Watching the Porsche 911 Carrera S thundering up the hill towards Mount Dandenong left me drooling. All that raw power, the chrome, the leather, the roar of the engine.
Over the years I have come to realise that my passion for cars and motorbikes fluctuate incessantly. In fact with each and every wind change my top 10 list of favourite cars and bikes seem to alter drastically.
I’ve been fortunate enough to have driven a few nice sports cars from Subaru WRXs, to Mitsubishi EVOs to Alfa Romeo Spiders. While the first 20 minutes of driving tends to get my heart racing, I’ve got to admit that things soon settle down and my mind wanders to thoughts about the next vehicle. There’s always another car, another motorbike, another shiny object to capture my attention… albeit temporarily. Coming to this realisation has saved me a fortune over the years.
This kind of self-awareness wasn’t always there however. Like Paul Kelly’s famous song “I’ve done all the dumb things.” I’ve owned new or newish cars, and recoiled in horror as they seemingly plummet in value with each hour that you drive them. Our lovely ‘automatic rain sensing windscreen’ sounded like a great idea until the stone chip required a $1200 piece of glass imbedded with rain sensing microchips. I’ve grimaced as kids fling open car doors with careless abandon and as shoppers underestimate the width of their shopping trolleys. I’ve also owned a few four wheelers and had a great time bouncing around the Australian bush. A fun frolic in a river, followed by a total engine rebuild taught me a lesson that fourbys can be costly!
Car expenses can add up to be a gargantuan expense from your yearly expenditure. As Aussies we love the feeling of driving around in something that makes us feel cool or gives us a bit off social currency. Whether we intuitively judge a person’s financial status or coolness by the car they drive, is up to us to personally answer. For me, I will admit that it subconsciously plays a part. However, visit Europe or Asia where touch parking can be a common practice, and the fascination with shiny vehicles can quickly lose its lustre.
But how much does a new car cost to run really? What if we were to choose something modest? Cars definitely have their purpose, but understand that they can leave a huge hole in your pocket. Did you realise is that driving a new humble Mazda 6 can cost you as much as $12,030.78 per year? Yikes!!
$12 grand to drive a car that doesn’t necessarily catapult you from 0-100 in any special time. $12 grand for a car that isn’t particularly regarded as a head turner. $12 grand for a car that you may have thought was actually a very rational economic choice. In some ways it is too. Were it a Toyota Landcruiser the annual costs are purportedly over $19k per year. Drive two new cars and you could expect this cost to potentially double. Is anyone else hearing alarm bells blasting in their minds? Fine if you are earning truckloads of cash but for the average Aussie earning $74,724 before tax this could make a massive dint in your pocket.
Vehicle expenses can hit you financially in both obvious and subtle ways. I’ve tried to list a few.
- Depreciation- What is a $30,000 car worth in 5 years? More than likely just a third of the cost. Then there’s the expense of losing the income opportunity that the money could have been deployed towards.
- Financing- A $30,000 loan fully financed at 12% means an additional $18,000 goes down the gurgler over a 5 year period.
- Registration- This would most likely between $500-$850 each year in Australia.
- Insurance- Depending on your rating and the level of cover, estimate $600+ per year.
- Servicing- The RACQ report would conservatively hint that the costs would be around $800+ if you drove 15,000 kilometres per year.
- Fuel- No way of avoiding this one unless you buy electric or have a Flintstones powered vehicle. Obviously the best way to lower your fuel bill would be to drive less, or to choose a more economical vehicle. At today’s prices, driving an average 15,000 kilometres per year, each litre per 100km of economy saved equates to roughly $180 back in your pocket.
- Tyres- Ones again, conservatively allow for $225 per year for when a replacement is due.
If you’re interested in reading the RACQ recently for yourself click here.
This post is not to persuade readers out of buying new vehicles or lavish cars. I would, however, advocate that each person ensure that car expenses only make up just a small proportion of your annual income. Earn $150k and want to buy a $30k car in cash? No problem. Earn an average of $50k and it could be much more financially harder for you.
To ensure you’re getting a good deal and moving onwards and upwards, add up how much your car costs you each year. Add up the registration, the repair bills, the interest, the insurance and the depreciation. Do a comparison on another more modest vehicle and weigh up the difference. If you could reduce your expenditure by $4-$7k each year, what could you potentially do with it?