Recent research by Finder shows Australians could be paying thousands of dollars more than necessary to keep their car running.
Finder analysed the cost of owning a car over a 12-month period – including insurance, registration and petrol – and found that Aussies could be spending $7963 per year on their vehicle.
Perhaps not surprisingly, costs were higher when rocketing around in a larger car such as a ute or SUV.
The analysis found that those who drive larger cars typically spend more on insurance, fuel and fines, spending $7963 per year on average on car-related costs.
In comparison, those who drive smaller vehicles and get better deals on insurance premiums spend around $3413 on average – a difference of $4550 per year.
It was found that some drivers were paying up to 133 per cent more than others when it comes to their car.
Ongoing costs of car ownership
According to Budget Direct, the average cost of transport for an Australian household is 13.8 per cent of the total annual income. But the total cost can vary wildly depending on the car, and also on where you live in Australia.
Putting the price you paid for your car aside, there are five main areas that influence how much you’ll be shelling out throughout its lifetime:
- insurance
- fuel
- registration and licensing
- car loan payments
- maintenance costs and servicing.
Buckle your seatbelts and read on to see a breakdown of how much the average Aussie driver can expect to spend on these things each year.
Insurance
Compulsory third party (CTP) car insurance is compulsory in Australia. It’s designed to cover you for the liability costs of causing injury or death to other people, but a higher level of insurance coverage is generally recommended.
Australia’s car insurance market is very competitive, so it often pays to shop around.
Finder analysed 36 driver profiles and found an average difference of $2643 between two car insurance policies.
“If you want to save some cash, your car insurance premium is the best place to start. Don’t pay the loyalty tax – if you think you’re paying too much, you’re probably right,” says Taylor Blackburn, insurance specialist at Finder.
“Before you let your policy roll over automatically, see what else is out there first. It could be the most cost-effective decision you make all year,” he adds.
Fuel
Paying for petrol can also make a dent in the wallet if you’re not shopping around for the best deal.
For the average driver churning through 1366 litres of fuel per year, paying 20 cents more per litre will set you back an extra $273 annually.
Mr Blackburn says there are a handful of ways Aussies can save on vehicle running costs.
“In addition to your insurance policy, you can help your bank balance by keeping an eye out for cheap fuel, carpooling when possible and avoiding speeding and parking fines.
“If you’re in the market for a new car, opt for a smaller, more fuel-efficient vehicle that will be cheaper to insure,” he says.
Registration and licensing
Any car driven on a public road must be registered with your state or territory’s Department of Transport and driven by a licensed driver.
After insurance, vehicle registration costs were found to be the next biggest expense. In New South Wales, registering an eight-cylinder Jeep Grand Cherokee will set you back $1274, whereas South Australians will pay just $646 for the same thing.
In fact, registration and licensing costs remain consistently lower in regional cities around Australia. This is a result of New South Wales, Victoria and South Australia implementing different policies that allow for different pricing structures in regional and metro areas.
The difference between registering a Jeep and a Toyota Yaris is the greatest in New South Wales where you’d save $522 per year on the smaller car rego, followed by $408 in Queensland.
Car loan payments
Car loans are another frequent cost of owning a car, often being paid weekly. The Australian Automobile Association (AAA) calculated the average weekly car loan repayments based on the top 10 vehicles sold in 2018 and found that there wasn’t much of a difference in car loan payments between capital cities and regional towns and cities.
This is because where you live doesn’t have too much of an effect on car loan rates. Instead, what is taken into account are things such as:
- the age, make and model of the car
- your credit history and credit score
- your financial status
- the lender itself. Certain lenders are able to offer lower rates than others.
Savings tip: there are plenty of different car loan products out there and interest rates can vary massively, so shop around.
Maintenance costs and servicing
Services and repairs are an often forgotten cost of car ownership. Regular servicing keeps your car at the top of its game and can pick up unnoticeable problems before they wreak havoc on your car. Plus, there’s always the chance you’ll blow a tyre, or some undecipherable symbol will light up on the dashboard.
Servicing your car can be expensive but, fortunately, many new cars come with ‘capped price servicing’, which puts a ceiling on the cost of your services for a period of time.
The Royal Automobile Club of Queensland (RACQ) has handy comparison tables available to show you a detailed breakdown of how much different cars will cost you to own and operate.
According to the RACQ, a small car such as a Hyundai i30 GO 1.6L T/D 7DSG Hatch MY20 will cost $31.17 for servicing and $7.78 for tyres on average per month, whereas a medium SUV such as a Hyundai Tucson Elite 1.6T AWD 7DSG MY21 will average out to $49.33 for servicing and $15.58 for tyres monthly.
So, the mere act of owning your car can cost you well over $10,000 a year – that’s in addition to the cost of actually buying the car. But there can be a big difference in annual costs for different vehicles. If you’re a fan of substance over style, then it’s well worth your time to look around for cars with cheap servicing and low-fuel use.
What car do you drive? Do you compare your insurance annually to ensure you’re getting the best price?
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Related articles:
https://www.yourlifechoices.com.au/finance/save-on-your-car-costs
https://www.yourlifechoices.com.au/news/explained-slash-car-repair-costs
https://www.yourlifechoices.com.au/finance/what-are-the-cheapest-cars-to-insure-in-2021
