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The real cost of owning a car

It's been about 10 years since I've owned a car. My wife doesn't own one either.

"You must save a lot in petrol"

That's one of the frequent reactions when someone discovers we don't own a car. "Of course, but it's just the tip of the iceberg" is the usual theme of my reply.

Many people I've talked to just aren't fully aware of the real cost of owning a car. Or even that there are six different costs of owning a car.

Six? Really?

Yes. Occasionally a work colleague or friend will boast their car only costs $X per week. Of course it turns out only some factors have been counted. Sometimes it's just petrol alone. To some people, that feels like the only cost they pay each week.

Why does this matter?

You might be questioning the need for a second car in the household (or even having one at all). Or you might just be choosing which car to get next.

Either way, to make an informed decision we need proper information. So let's look at the six costs.

1. Depreciation

Your car loses value. Every year. If you've bought a car for $30,000 and 4 years later it's worth half that, then you've lost $15,000. In four years, that's almost $4,000 per year.

2. Cost of funds

This is the most overlooked cost with people I've talked to.

Cars aren't free. The money has to come from somewhere - and that's going to cost us.

If it's a car loan, we're paying interest. If it's from a savings account, we miss out on the interest we would have earned. If it was from our mortgage offset account, we get charged more interest on our home loan (because the offset is less). If it was money was an investment, we forego the compounded earnings the investment could have made.

Worse still, we never get that money back. When we sell a car, whatever is left (after depreciation) generally goes towards the next car, and the next, ... for decades.

A while ago, I showed how $10,000 in a retirement account can earn $100k in 30 years.

So buying a $20,000 car could mean we miss out on earning $200k over 30 years. Maybe not all investments are that good, but that would be an average cost of over $6,000 dollars per year.

Of course money we miss out on earning is invisible to us, so we often don't think about how much it is.

Car payments however are more obvious. calculated the Australian average to be $6,650 per year.

3. Petrol

The Australian average turns out to be $3500 per year for a two-car family, so let's say $1750 per car.

That cost is based on a petrol price of $1.30, so it may be more now.

If you're doing your own numbers you may want to add up your receipts for a few months. It might be more than you think.

If you are choosing a car, check out Green Vehicle Guide to compare petrol consumption and find yourself an efficient vehicle.

4. Insurance

Again fairly obvious but it's a factor. Sometimes you can reduce it by shopping around. Even if you stay with your provider, telling them you have a cheaper quote from a competitor can persuade them to reduce your premium.

Other than that it will probably go up each year. So for a realistic prediction, add a few percent to last year's amount. has the average insurance at $24.63 per week. It's not clear if this is the average per car or per household but it's about $1260 per year.

5. Registration

This one is almost impossible to reduce, other than changing your vehicle. If you're doing your own numbers add a bit to last year's bill for a better forecast of next year's costs.

This averages about $800 per car.

6. Servicing, maintenance and repairs

This is a tricky one. Our memories are not good on this. We tend to think about our annual service, but there's also those 'one-off' repairs. Sometimes we ignore them because their one-off, but there's always something that will need fixing, so they should be included for an accurate figure.

If you've got record for the last few years you may be able to work out an average yearly cost.

The average Australian household pays over $1500 per year.

The extras (7 - 12)

Of course, technically there's more than six if you include parking fines, speeding tickets, parking fees, car seat covers, personalised number plates, car washes, etc. But these are somewhat avoidable, and up to the individual. The big six are pretty much unavoidable.

So what's a typical total

Obviously a lot of these costs depend on the type of car you have. Figures from RACV for 2020 (for some reason calculated by the month) are as follows.

  • Light car - $770 / month
  • Small car - $929 / month
  • Large SUVs - $1433 / month
  • 4x4 pick-ups - $1591 / month
  • All-terrain vehicles - $1805 / month

"What about my car?"

Yes, the previous figures are category averages. For your exact brand, check out The Carculator.

You can find the running cost of your vehicle and also compare to others.

I've looked up the most popular models in Australia and there's quite the variation between cars.

  1. Toyota Hilux 4x4 - $263.56 per week ($13,740 per year)
  2. Toyota RAV4 -  $198.47 per week ($10,350 per year)
  3. Ford Ranger 4x4 - $262.80 per week ($13,700 per year)
  4. Toyota Corolla - $165.01 per week ($8,600 per year)
  5. Mazda CX-5 - $201.54 per week ($10,510 per year)
  6. Hyundai i30 - $157.90 per week ($8,230 per year)
  7. Mitsubishi Triton 4x4 - $237.79 per week ($12,400 per year)
  8. Toyota LandCruiser - 368.86 per week ($19,230 per year)
  9. Nissan X-Trail - $201.19 per week ($10,490 per year)
  10. Mazda CX-3 - $170.61 per week ($8,900 per year)

What about second hand vehicles?

Good question. You may have to do your own number on that. You may have much less depreciation and cost of capital, but you may also have more repairs and higher petrol costs.

So what now?

Hopefully realising the real cost of owning a car can help you make the best decision for your needs. It might mean finding a more affordable vehicle (perhaps buying second hand).

It might mean having one less car - even if it means the occasional rideshare or car rental, that may still end up cheaper than owning an extra car all year round.

Related reading

How to waste a year's wages

Why living differently is rare

Scott & Taylor's car choices

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Oh, and those Australian averages came from this article by


  1. Repairs are the biggest annual cost for us (but maybe not so much with a newer car).

    1. Yes NZ Muse they can be a biggie can't they. A relative of mine recently had a repairs of more than $5000. Obviously that doesn't happen every year, but they really can bite. You're right in that a newer car might cost less to repair, but it also costs a lot more to buy and depreciates more. So you might still be making the more affordable choice.


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