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Hidden costs of buying a car

The freedom and flexibility that comes with owning your own car is undeniable. However, cars can become an expensive asset to maintain over time and are not typically considered an investment as they depreciate rapidly.

If you’re thinking of buying another vehicle or upgrading to a newer model, there are a number of hidden costs you should factor into your budget.

The cost of owning a car goes beyond the purchase price. For this reason, you’ll need to add up both the upfront and ongoing costs associated with running a car the next time you are car shopping.

Upfront costs include:

  • Inspection - If you’re considering buying a used car, it may be a good idea to get the car inspected by an expert and give yourself the peace of mind that you aren’t buying a lemon. Prices will vary depending on the car, the inspector you select and the comprehensiveness of the inspection but can range from $100 to $500.
  • Purchase price - The cost of the car.
  • Stamp duty - This tax varies from state to state.

Some of the ongoing costs involved include:

  • Licence fee – You’ll need to keep your driver’s licence renewed if you wish to drive.
  • Loan repayments - If you take out a loan to purchase the car you’ll need to consider monthly loan repayments and interest.
  • Registration - In order to drive your car on public roads, your state or territory will require you to pay an annual vehicle registration fee. The fee will vary depending on the make and model of your car and where you live. Generally, if your car is more than five years old, you may also need to pay for a safety check (often called an eSafety check or pink slip) before you can renew your registration. If this applies to you, it will be stated on your registration renewal notice.
  • Insurance - Covers the cost of repairing your vehicle should you be involved in an accident. You’re also legally required to pay third party insurance (known as a “green slip”), which protects others in the event of injury or death resulting from an accident. Comprehensive car insurance covers your car, other cars and protects you from theft of your vehicle. Comprehensive insurance will give you the most cover however, this does mean that it will be more expensive than other types of car insurance. Some factors that will determine the cost of insurance are your age, driving record, type of car, age of the car, where the vehicle is kept, etc.
  • Maintenance - The ongoing upkeep of your vehicle includes changing fluid, brakes and tyres as well as tune ups and servicing. If you’re buying a new car, you may benefit from fixed or capped price servicing. This type of servicing can provide you with certainty as the car manufacturer caps the annual cost of servicing for a determined period of time (a few years or as long as the lifetime of ownership). Of course, it’s important you read the terms and conditions associated with your capped price service arrangement, as the cost is sometimes built into the purchase price and manufacturers can change the capped price at their discretion.
  • Petrol - Fuel could be one of the most significant ongoing costs to running a vehicle. You should consider whether diesel, LPG or perhaps a hybrid car is more economical.

Mortgage Choice can help you with more than your home loan. In fact, your local mortgage broker can help you find your next vehicle through our door-to-door car buying service. Should you need finance to fund your car purchase, they can also help you find a loan that suits your needs.

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