What a car really costs to own

Think the cheapest car at the dealership is really the most inexpensive? Think again, as the asking price fails to reveal the many hidden costs of car ownership.

Running costs such as fuel, tyres and servicing can quickly make that apparent bargain buy a costly mistake, while depreciation is the biggest cost of all for new car buyers. Insurance is another key consideration, since the type of cover affects the ongoing cost of your vehicle.

According to CarsGuide, smaller cars are typically more affordable, fuel efficient and cheaper to service than larger vehicles, since their parts do not wear out as quickly.

The Suzuki Alto hatchback has topped the Australian Automobile Association’s running costs survey for three straight years, costing just $6,237 a year to run according to RACQ’s 2014 survey, including purchase price, loan repayment costs, registration, fuel, servicing and depreciation.

In contrast, the survey of more than 100 of Australia’s top-selling cars found the most expensive cars to own and operate were the Nissan Patrol and Toyota LandCruiser four-wheel-drives, costing more than $21,000 a year to keep on the road.

The top-selling Toyota Corolla ranked only eighth in the small car category, while the economical Toyota Prius Hybrid cost more than $10,000 a year to own and operate, despite its low fuel costs. Holden beat Ford in the big car stakes, with the 3.0-litre V6 Commodore cheaper than the four-cylinder Ford Falcon due to Ford’s higher depreciation and purchase costs.

For environmentally conscious buyers, the Australian government’s Green Vehicle Guide also provides information on vehicle greenhouse and air pollution emissions. According to the guide, top performers as of January 2015 were led by the BMW 101, Mitsubishi iMiEV, Nissan Leaf and Renault Kangoo, among other green vehicles.

Diesel vs petrol cars

According to the RACV’s latest study, diesel cars provide better fuel consumption but are usually more expensive to buy. It reported an average price difference of around $4,000, with a similar mark-up for SUVs.

However, advances in petrol engine technology have narrowed the difference on fuel consumption, with a VW Golf in its study apparently more economical than many small diesel cars. RACV also found that while diesel cars tend to hold their value better than petrol vehicles, it still does not make up for the price premium when buying new.

Depreciation: the silent killer

Depreciation is a silent killer and the biggest cost for new car owners. Unlike other assets such as your house, the minute you drive the car out of the showroom it starts losing value.

Almost every new car loses at least a third of its value in the first three years, with many dropping by more than half. However, small cars and SUVs tend to hold more of their value than larger cars.

For used car buyers, most of the loss of value for a car occurs in the first three years, so it makes sense to buy a used car of around three years old and keep it for two years, selling it before repair costs start to rise.

Car insurance

Another cost of car ownership is car insurance, with owners required by law to have compulsory third party (CTP) insurance covering death and injury to people if you are involved in an accident. However, it is important to also obtain comprehensive insurance, which will protect both your car and other’s property if your car is in an accident or is stolen.

You can get an online car insurance quote now with Real Insurance. Using our online quote tool, you can compare our different types of car insurance. Be sure to read our Product Disclosure Statement for information to help you decide which type of cover is right for you.

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