The real cost of buying a car
While buying a car can be exciting, the initial cost of the vehicle itself is only one part of the picture.
According to the Australian Automobile Association (AAA), the national average cost of running a car in Australia is estimated to be around $453 per week, per household – that’s more than $23,500 a year. In Sydney, it can be closer to $30,0001 annually.
That can come as a surprise if you’re only thinking about the purchase price.
Your actual costs will depend on the type of car you choose and how you use it. Still, it’s helpful to understand the full picture before you start shopping.
What does a car really cost?
Here’s a simple breakdown of the most common costs to factor in:
| Cost | What to expect |
|---|---|
| Purchase price | The upfront cost of the vehicle |
| Stamp duty | Varies by state and vehicle value |
| Registration & CTP | Ongoing annual cost |
| Insurance | Depends on driver, car type, and cover |
| Fuel or charging | Ongoing running cost |
| Maintenance & servicing | Regular upkeep that varies by make and model |
Looking at these costs together can give you a more realistic view of what you’ll be paying beyond just the sticker price.
First-year costs vs ongoing costs
In the first year, your costs are usually higher, as they include:
- The purchase price
- Stamp duty
- Initial registration and insurance
After that, your ongoing costs are mainly:
- Fuel or electricity
- Insurance
- Servicing and maintenance
This is often where the difference really shows up in your budget.
Stamp duty
Stamp duty is a one-off cost you pay when transferring ownership of a vehicle. It applies whether you’re buying a new or used car and is usually based on the value of the car or the price you paid, whichever is higher.
Costs vary depending on where you live. So make sure you check with your local vehicle registry office on the correct rates you will have to pay.
It’s one of those costs that’s easy to overlook until you’re at the point of purchase.
Transfer fees and registration
When you buy a car, you’ll need to transfer the registration into your name. Transfer fees and time frames differ by state. You’ll also need to renew your car registration every year.
The cost depends on factors such as:
- the type of vehicle
- engine size
- where you live
You’ll also need Compulsory Third Party (CTP) insurance. This covers damage caused to other people in an accident, but it does not cover damage to your car.
Comprehensive insurance
Many people choose comprehensive insurance, which covers the cost of repairing or replacing your car if it’s damaged.
It’s not mandatory, but it’s commonly taken out for peace of mind.
Without it, you could be covering the full cost of repairs yourself if something goes wrong.
Costs will vary depending on:
- where the car is kept
- how much you drive
- your driving history
- the characteristics of your car
Note: We’re not able to provide insurance advice so you may need to discuss your relevant needs with a financial planner or insurance broker.
Servicing your vehicle
Cars need regular servicing to stay safe and reliable.
Your owner’s manual will outline how often this should happen. As your car gets older, servicing may become more frequent or more expensive.
Servicing costs can add up over time. Some estimates suggest they can reach around $2,500 per year, depending on the vehicle and how it’s used¹.
It might not feel like a big expense at first, but it’s one of those costs that can quietly stretch your budget over time.
Other ongoing costs
In addition to the main costs, there are other costs that can add up:
- petrol
- replacement parts and repairs
- new tyres
- road tolls and parking
- roadside assistance
- loan repayments if you are financing the car
What people often forget to budget for
Some of the most commonly overlooked costs include:
- increases in insurance premiums over time
- unexpected repairs
- rising fuel or energy prices
These are the kinds of costs that don’t feel big on their own, but can quietly stretch your budget.
How financing fits into the total cost
If you’re using finance to buy your car, your loan repayments will become part of your overall budget.
Looking at your repayments alongside your running costs can help you choose a car you can comfortably afford over time.
It’s not just about whether you can afford the repayments today, but whether it will still feel manageable six or twelve months down the track.
The bottom line
Buying a car involves more than just the upfront price.
A simple way to think about it is: the purchase price gets you the keys, but the running costs determine what it really costs to keep the car.
Understanding the full cost helps you avoid surprises and make a decision that works for your budget long term.
We’re here to help
Before you buy a car or take out a loan, it’s worth checking whether these costs fit comfortably within your budget.
You can:
- use our car loan repayment calculator
- compare different loan amounts and terms
- get a better sense of what’s affordable for you
That way, you’re not just choosing a car you like, but one you can comfortably keep.
Contributor | Andrew Gamble, Head of Sales - Asset Finance
Andrew brings more than 20 years of experience in the finance industry. His strategic vision, leadership and his customer centric approach has contributed to the significant growth of Pepper Money's Asset Finance business.
Published by Pepper Money. Read our Editorial Policy to learn how we create and review content.
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