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How Much Does it Really Cost to Own a Car?

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Cars provide an essential service within many people’s lives. They help people get to work and home, as well as other more exciting destinations. For many, not owning a car would prove a serious inconvenience (many of our livelihoods depend on these machines). For others, they’re not entirely necessary, but it’s a luxury item. Whichever category you fit into, if you’re looking to acquire your first car in Australia, you’re going to need to become aware of some immediate and long term expenses that come with car ownership. It’s not just a matter of buying a car and dusting your hand off of your financial responsibilities – there are continuous running expenses and frequent fees that must be paid. Today, we’re going to cover the whole shebang. We’re going to dive deep into all the expenses you should be aware of in car ownership.

Buying Costs

Buying Second Hand

Most first cars are second hand, especially in the case of young or new drivers looking to buy an older and cheaper car to practice in. However, not all second hand cars are cheap – or old for that matter. A second hand might have only spent a few months on the road before someone’s decided to sell. Buying second hand is a great way to get yourself a good deal; however, it’s incredibly important to buy with caution and to check for certain documents, to avoid any trouble in the future. Most importantly, you want to ensure that the car you’re buying is in good road worthy condition, so this will involve several checks that should be performed before purchasing. Often the seller will cover these, but expect some to split or ask you to cover these inspections. The following are common services performed for used cars.

The Roadworthy Inspection and Certificate

This is an important step to do before purchasing a used car. It involves getting a professional assessment of the vehicle to ensure it is safe and legal to drive and register. The inspection covers brakes, tyres, body, steering, suspension, windscreen, lights. The cost of a certificate depends on the state in which the vehicle is registered. Check with your state’s transport department or government website. For reference, The Queensland Department of Transport and Main Roads can produce a certificate for $84.70. In Queensland, this certificate is required when:

  • A registered light vehicle is offered for sale in Queensland
  • A registration is being transferred to a new owner
  • A Queensland registration is being transferred to another state or territory (or vise versa)
  • When re-registering an unregistered vehicle

 

Mechanical Inspection

This is an extension of the road safety assessment. It is performed by auto groups such as RACQ to assess that a car is safe for the road. The general cost for this type of inspection is around $225. They involve checking the:

  • Engine, transmission and drivetrain
  • Suspension, steering and brakes
  • Wheels and tyres
  • Interior and exterior (e.g. for rust and previous collision fixes)
  • Electrics

 

Master Check

This assessment combines the other two checks and provides a comprehensive review of the vehicle, including a full history check of the vehicle for any legal implications or damage history you may not have been aware of. RACQ offers this at $299. It’s recommended that you run this check before purchasing your second hand vehicle as it’s the most comprehensive and will give you that extra peace of mind when purchasing or provide you with the information to walk away from a bad deal and save you money in the future.

“If it saves you buying a potential lemon, or even worse, a potential death trap, it’s money well spent” – Suncorp.

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Extra Costs of Purchasing Privately
Transfer fees may apply for changing the vehicle registration and ownership of the vehicle. If you are transferring registration of a personalised number plate a fee will also be incurred. If the seller decides to keep their plates, they (or you) will then need to pay for new standard number plates so you can fix them to the car before selling – this will typically cost around $30–40. You will also need to pay for stamp duty, insurance (at least a cover note), and may incur bank fees for a money transfer.

Purchasing From a Dealer
While you won’t get the best deal possible buying second hand from a dealer, it is often the safer, less-hassle option. Depending on how much homework you feel like doing, purchasing from a dealer could be a better option. Dealerships are experts in the paperwork involved in transferring over car ownership, and reputable ones usually complete their own inspections and tests to ensure quality before selling. In saying this though, dealerships are known for putting up the price on their vehicles due to the margin they have to make as well as advanced sales tactics.

These costs are all calculated on top of the actual price paid for the vehicle – definitely don’t forget about that one.

Buying New

On top of the cost of purchasing your new car, you will also have to cover the vehicle stamp duty, which is the percentage you pay to the state government based on how expensive your car was. This percentage encompasses different types of cars, how much they emit, how big they are, and how ‘luxury’ they are. The more emissions (usually based on number of cylinders and engine) the higher the tax is. There is also a certain point where the car becomes ‘luxury’ when it costs over $100,000, this also calls for a higher tax. This is an immediate cost which is paid upon buying a car. On top of this, again, you will need to quickly organise insurance (or a cover note), and registration. You should not drive your new car without insurance in case the unexpected occurs, and you legally cannot drive an unregistered car on Australian roads.

costs vary across states
(Taken from QLD Department of Transport and Main Roads – these costs vary across states)

Running Costs

Insurance

It’s essential to purchase compulsory third party insurance when buying a new car – you should at least have this type of cover to ensure that if you cause damage to anyone else’s car, your insurance company can cover the costs. You are legally required to have CTP insurance if you are driving your car on the road. Comprehensive cover is the step up – this covers damage that is incurred by your car. CTP insurance is typically around the $350 mark for all car drivers and is included in the registration payment required annually or bi-anually. If you’re getting comprehensive insurance, the total cost of your cover will depend on a few factors:

  • The amount you’re covered for (calculated on either the market cost of your vehicle or its actual cost)
  • Your excess (how much you’ll have to pay out of pocket when making a claim)
  • Any extras you need (hail cover, loan cars, etc)

If you need to get insurance fast – say you’ve just purchased a new car and you need to drive it home but you haven’t found the right insurance company for you – you can call any company to organise a cover note. Technically, Australian insurance companies no longer provide actual cover notes (temporary cover), but they can provide cover for you within a ‘cooling off’ period that allows you to temporarily cover your car for any accidents or damage without completely purchasing cover.

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Registration

As mentioned, registration is paid annually or bi-annually. Your registration will cost between $600–$1200 depending on your state and how many cylinders your car is powered by. Registration fees typically cover the maintenance of roads and traffic lights as well as third party insurance.

Depreciation

Although this is not an expense in the sense that it doesn’t involve money literally coming out of your account, it is a cost that not everyone thinks about but is definitely real. Depreciation starts to happen as soon as you drive your new car out of the show room and into your garage. A car is an asset that has high depreciation costs. According to the ATO, the useful life of a vehicle is 8 years (divide the cost of the new car over 8 years to determine its value). This means that the vehicle essentially loses its value within this time frame. The good news for this is that if you use this car for employment purposes you can deduct the depreciation as an expense on your tax return.

Petrol

This is definitely an ongoing expense. According to the RACQ Annual Fuel Price Report, the average price for 91 fuel in 2019 was 142.1 cents per litre. For reference, the average fuel tank size is 55 litres, so that’s about $78 for a full tank. For drivers that use their car everyday, they might be filling up every week (depending on the distance travelled). Currently, a majority of Australians still drive petrol powered vehicles, however electric cars are growing in popularity – they are less expensive to ‘refuel’ as electricity is generally cheaper compared to petrol. For an ‘eLitre’ of electricity, you’ll be paying 37-62 cents, according to Reduction Revolution – although upfront, an electric car is definitely more expensive.

Servicing

A basic service in Australia costs between $150 and $500, however can be more depending on any additional repairs that are needed. The cost also depends on the type of car and the mechanic or dealership that is servicing your car. Things like fixed price servicing or capped servicing make costs lower. Servicing is often required once or twice a year, or every 10,000kms travelled, whichever comes first.

Servicing is important for things like warranty as not completing a service can render repairs otherwise prevented by a service, not covered. If servicing twice a year, a rule of thumb is to alternate between a major and minor service (supplementary and full). This helps prevent any unforeseeable problems arising in your vehicle or and helps you detect any problems earlier, saving you money in the future.
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Cleaning and Maintenance

Finally, there’s the cost of cleaning – by either yourself (cheaper) or a car washer (more expensive). Buying yourself a little car cleaning kit will cost you a fair amount initially, but all of your products will last you throughout the year (depending on how often you clean your car). To learn more about how to best clean your car and which products you should be using, check out our recent article on DIY advice for getting a professional clean.

One thing we haven’t mentioned is accessories as it really depends on you how much you want to spend on car seats, wheel covers, and god forbid, car eyelashes. So, we’ll leave this one up to you!

In Summary

Car ownership ain’t cheap, but it’s worth it to have the freedom to go where your heart desires (as long as it’s got road access). If you’re planning on purchasing a new car or your first car, make sure you budget all of the aforementioned expenses. Sometimes, however, as a car owner, you get the joy of surprise expenses – that’s just a bridge you’ll have to cross when you get there unfortunately.

If one of those unexpected expenses is the cost of a broken window or windscreen, there is nothing to worry about – Novus has you covered. Novus Autoglass service broken or chipped windscreens and windows by providing efficient and affordable repairs and replacements. You can have peace of mind knowing we provide a lifetime warranty on any replacements. Call Novus to book in a service on 13 22 34.