The Hidden Costs Of Owning A Car
Anyone who’s owned a car will agree they can cost a pretty penny, with the average cost of car ownership starting at around $7,000 per year. While there are lots of obvious expenses like the purchase cost, fuel, and insurance, it’s easy to forget some of the less obvious, hidden costs of owning a car.
Whether you’re considering buying a new car or hanging on to a car you currently own, it’s worth taking a few minutes to review how much it will cost over a year. Here’s a breakdown of the hidden costs of a car:
Cars lose value as soon as they leave the dealership, and every kilometre driven lowers the resale price. While cars can be assets if you use them for work, you’ll never sell a car at a profit outside the collector market.
Depreciation is how much you lose on resale. If you buy a car at $30,000 in January, then sell it for $20,000 in October, you’ve lost $10,000 to depreciation.
According to RACQ, here’s how much depreciation costs for some common new cars:
- Toyota Corolla: $56 per week
- Kia Sportage (AWD): $83 per week
- Toyota Hilux 4X4: $108 per week
Tyres and Maintenance
Humans aren’t good at planning for unexpected events, so we’re often caught out by irregular expenses. A new set of tyres definitely falls into that category. Even yearly services and regular maintenance is often needed earlier than we think.
The cheapest tyres still cost upwards of $320 for a set of four. The cost of maintenance is highly variable, but even new cars can regularly need hundreds of dollars in labour.
Here’s what RACQ says you can expect to pay for tyres and maintenance if you drive just 5,000km per year:
- Toyota Corolla: $342 per year
- Kia Sportage (AWD): $368 per year
- Toyota Hilux 4X4: $453 per year
Finance and Interest
A Finder analysis found 1 in 5 new cars bought in Australia are financed with a loan. Finder found the average annual interest rate was 6.3%, with an average loan of $35,797. That means those cars attracted over $536 million in interest in the first 12 months!
Lenders rely on interest being easy to charge but hard to spot, so you’ll miss this cost if you don’t keep a close eye on your finances. Here’s what RACQ says you’ll pay each week, based on a 5 year loan at just 6.17% per annum:
- Toyota Corolla: $17 per week
- Kia Sportage (AWD): $25 per week
- Toyota Hilux 4X4: $33 per week
While fuel isn’t a hidden cost, it’s incredibly hard to predict, thanks to how often the price jumps. As well as increasing when the global cost of oil is high, the cost of petrol varies week to week.
Many Australian motorists ignore the cost of fuel completely, to avoid the stress that comes with trying to shop around vigilantly. Unfortunately, this means many car owners are spending more on fuel than they realise.
Here’s what RACQ reckons fuel costs, driving 5,000km a year:
- Toyota Corolla: $448 per year
- Kia Sportage (AWD): $478 per year
- Toyota Hilux 4X4: $635 per year
Registration and Insurance
Just like tyres and maintenance, we all know that registration and insurance is a regular cost, but because it’s a year between payments it can catch us by surprise. To make matters worse, 75% of us don’t shop around for car insurance, missing out on big potential savings.
Other regular costs that stay hidden until they’re suddenly due include license renewals and roadside assistance. Taking everything into account, here’s what RACQ estimates it costs each week:
- Toyota Corolla: $41 per week
- Kia Sportage (AWD): $43 per week
- Toyota Hilux 4X4: $47 per week
The real cost of car ownership
All things considered, the cost of car ownership starts at around $7,000 per year. It’s a pretty staggering amount, but considering how easy it is to miss the hidden costs of car ownership we’ve mentioned in this article, it’s easy to forget how much car ownership really costs.
There is an alternative, however. Living a car-free life is easier than ever, thanks to car sharing services like GoGet. It’s worth checking out if car share could work for you, considering the thousands of dollars, and the hundreds of hours time and hassle you could save!