Vehicle ownership costs – more than just the purchase price

15 March 2017

Vehicle ownership costs – more than just the purchase price

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Owning a vehicle involves a lot more than people might think, both in expenses and responsibility. Are you lifting the couch cushions just to put enough fuel in the car to get you through another week? What happens if your ride breaks down?

When calculating vehicle costs, there are two separate factors that make up the total ­­– fixed and flexible.

We’ve used a small petrol and diesel car as an example to provide a rough guide of what vehicle ownership costs can accumulate to.

Fixed costs are those that don’t change with vehicle use. You still pay even while your vehicle is parked in the garage.

Common fixed costs include expenses like vehicle insurance, Warrant of Fitness and vehicle licensing. They can also include factors like vehicle depreciation and interest accrued if under finance.

With a small car, you could end up having a fixed yearly cost of $4500 which equates to $12.30 per day. Of course, this is just an estimate and it’ll vary according to how old the vehicle is, how long you have owned it, and the purchase price.

Vehicle depreciation is the largest contributing factor to a new vehicle’s running cost. A new vehicle purchased four years ago for $26600, may have depreciated by 50%. That money lost (outlay) could have been invested and gained interest, which is also reflected in the calculation of the fixed running cost. While used cars may still lose their value over time, the percentage difference will be significantly lower.

Flexible running costs reflect all the consumables. Fuel, tyres, repairs and maintenance – spending on these all add up.

If a small car is being driven about 14,000 km a year, your total fuel bill will be about $2400, and it could be more if the price of fuel goes up. Tyres will cost about $266 each year if they last three years and repairs and maintenance will be about $550.

If you combine the fixed and flexible costs, it would give a combined total of around $21 per day. This is all just for a smaller vehicle and these costs will increase for bigger cars.

Other factors that may have an impact on running costs are driver license renewal, extended warranties, breakdown service subscriptions, diesel road user charges, and even parking costs.

When the budget is tight, the cost of some items can be reduced by shopping around to find the best deals on repairs and maintenance to help reduce the yearly expenses. But never scrimp when it comes to safety items and insurances.  


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