The Often Overlooked Costs of Owning a Car
Cars are a luxury item, make no mistake. If you’re one of the vast majority of Aussies who live in urban centres, cars are not essential for getting around. Buying a car is a commitment, but why I hear you ask? Simple answer: running costs. Here are the three biggest and ongoing costs that people often overlook when choosing to buy or upgrade their car.
Fuel efficiency
This is the single biggest cost of running a car. Years ago, fuel efficiency was something that environmentally-minded folk were concerned about. That was before petrol and diesel costs started to dramatically rise. While none of us know what the future holds, the one thing you can bank on is steadily rising fuel costs.
Car repayments
At the time, $400 per month for your car repayment seemed reasonable. But then your fridge blew up and the landlord increased your rent. You should always build a safety margin into your budget. By locking yourself into high interest rate car (or personal) loans may mean you can’t afford it when the unexpected happens. The last you thing you want is to default and affect your credit rating.
If your credit rating isn’t great and you need a bad credit car loan, chances are, you’ll be paying very high interest rates and exposing yourself to more financial risks. Don’t despair. Instead, find yourself a specialist lender who can draw from a panel of lenders who may be more flexible and whose products are better suited to your needs. They may even be able to negotiate better loan rates and terms on your behalf.
Insurance and registration
These compulsory items are hefty and can really impact your overall financial situation. Vehicle registration costs are different across each state in Australia. Regardless of which state you live in, Compulsory Third Party (CTP) insurance is a significant component all Australian vehicle registrations.
As a driver, CTP covers you for injury to other people if you’re involved in an accident. It doesn’t cover you for damage to other people’s cars or property, nor will it pay for damage to your vehicle. That’s where additional car insurance come in. Whether you choose a comprehensive policy or basic cover such as Third Party, Fire and Theft, this is yet another cost of running your car.
All car insurance premiums, including CTP, are affected by the type of car you drive as well as the safety history of all nominated drivers. Insurance premiums are also affected by vehicle weight and number of cylinders. Modified, premium, sports and vintage cars will all attract significantly higher premiums.
Servicing
The average Australian car does around 20,000km per year and therefore, regularly servicing is essential. This costs hundred of dollars and once again, modified, premium, sports and vintage cars will attract higher bills. Watch out for buying old cars as items like gear boxes and automatic transmissions cost big bucks to replace.
Don’t get sucked into glamour car commercials. Owning a car costs far more than just the purchase price. Do your sums first and figure out if it all adds up for you.
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Category: Car Purchase
