Owning a car: Costs you should consider

When you’re buying a new car, don’t just look at the price tag. Owning a car comes with a lot of extra (often expensive) costs that you need to consider, too.  

To better prepare yourself for car ownership, here are the costs of owning a car you need to consider:  

Upfront costs when buying a car 

When budgeting for your car purchase, don’t forget to include these costs, as well.  

Stamp duty  

Stamp duty is the tax you pay to the State or Territory Government. The amount depends on the price and type of car. Each state and territory has a different stamp duty cost for used cars, hybrids, electric cars, utes, and the like, as well.  

If you’re buying a brand-new car, some dealers may include stamp duty costs in the final price. But it’s always best to double-check and make sure.  

Registration and Compulsory Third Party Insurance  

All cars in Australia being driven on public roads must be registered. Registration typically comes in the form of an upfront fee, plus an ongoing annual or semi-annual fee. Don’t forget you’ll also need to pay to renew your driver’s license every few years, too.  

Often, the cost of registration includes the compulsory third-party (CTP) car insurance premium. By law, you’re required to pay for CTP to cover injuries caused by your driver. Car registration and CTP fees are usually more expensive in capital cities compared to regional areas.  

According to the Australian Automobile Association (AAA), the average annual cost of registration, CTP and licensing for a two-car Australian family is around $1,826.89 in capital cities and $1,681.09 in regional areas. Depending on the state or territory, you may be able to save money by paying your registration annually instead of semi-annually or quarterly.  

Dealer Delivery  

If you’re buying a brand-new car, you’re most likely going to have to pay for dealer delivery. This is the cost of getting the model from the factory to the dealership. The fee also includes preparations such as detailing, final mechanical inspection, removal of packaging, and fitting accessories.  

Typically, the dealer delivery fee averages $1,500 to $2,000, depending on the dealer and manufacturer.  

Vehicle inspection  

Before buying a used car, it’s a good idea to have it inspected by a professional. Even if you’re a car-savvy individual, it’s always better to have a second pair of eyes looking at a used car before purchasing.   

A vehicle inspection can be done by a mechanic or through your state or territory’s motoring club, like the RACV or the RACQ. The inspection can be as low as $40 to somewhere around $280, depending on where and who is doing the inspection.  

Complete car history and financial reports  

This is extremely useful for those buying a used car. For only $2, you can go on the Personal Property Securities Registry (PPSR) website and see if the previous car owner owes money on the car you’re about to purchase.  

You can also get a more comprehensive car history report for a larger fee. You’ll get details like its write-off history, approximate valuation of the car, and odometer reading. You can also find out if it’s been stolen.  

Ongoing costs when owning a car 

These costs are what you may need to spend to use and maintain your car. Some costs are monthly, annual, or semi-annual. 

Car loan payments  

Car loan repayments depend on the type of car and the type of loan you decide to take. If you want to save on interest and own your car faster, a car loan with a competitive interest rate and a 36- or 48-month term may be ideal; however, it may involve higher repayments. Most car owners take a five-year loan term, as well. To get a better idea of what your car repayments will look like, check out loans.com.au’s car loan calculator.  

There are many different kinds of car loans to choose from, such as new car loans, used car loans, fixed, or variable car loans. Take your time and talk with lending specialists to figure out which is right for you. 

Car insurance  

It would be wise to take out a higher level of coverage because CTP doesn’t insure your or other drivers' cars against damage. Higher levels of car insurance include:  

• Third-party car insurance (cover for damage to other people’s vehicles)  
• Third-party fire and theft car insurance (all of the above plus fire and theft protection for your car)   
• Comprehensive car insurance (the highest level of cover – all of the above, plus coverage for damage you’re on the receiving end of)     

Not only that, but the cost of a car insurance premium can vary based on many factors, such as:  

• Your car  
• Your age (younger drivers generally pay a higher premium)  
• Your driving history   
• Your gender (males pay more, as statistically they’re more likely to be involved in accidents)  
• Your suburb  
• How far you travel, where you keep the car overnight, etc  

According to the AAA, the national average weekly cost of comprehensive car insurance is $48.05— a small price to pay for peace of mind.  

Maintenance  

Repairs and regular servicing are hidden costs of car ownership, but if you want your vehicle to remain roadworthy, it’s highly recommended to get regular maintenance.  

Servicing your car can get pretty expensive, but most new cars come with ‘capped price servicing’, which essentially means new car owners will know ahead of time exactly how much they’ll be charged, rather than being surprised with a nasty bill at the end.  

The costs of maintaining your car can be hard to predict, given how many things can go wrong with cars, but the AAA found the average household paid $36.30 each week for maintenance and servicing.  

Depreciation  

Although not a traditional cost, depreciation is something you should think about, especially if you’re going to sell your car in the future. Cars typically depreciate in value over time, losing thousands in value through the years. Keeping track of your car’s depreciation value will help you know when it’s time to sell or upgrade your car.  

Fuel 

Fuel is almost certainly a car expense you’ll pay the most regularly, and it can be hard to predict how much it will cost because the price is always changing. Factor in the cost of fuel when purchasing a car so you don’t end up buying a fuel-guzzling vehicle instead of something more fuel-efficient.   

When you think about how often you need to fill up the car, the costs can quickly escalate, especially if your vehicle isn’t very fuel-efficient. Keep track of your car use to get an estimate of your regular fuel costs. 

Factors you should consider before buying a car 

Aside from costs, here are other factors to consider before buying a car: 

Buying a new vs used car 

New cars will usually have the latest technologies, accessories, and safety features. They also come with warranties, and you’ll likely pay less for car insurance as newer cars are often seen as less of a risk. However, new cars are more expensive as a whole and can depreciate in value very quickly right out of the dealership. 

Used cars, on the other hand, tend to be much cheaper, as cars are a rapidly depreciating asset. They also don’t have to be broken down husks - a used car is simply defined as a car that has been owned before, so a relatively new-looking one-year-old car could be considered used, resulting in a bargain. 

The downside of used cars is that they could be an older model without new safety and comfort features. They could also be more prone to maintenance and servicing, costing you more in the long run. 

Make and model of the car 

There’s a whole host of questions you need to ask yourself about the type of car that will best suit your needs. Answering as many of these questions as you can may help narrow your search: 

• Do you want a manual or an automatic car? 
• How many seats do you need? 
• How often do you drive the car? 
• How long do you need the car for?
• Do you want a car with a five-star safety rating? 
• Do you want a car with features like Bluetooth, reversing cameras, heated seats, etc.? 
• Do you need a car that you don’t mind storing outside, or are you keeping it undercover? 
• How fuel-efficient is the car? More fuel-efficient models can save money over time. 
• How green is the car? If you’re concerned about the environment, consider a car with lower CO2 emissions. 

You should also consider whether you want a big car, a mid-sized car, like an SUV, or a smaller car. You don’t want to commit to buying a car only to realise it doesn’t meet your criteria. Check as many things off your list as you can before you buy. 

How are you going to finance it? 

Unless you have the cash to pay for the whole car, chances are you’re going to need financing to fund your purchase. If this is the case, then check out some of loans.com.au’s car loans, which offer competitive interest rates and useful loan features. 

Buying a car is a serious purchase, which is why getting the most out of your car loan is essential. A good car loan with a competitive rate could result in hundreds of dollars a year in savings. Book an appointment with one of our car lending specialists to learn more or apply now for a car loan to get started. 

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