Buying a car could be the second most expensive purchase you make in your life (after a house) so it is essential you consider all the financial implications before you drive away.
What are the purchase costs?
There are a number of initial costs that must be factored into your budgeted purchase price. These include:
- Car registration.
- Compulsory Third Party Insurance.
- Other insurance – if additional cover is required.
- Mechanical or other inspections.
- Dealer delivery charges.
- Government taxes and levies – including stamp duty and transfer fees.
What everyday costs should I budget for?
The most obvious running cost you’ll have is fuel, but with oil prices fluctuating, petrol can be difficult to budget for. In addition to fuel, other costs include:
- Insurance – if you require comprehensive or third party, fire and theft insurance in addition to the compulsory third party included with your registration, this must be factored into your budget as insurance costs can add up.
- Loan repayments – if you required a loan for your car, these costs must be considered.
- Regular services – again, these can be costly, especially if you are not comfortable doing minor work on your car such as oil and filter changes.
- Spare parts and repairs – including tyres, filters, mechanical parts and lights. Repairs, including those for normal wear and tear can soon add up, in particular for non-standard or luxury cars.
- Membership of associations and clubs – annual fees of automobile associations offering breakdown assistance need to be considered in your budget.
- Registration costs – unfortunately, not a one-off payment on purchasing the vehicle, registration is a potentially costly annual financial drain. You may also be required to provide certification regarding the mechanical performance of the vehicle which involves a trip to an inspection station and additional costs.
Working out your budget
Once you have decided on your new car, put down on paper all the potential costs involved with the everyday running of the vehicle. If in doubt, over-estimate rather than under-estimate. And don't forget the fuel costs; with petrol fluctuating up to $1.40 a litre, everyday travel can become an expensive exercise.
Example
Jonathan* is planning to purchase a new car for $30,000. He has decided that he can contribute $10,000 from his personal finances, leaving $20,000 which he is financing with a car loan.
Jonathan's budget
- Fuel – Jonathan estimates that he will travel approximately 300km per week. At an average economy of 10km per litre and a slightly inflated fuel price of $1.45 to take into account any sudden rises, Jonathan's annual fuel cost will be $2262
- Insurance – Jonathan has decided on comprehensive insurance for his new car, costing him $326 per year
- Registration – and compulsory third party insurance will cost Jonathan $732 per year
- Maintenance and service charges - Jonathan has calculated that $300 should cover all his annual maintenance needs
- Loan repayments – annual repayments are $5650
- Club membership – Jonathan has chosen to join his state's automobile association with an annual fee of $150
Jonathan's annual costs for his new car are $9420 which equates to a weekly budget of $181.15.
