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What is the total cost of owning a car?
According to CarExpert, a cheap car is likely to set you back around $20,000. That makes it look like the cost of owning a car in 2023 is no sweat but there's a long list of other costs to think about.
Based on the latest Transport Affordability Index published by the Australian Automobile Association (AAA), the average cost of owning a car in Australia as of the March Quarter 2023 is $23,213 per year for capital cities and $19,510 per year for regional areas.
Costs are up by approximately $1,509 compared to last year. The increase is mostly due to a steep rise in car loan repayments during the period, coupled with the reinstitution of fuel excise taxes last quarter. The steepest spikes experienced were $951 in Sydney for capital cities, and $1,337 in Alice Springs for regional areas.
Are you planning to buy a new car soon? Finder's Consumer Sentiment Tracker recorded 21% of respondents (n=1,059) will be shopping for a new ride this year.
The total cost of owning a car
To get the total cost of buying a car, you should factor in both the drive-away cost and car running costs. You should also consider depreciation costs.
The AAA estimates that the weekly upfront cost of owning a car is $251.90 if you live in a capital city, and slightly lower at $243.63 if you're in a regional area.
The average car price in Australia for a brand-new vehicle was $56,886. This is based on the average car price of the top 5 selling motor vehicles in May 2023 released by the Federal Chamber of Automotive Industries.
Vehicle type and model
Prices can vary a lot depending on the car make and the model you buy. For example, a Toyota Hi-Lux, the most popular vehicle in Australia, comes at an entry-level price of $32,465 while the Tesla Model Y comes at an entry-level price of about $70,000. If you opt for add-ons on the interior or exterior, be ready to shed off a couple more of your cold hard cash too.
In the past, buying a used car may have seemed like the cheaper choice but that may not always be the case, depending on what options you're willing to consider.
Manufacturers are closing the gap in the demand for new cars as supply chain issues met in the past two years continue to be resolved. As car production ramps up, the average price for brand new cars are expected to drop, more buyers are expected to choose brand new cars, and prices for used cars will slide. Used car prices already experienced a steep 12% decline in January and are further expected to drop by 10% later this year.
Mileage
This next parameter will not matter much if you're cashing in on a brand-new vehicle. However, it greatly affects price, performance and future maintenance costs if you're opting for a used car.
Lower mileage could jack up the price. It could also possibly lower car service costs compared to a used car with higher mileage.
Financing costs and interest
Where and when you take out a car loan affects how much you pay for how long. If you research your financing options well enough, you should be able to better negotiate financing terms.
Taxes and registration
The actual drive-away cost will always be significantly higher than the advertised car prices. Where you buy also impacts how much you pay for registration. For instance, stamp duty on cars in NSW would cost more than stamp duty on cars in QLD.
When you're planning to buy a new car, you need to remember that the true cost of owning a car goes far beyond driving it out of the dealership.
Overall, the AAA estimates that transportation costs account for 16.4% and 15.2% of a typical Australian household's income in the capital cities and regional areas, respectively. The report also emphasises that lower cost estimates do not necessarily mean it's more affordable, especially since household income is significantly lower in the regions than in capital cities.
Here are some of the additional costs you should consider.
Petrol costs
Petrol prices have been hitting new peaks since the pandemic and continue to worsen. With the reintroduction of fuel excise taxes, refills will cost $15 more for every 60 litres.
Maintenance and repairs
In April, a Finder survey of 919 Aussies found that 2 in 5 skip on vehicle upkeep, while 1 in 4 admitted not being able to afford car service costs.
The more you drive, the higher the cost of maintenance. Can your current budget and living costs absorb this additional cost?
Car insurance
CTP is required for registration but if you want cover for damage to your own car, you'll need comprehensive car insurance. According to the 2023 Finder Car Insurance Awards, the average cost of comprehensive car insurance was approximately $1,366 per year.
Depreciation
Find out the resale value of the car you're planning to buy. Use websites like CarSales to see how various cars and models hold their value over time based on conditions and kilometers travelled among other factors. In general, some brands will depreciate faster than others.
Parking and toll fees
Account for toll and parking fees on your usual route. If you don't have a garage at home, you may have to rent parking space continuously.
Tips to save on the costs of owning a car
It's clear. Vehicle price is not the only car cost you should be thinking about if you're planning on buying a car.
Here are some ways to save on your next car purchase.
Buy secondhand
Keep in mind that a brand-new car may carry a steeper upfront cost but a secondhand car, depending on its condition, may entail higher running costs.
Buy an energy-efficient car
The upfront cost of buying an electric vehicle (EV) is steeper. However, car running costs may be significantly reduced over time.
The good news is that different states are pushing for wider EV ownership, and have come up with incentives for EV buyers. If owning an EV is an option for you, make sure to check out EV incentives where you live and take note of any conditions like price threshold as well.
Avoid unnecessary add ons
Always demand a cost breakdown. Keep an eye out for unnecessary add-ons so you can keep costs to a minimum.
Follow the car maintenance schedule
Don't skip out on your maintenance schedule. If you can't afford car maintenance and repairs, maybe you really can't afford the total cost of owning a car. If you miss periodic checks, you're only setting up yourself for more serious car trouble ahead.
Keep your car insured
Like any other insurance, the last thing you want is to file for an insurance claim. However, buying sensible car insurance coverage shields you from surprise expenses.
Drive safely
Learn energy-efficient driving techniques to save on energy costs and decrease the rate of wear and tear of your motor vehicle's engine and parts.
Can you afford a car in 2023?
Don't be duped by a car's advertised price. Shop around and always inquire about the drive-away cost of owning a car. Always think about what other options you have.
Set a budget for your next car purchase and work through car running costs into your regular budget. That new ride will definitely cost you extra and it pays for you to know how much you can really afford to spend on buying and running a car month after month.
Frequently asked questions
Currently, the cheapest prices for a brand-new car are under $20,000.
Based on the Top 5 cars according to May 2023 car sales volume, Aussies paid $56,886 on average for a brand-new car.
AAA estimates that the average annual car cost is $23,213 and $19,510 for capital cities and regions, respectively.
The total cost of owning and running a car factors in loan repayments and other costs such as tax and registration, car insurance, repairs and maintenance, and petrol.
You should always factor in your capacity to pay for a new car based on how much you earn regularly and how much you can afford on top of other expenses. Other than that, you should also weigh the costs against other plans you may have that may need a substantial amount of money to pursue, like buying a house or putting up capital. Buying a car can set you back several months or years so think hard about what you'd want to prioritise.
Margaux Diaz is Content Marketing Specialist at Finder. She supports the SEO team in content promotion and partnership building in the US and Australia. Prior to joining Finder, she managed health promotion and other social development projects for the United Nations and consulted for private non-profits, and government agencies. She has also written for publications and blogs in the health and wellness, beauty, fitness, non-profits, business, and finance spaces.
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