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What Are The Hidden Costs of Buying a Car?

What Are The Hidden Costs of Buying a Car?

It’s a mistake even seasoned car buyers make – the spot a great deal at the showroom or online and rush to snap it up. Not so fast. The thought of getting behind the wheel of a new car is enough to get anyone excited, but that’s no reason to make what could be a serious financial error. Unfortunately, that great deal you’ve spotted on the sticker isn’t the whole story – every car purchase comes with hidden costs that you need to be aware of when you’re in the market. 

To help you make a more informed choice, Carbar has rounded up four of the most significant hidden costs of buying a car. If you’re wondering which car to buy and price is a factor, read on.

Depreciation 

Unless you have a true collector’s item, your car is less valuable every year. The single largest contributor to your car’s running costs, depreciation makes up more than 40% of your after-purchase expenses. With some cars losing as much a 17% of their value every year for the first three years, your Corolla could hypothetically shed more than $10,000 in value over just 36 months of regular usage, leaving you with a big gap to make up if you’re looking to trade up. 

Loan interest 

Unless you’re paying for your car upfront and in full, you’ll be taking out a loan, which means paying interest. While not an immediate cost that you have to worry about, interest will significantly drive up the cost of a vehicle over its lifetime. Take that $23,500 Corolla from before – if you took out a three-year loan for the entire purchasing price of the car at a standard 8% per annum interest rate, you could end up paying more than $31,000 after interest, balloon payment and application fees. That’s nearly $8000 more than you originally thought you were up for.  

Stamp duty 

Every state and territory in Australia levies a tax whenever a vehicle changes ownership. Called stamp duty, this tax applies whether the car was purchased new from the dealer or used from a previous owner. Unlike GST, this tax won’t be included in the sticker price of the vehicle, often becoming a nasty surprise for any buyer who hasn’t made a conscious effort to factor it into their budgeting. 

Complicating matters is that each state and territory calculates stamp duty differently. Many jurisdictions – such as New South Wales – calculate stamp duty payable purely on the purchase price of the car. Others such as Queensland vary stamp duty depending on the design of the engine, or the amount of CO2 the car emits as in the Australian Capital Territory. These varying stamp duty amounts can impact your choice of which car to buy, sometimes encouraging drivers to choose smaller, less expensive, less powerful or less polluting vehicles.  

The result is that the final price you pay for a car can vary wildly. That modestly priced Toyota Corolla you were looking at could end up costing you significantly more than its original $23,500 sticker price – up to $1000 more in some jurisdictions or as little as $240 in others. Keep this in mind when you start shopping around. 

Inspection costs 

Do you know what you’re buying when you go car shopping? You should. While strict regulations mean that dealers must sell a certified roadworthy vehicle that functions as advertised, you’re not nearly as well protected when you buy through a private sale. As such, any driver who doesn’t want to pay thousands for a lemon should factor in the cost of a pre-sale inspection into their budget. These inspections aren’t expensive and can save you big by helping you avoid cars requiring huge repair bills. While only costing on average a few hundred dollars, they are an expense that must be factored into the total cost of acquiring the car. 

Looking for a way to get behind the wheel of something special without the financial risks ? Carbar makes it simple. For a single fixed weekly payment, you can drive what you want, where you want while they take care of all the ongoings. Your subscription includes everything from insurance to registration and servicing, even covering things like tyres and roadside assist.

To learn more about car subscription, browse our range of vehicles or join for free, visit carbar.com.au today.

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