How much does it cost to own a car?

RACV RoyalAuto Magazine

Driving Your Dollars is the annual RACV motoring costs study that looks at all of the aspects of owning and operating a car over a five-year period. These numbers are here to help you make an informed decision when purchasing a new car.

We’ve increased the number of SUVs this year and re-categorised them to provide more information in this booming segment of the market.

In 2015 we’ve seen an overall reduction in the average cost of running a car due to a fall in fuel prices and interest rates. The numbers are over the page, but first here is some information on how we calculate them.

STANDING COSTS

On-road price

This is the manufacturer’s list price plus the government charges and dealer delivery fee. The government charges are made up of stamp duty, registration, compulsory third party insurance, number plate and transfer fees. The mystifying dealer delivery fee is a typically exorbitant fee charged by the dealer to prepare the car for sale.

The on-road prices we’ve listed on the following pages are an estimate based on an average dealer delivery fee and these are really the most you should ever pay. It is critical to negotiate with a dealer to reduce your costs when purchasing a car, and on-road costs are a key target. Dealers are required to publish a drive-away price that includes these fees, but it’s still worth negotiating that price down.

Depreciation

Depreciation is the largest cost in owning a car. On average it accounts for almost 40% of your total costs even though you don’t actually see that lost value until it comes time to sell the vehicle. The worst cars for depreciation are those typically purchased by fleets, with many predicted to lose more than two-thirds of their initial price over five years of ownership.

Interest

The interest rate has fallen noticeably since last year and this has reduced the cost of purchasing a new car with a loan. Our calculations are based on taking out a loan for the entire cost of the car but these fees will be lower if you have a deposit or a trade-in that will cut the amount you need to borrow.

Other standing costs

The remainder of the standing costs in our study include the typical annual bills you’ll encounter when owning and operating a car, including registration, insurance and roadside assistance. We’ve also added the price of a driver licence as you’ll need that if you actually want to drive your shiny new car.

RUNNING COSTS

The running costs figure is made up of the servicing and maintenance costs, tyres and the always-contentious fuel bill.

Capped Price Servicing

Almost all major brands now have capped price servicing (CPS) in one form or another, but they are not all equal. It is worth looking at the fine print and considering the period covered by the program. Some brands only provide fixed servicing costs for three years while others can tell you what they’ll charge you to service your car in half a million (or more) kilometres’ time.

CPS schemes were in the spotlight earlier this year after an ACCC investigation found a manufacturer had increased its fixed servicing costs after advertising they were capped. This meant the cost of the service was higher than the published rate when the car was bought. ACCC deemed this misleading and said manufacturers need to be clear with their terms.

When comparing vehicles you should also be aware of extras not included in the capped price. Many brands don’t include coolant, brake fluid or pollen filter changes which are required and add to servicing costs. There are also extras such as ‘premium’ oil which comes at an unnecessary additional expense. The dealer must service the vehicle with at least the minimum specified oil and this will be perfectly adequate for normal use.

Other servicing costs

Where there is no servicing scheme available, we’ve added up the cost of parts and total labour required to service the car for five years. Our servicing cost also includes many unscheduled items such as brakes, a battery, windscreen, headlight globes and other parts that may need to be replaced in five years of ownership. It is likely you won’t have to replace all of these items and the cost may be less for you. However we include the same parts for all cars so they can be compared equally.

Tyres

As the only thing connecting your car to the ground, tyres are one of the most important parts of the car. We’ve included the cost of replacing one set of tyres in the five years of owning the vehicle. Your tyres can also contribute to the overall costs in other ways. It is important to ensure they are correctly inflated as this can affect your fuel consumption. The wheel alignment is also critical, as incorrect alignment will cause premature tyre wear and you’ll have to replace them more frequently.

Fuel

The fuel bill is the most contentious item in our operating cost study. Although it only contributes to around 13% of the total costs for an average car, it’s because it’s money that you outlay every week that makes it so noticeable.

The good news is that fuel prices are lower this year compared with 2014. The average fuel consumption for vehicles in this study is also getting better every year as new, more fuel-efficient models are released.

The fuel consumption figure is taken from the Government’s Green Vehicle Guide, www.greenvehicleguide.gov.au. Fuel costs are based on driving 15,000km a year for five years.

Written by Blake Harris
July 01, 2015