The Hidden Costs of Car Ownership: What to Expect When Buying a New Vehicle

Buying a new car is an exciting milestone, but the financial commitment extends well beyond the initial purchase price. From fuel to insurance and everything in between, the costs of owning a car can add up quickly. If you’re considering a new vehicle, it’s essential to understand the ongoing expenses you'll face.

Breakdown of Ownership Costs

Using data from the Australian Automobile Association’s (AAA) transport affordability report for Q2 2024, we’ve compiled a comprehensive overview of the average running costs associated with owning a car in Australia.

1. Depreciation

The moment you drive your new car off the lot, its value begins to decline. Typically, vehicles lose 20-30% of their value in the first year, translating to thousands of dollars. Not all cars depreciate at the same rate; popular models like the Toyota RAV4 hold their value better, while luxury European brands tend to depreciate more rapidly.

2. Loan Repayments

For most buyers, financing a car is the largest ongoing expense. Average loan repayments for Australian households are around $6,119 annually. You can choose to pay the total cost upfront or opt for a financing package, but for most, a car loan is a necessity.

3. Fuel and EV Charging Costs

Fuel costs are a significant factor for car owners. The average Australian household spends $2,930 annually on petrol. In contrast, electric vehicle (EV) owners enjoy lower charging costs, with average annual expenses around $500 if charging at home. This makes EVs a more economical choice for many drivers.

4. Servicing, Tyres, and Repairs

Routine maintenance is crucial for keeping your car in top condition. On average, Australians spend $1,022 per car annually on servicing, which includes repairs and tyre replacements. Most manufacturers recommend servicing every 12 months or 15,000 km, though EVs often have longer intervals between services.

5. Insurance

In Australia, all car owners must have compulsory third-party (CTP) insurance. Many also choose additional coverage, such as comprehensive insurance, which protects against damage to your vehicle in the event of an accident. On average, households spend $1,259 per car on insurance annually.

6. Registration, CTP, and Licensing

Registration fees allow you to legally drive your vehicle on public roads. In many states, CTP insurance is included in these fees. The average cost for registration, CTP, and licensing is approximately $928 per car each year.

7. Parking and Tolls

Parking and toll costs can quickly add up, particularly for those living or working in urban areas. On average, households spend about $447 on parking and $580 on tolls annually. These costs are often overlooked but can significantly impact your overall budget.

8. Roadside Assistance

Having a roadside assistance plan is a safety net for drivers facing breakdowns or other issues on the road. The average spend on roadside assistance is around $68 per year, offering peace of mind for motorists.

Total Annual Costs

Considering all these factors, the total expected expenditure for maintaining a new car can be quite substantial:

• Internal Combustion Engine (ICE) Vehicles: Approximately $12,773 (excluding depreciation).
• Electric Vehicles (EVs): Approximately $10,343 (excluding depreciation).

Conclusion

Owning a car comes with a range of financial responsibilities that extend far beyond the purchase price. By understanding these ongoing costs, you can better prepare for the financial implications of car ownership. Whether you opt for an ICE vehicle or an EV, it's essential to budget for all aspects of ownership to ensure a smooth and enjoyable driving experience.