Owning a vehicle involves a lot more than people might think, both in expenses and responsibility. Despite recent reports from online used car trader Trade Me, that the median asking price for used cars have risen 35% year on year due to the impact from Covid, in New Zealand it is still affordable and relatively easy to purchase a used vehicle. However, the reality for many buyers is finding themselves surprised when it comes to the cost of filling the tank of their new purchase. If this is the case then there is a good chance all the costs associated with vehicle ownership haven’t been considered carefully enough before making the purchase.

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

As an example AA have used a new small petrol car and looked at the average costs you may incur on the third year of ownership to provide a guide of what vehicle ownership costs can accumulate over time.

 CarCosts Blog

Fixed costs

Fixed costs are those inevitable expenses that don’t change with vehicle use. You still pay these costs 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 new small car, you could end up having a fixed yearly cost of $5,000, which equates to $13.70 a day. Of course, this is just an estimate and it will 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 costs. On average, new cars lose 9% - 10% of their value when you drive them off the showroom floor. This varies by make and model, but the average is around 10% and generally new cars also lose about 20% of their value each year for the first year or two. This slows down as the car gets older, providing it is adequately maintained.

Money is also lost on your (outlay) this money could have been invested and gained interest, which is also reflected in the calculation of the fixed running costs, you can look at the fixed term interest rates at the time to gauge how much this might be over a year.

While used cars may still lose their value over time, the percentage difference will be significantly lower, and significantly reduce the fixed cost, however these used vehicles can conversely have higher flexible costs.

Flexible costs

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

If a new small car is being driven about 14,000km a year, your total fuel bill will be about $2,100, and it could be more if the price of fuel goes up.

If you averaged all the repair costs you might incur over five years including brake pad changes, it could be about $580 and tyres will cost about $380, providing they don’t experience premature wear due to alignment issues.

If you combine the fixed and flexible costs, it would give a combined total of around $22 per day. This is all just for a smaller vehicle and these costs will increase for larger cars.

Other factors

Other factors that may have an impact on running costs are driver license renewal, extended warranties, breakdown service subscriptions, diesel road user charges (if you happened to buy a diesel), and even parking costs.

AA Auto Centre

It is important that you look for a vehicle expert you can trust when factoring in service and repair costs. Maximise the lifespan and value of your vehicle with regular servicing. AA Auto Centre is a good start with fully qualified mechanics that can service any make or model vehicle with the latest equipment.

AA Auto Centre has three levels of vehicle service options designed to meet the needs of cars no matter their age, condition or history, and an extra bonus is that all work is protected by their quality guarantee for every motorist’s peace of mind.

Find out more on how the AA can help

Vehicle experts you can trust

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