bargain hunting.

Buying a new car need not be a difficult exercise. Be prepared before stepping into a dealership and avoid spur of the moment decisions you may later regret by bearing in mind your requirements and researching the market. And of course, if you're buying a new car, it's vital to organise car insurance so that you are covered once you take possession of your new car and drive out of the car yard.

1 New vehicle sales top the magic million, Federal Chamber of Automotive Industries (FCAI)