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What to Budget for When Buying a Car

Understand the essential expenses you need to consider when purchasing a car.
Published on December 7th, 2020
  Written by 
Adrian Edlington
Adrian Edlington is PR & Communications Manager at Savvy. With a keen interest in personal finance, car loans, the mortgage industry, cost of living pressures, electric vehicles and renewable technology, Adrian's research includes conducting primary data surveys and analysis of up-to-the-minute secondary Australian data sources. His work on behalf of Savvy has been featured on ABC.net.au The Conversation, the Sydney Morning Herald, AFR, News.com.au, The Age, Herald Sun, Adelaide Now, SBS On The Money, 7News, Car Expert, Which Car, Drive.com.au and more. In his spare time, Adrian enjoys mountain biking and business podcasts.
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   Reviewed by 
Bill Tsouvalas

Reviewer

Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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Buying a car is much more than paying the sticker price. Whether you're opting for a brand-new vehicle or a used one, purchasing a car is a significant financial decision. Your budget should include not only how much you can spend upfront, but also how much you’re prepared to spend over the life of the car. Let’s take a look at the essential expenses you need to plan for when buying a car in Australia.

Base price

The most obvious cost when buying a car is the base price. This is the cost of the car without any additional features, options or upgrades. It gives you a clear idea of the minimum amount you'll need to allocate for the purchase, helping you to set a realistic budget.

Bill Tsouvalas, Managing Director of Savvy, commented:

"With the rising cost of living, it's more important than ever to shop around and find a vehicle that not only meets your needs but also fits comfortably within your budget. Making a sensible choice now can save you from financial stress down the road."

The price of a car can vary widely depending on a number of factors. The make and model play a significant role, with prices differing drastically from economy cars to luxury vehicles. Whether you're buying a new or used vehicle also impacts the base price. New cars are typically more expensive, whereas used cars can offer considerable savings but their condition and history can make them a riskier choice.

It’s also crucial to consider factors such as the brand's reputation, reliability and resale value. A car that holds its value over time or has lower maintenance costs can provide greater overall savings, even if the initial purchase price is higher.

Extras

The sticker price on a car is usually for the base model. If you want any additional features that don’t come as standard, this will cost extra and can add hundreds or even thousands to the final price of the vehicle. Common car extras include:

  • Infotainment systems
  • Premium sound systems
  • Leather upholstery
  • Sunroof or moonroof
  • Upgraded wheels and tyres
  • Paint and trim options
  • Interior comfort features, such as ventilated seats and climate control

Stamp duty

In Australia, stamp duty is a tax levied by the state or territory government on certain transactions, including the purchase of a car. It's a one-time tax paid when purchasing a new or used car and is based on the purchase price or the market value of the car, whichever is higher. The amount you'll pay depends on the vehicle's determined value and the state or territory in which you're registering it. Its environmental impact can also play a part in how much you are charged.

You can usually calculate stamp duty using online calculators provided by your state or territory's revenue office. You can find out more about how stamp duty for cars works here.

Loan repayments

If you cannot buy a car outright, financing the purchase through a car loan is a common option. Before applying, it is important to understand how a car loan works. Consider the following:

  • Loan options: there are various loan options available for financing a car purchase. It's essential to compare interest rates, terms and fees from different lenders to find the most suitable loan for your financial situation.
  • Repayments: when budgeting for a car loan, consider the repayments you'll need to make weekly, fortnightly or monthly. The amount can vary depending on factors such as the loan amount, interest rate and loan term. A loan calculator can help you estimate your monthly repayments and ensure they fit comfortably within your budget.
  • Total loan cost: while focusing on repayments is important, it's also crucial to consider the total cost of the loan over its entire term. This includes not only the principal amount borrowed but also the total interest paid over the loan term.
  • Loan term: the loan term, or the length of time over which the loan is repaid, also affects your budget. A longer loan term typically results in lower monthly repayments but may cost more in total interest over the life of the loan.
  • Deposit: although it is entirely possible to get a car loan upfront, having some money to put towards your car may work in your favour. This can increase your chances of getting a loan with a lower interest rate and also means that you don’t need to borrow – and pay back – as much money.  

Registration and CTP insurance

Before you can legally drive your car on Australian roads, you'll need to register it and purchase Compulsory Third Party (CTP) insurance. CTP insurance is a legal requirement for all vehicles and provides coverage for personal injury claims resulting from car accidents.

The process of purchasing CTP insurance varies depending on the state or territory you live in. In some regions, CTP insurance may be automatically included in your vehicle registration costs. However, in other areas, you may need to purchase it separately from an insurance provider licensed in your state or territory.

CTP insurance is closely linked to your vehicle's registration, with cover valid for the duration of the registration period. This means that each time you renew your vehicle's registration, you'll also need to renew your CTP insurance. It's crucial to be aware of your renewal date – and to factor this cost into the overall budget for your car.

Insurance

While CTP insurance covers personal injury claims, it's essential to take out additional car insurance to protect you and your vehicle against a variety of incidents. In Australia, there are three main types of optional car insurance. However, when it comes to purchasing a car under finance, there’s generally only one option available: comprehensive car insurance.

Comprehensive insurance offers the highest level of coverage for your vehicle. It protects against damage due to collision, fire, theft and sometimes extreme weather events. Additionally, it covers damage caused to other vehicles or property. 

You may also wish to consider purchasing roadside assistance coverage to provide peace of mind in case of breakdowns or emergencies while driving. Many insurance providers offer roadside assistance as an optional add-on to your policy for an additional fee.

Fuel

Fuel costs are an ongoing expense of car ownership. The amount you'll spend on fuel depends on factors such as the car's fuel efficiency, your driving habits and current fuel prices. Research the fuel efficiency of different makes and models before making a purchase, and consider opting for a more fuel-efficient vehicle to save money in the long run. Alternatively, you could consider buying a hybrid or electric vehicle. These cars are typically more expensive to buy but are often cheaper to run.

Maintenance and repairs

Setting aside a portion of your budget for maintenance and repairs can help you avoid financial strain when issues arise.

Regular maintenance, such as oil changes, tyre rotations and brake inspections, is essential to keep your car running smoothly and prolong its lifespan. As a general rule, cars should be professionally serviced every 6 months or 10,000 kilometres.

Additionally, it is important to be prepared for unexpected repairs that may arise due to wear and tear or unforeseen accidents.

Parking and tolls

Depending on where you are in Australia, you may have to pay a toll to use certain roads. New South Wales, Victoria and Queensland have toll roads and if you will be regularly driving on these roads it is crucial to consider the associated costs. Toll charges vary by region and are influenced by factors such as vehicle type, distance travelled and time of use. To determine the applicable toll fees for your journeys, visit the relevant state's official website for detailed information.

Likewise, especially if you live in an urban area, parking fees may be a regular part of your driving experience. Fees can vary widely depending on where you park – whether it's street parking, metered parking or a parking garage – and when. It's essential to budget for parking expenses, particularly if you regularly commute or spend time in areas where parking is in high demand.

Factoring in all the costs, running a car in Australia isn’t cheap. From the initial purchase to everyday expenses like fuel and parking, the costs can quickly add up. It’s therefore crucial to prepare and set a budget before buying a car to give you peace of mind before you hit the road. If you're ready to explore your car loan options, you can compare more than 40 lenders and hundreds of loans with our financial professionals at Savvy. Get started today.

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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.

The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.

Approval for car loans is always subject to our lender’s terms, conditions and qualification criteria. Lenders will undertake a credit check in line with responsible lending obligations to help determine whether you’re in a position to take on the loan you’re applying for.

The interest rate, comparison rate, fees and monthly repayments will depend on factors specific to your profile, such as your financial situation, as well others, such as the loan’s size and your chosen repayment term. Costs such as broker fees, redraw fees or early repayment fees, and cost savings such as fee waivers, aren’t included in the comparison rate but may influence the cost of the loan. Different terms, fees or other loan amounts may result in a different comparison rate.

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