Buying a car is always an exciting experience, whether it’s your first car or the nth replacement. As car lovers always say, there’s nothing like the smell of a new car. Acquiring a new car is something that you save and plan for and most likely shop around for quite a bit before deciding on THE one.
Have you been crunching the numbers? You should have! However, if all you’ve accounted for are the upfront and monthly payments you make to the dealership, then you’re in for a tricky financial situation. You’d need to factor several expenses into the equation in addition to the purchase cost.
Adding up the real cost of owning a car in Australia
Here is the breakdown of expenses that should be included in your computation for the true cost of owning and running a car. All figures are in AUD.
1. Purchase cost – the upfront cost of a new car varies depending on make, model, year, and trim level. The retail price of the cheapest base models displayed in Aussie showrooms today is in the region of $14,000, with driveaway deals within the range of $16,000-$17,000.
Aside from the car’s retail price, the driveaway typically covers pre-delivery costs, stamp duty, registration fees, compulsory third-party (CTP) insurance, a full tank of fuel, road user charges for a specified distance, dealer delivery, and maybe, new floor mats. For luxury cars, the driveaway price usually includes luxury car tax, which is one thing you’d want to be covered because it's ridiculously expensive if you had to pay for it separately.
If the dealership’s sale price does not use the word ‘driveaway’ and only offers ‘free ORC’, it generally means that your payment only covers the car, its registration, stamp duty, and CTP fees, so expect to spend more for the other costs.
Tip: Read our previous articles on the different terminologies used in new car dealerships and the latest EOFY new car deals in Australia.
2. Fuel – it’s the most obvious expense that you dip into your wallet for regularly, for as long as you use your car. How much you actually pay for gas depends on how frequently you're on the road and how fuel-efficient your vehicle is. It’s quite normal for two-car households to spend $60-$70 per week on fuel.
Tip: Use apps like PetrolSpy and FuelMap to find the nearest station with the cheapest fuel per litre.
3. Insurance – aside from the CTP, which covers the cost of injuries or death to a third party in times of an accident, it's a good idea to add another layer of protection to your car, such as comprehensive car insurance. The premium you pay depends on your age, your vehicle's model and age, your driving history, the state you’re in, where you park your car, and several other factors. For instance, the annual premium for comprehensive insurance may run as low as $70-$80 for drivers at least 45 years old in Tasmania to as high as $2700-$3000 for under-25 male drivers in NSW. As you will realise, there’s no cut-and-dried average premium for insurances.
Tip: Know more about the types of insurances to find the right coverage for you and your car.
4. Registration – aside from the fees you pay for your driver’s licence, you also need to pay for your car's annual registration. Fees vary from city to city, but a two-car household typically sets aside approximately $1,500 in its budget for registration, licence, and the mandatory CTP.
Tip: Spend lower fees by paying annually, instead of quarterly or semi-annually.
5. Depreciation – car owners often overlook this expense because they don’t pay it out of the pocket. You shouldn't forget, however, that a car is a losing investment. Like all depreciating assets, its value declines the moment you drive it from the dealership. As a rule of thumb, the older a car gets and the more kilometres it passes behind, the farther down its value goes.
To give you an idea about how depreciation affects your car’s resale value, here’s an example. A Toyota HiLux that covers around 15,000 kilometres a year depreciates almost $100 per week or approximately $5,000 per year.
Tip: Take good care of your car, never miss regular servicing, drive carefully to avoid accidents, and park it where it’s safe from the elements or vandals.
6. Repair and maintenance – spending for regular cleaning, servicing, and repair of your vehicle is a necessary expense. Not only does it ensure your safety and convenience, but it also slows down the speed of depreciation. It’s no secret that a well-kept vehicle preserves its value and fetches a reasonable price in the used car market. Maintenance expenses, including replacement of tyres, will vary widely depending on individual situations.
Tip: If you notice some minor issues with your car, don't dismiss them because they might be early signs of bigger problems. Refer to the owner’s handbook for the recommended replacement schedule for fluids and consumables.
Should your car need repair and entail replacing parts, it’s still possible to keep expenses at the minimum by sourcing parts smartly. You may request a part through CarPart, which is a great way to connect to certified sellers directly. Through this channel, you get the best quotes for the parts that you need, ensuring you of the best quality at the right price. Find a part with this tool now!
By JMSL