When it comes to owning a car, the purchase price is just the beginning. From insurance to maintenance, fuel to parking, the costs of car ownership can quickly add up. But there's an alternative that could help you manage these expenses more efficiently: a novated lease.
When considering whether a novated lease is the right option for your new car, it’s important to have a full understanding of car ownership and the costs that come with it. Learning this information will allow you to make more informed choices when it comes to deciding on your car.
This guide aims to discuss these details, outlining what car ownership is, as well as providing a breakdown of the various costs involved in car ownership.
What is car ownership?
Car ownership refers to the responsibility of possessing and maintaining a vehicle. This involves everything from buying the car, paying for insurance and registration, to fueling and servicing it.
On the other hand, a novated lease, a type of vehicle leasing arrangement, could provide a more budget-friendly solution, bundling many of these car costs into one manageable payment. But what are these ownership costs?
Car ownership cost breakdown
Initial purchase price
The first cost you'll encounter when owning a car is the purchase price. This is often a significant upfront expense, especially if you're financing with a car loan that incurs interest over time. Car loan repayments will vary depending on the duration of the loan, the type of car, and more.
Price depreciation
Depreciation is the loss in value that a car experiences over its lifetime - this happens to all vehicles as soon as they hit the road for the first time. It's important to consider, especially if you plan to sell the car later, as it can affect the vehicle's resale value significantly.
Depreciation of a car’s price also isn’t even - usually, when a new car gets its first few thousand kilometres, a large amount of depreciation hits the car. If you’ve obtained your car on a loan, by the time you complete your car loan payments, the car’s sale value has taken a big hit.
Car insurance
Car insurance is a necessary expense to protect you from potential damage or liability costs. The average annual premium can vary based on several factors, including the type of coverage, the driver's history, and the car's make and model.
Some phrases often mentioned by many insurance companies and members of the Australian Automobile Association include:
Comprehensive car insurance - this type of insurance provides coverage for both damages caused to your car and damage you may cause to other vehicles.
Compulsory third party insurance - this insurance is a government insurance policy that provides cover to drivers who cause injury to another person in the case of a crash.
Car registration and taxes
In Australia, car owners are required to pay annual registration fees. The registration cost can vary by state and depend on factors like the car's value, weight, and fuel efficiency - so calculating car registration costs is very important to all vehicle owners.
Paying for your own driver’s licence also can be counted in this category. Licensing costs are an important factor to consider in your overall car transport costs.
Car fuel
Fuel is an ongoing cost for car owners and can fluctuate based on fuel prices and the car's fuel efficiency. With Australia's vast landscapes, these fuel costs can be significant, especially for those frequently on the move.
Saving on fuel can happen in a few ways, including waiting until cheaper fuel days, or even investing in a hybrid or electric vehicle. The total cost of fuel over the course of a year is substantial, so finding the lowest prices can save you a big amount of annual costs for your car.
Car maintenance and repairs
Regular servicing, unexpected repairs, roadside assistance and tyre replacements are all part of car ownership. While maintenance costs for getting your car serviced can be predictable, repair costs can catch you off-guard and make a sizable dent in your budget.
What you don’t want to happen is for you to get into an accident or break down on the side of the road and not have any money reserved for sudden costs such as this.
Car parking
If you live or work in a city, parking can be another significant expense. Daily parking rates can add up, particularly in Australia's major cities with the likes of major parking buildings.
Some of these car parks allow you to purchase a monthly access card at a discounted price - which can make the costs of parking easier. Some businesses also offer employees free or discounted parking costs.
Reduce the costs of your next car with a novated lease
A novated lease is a lease agreement between you, your employer, and a finance company. It includes many of the costs associated with car ownership, packaged into a single regular payment.
Compared to traditional car ownership, a novated lease could offer lower car running costs, potential tax benefits, and the convenience of having expenses like maintenance, registration, and insurance included in the lease.
Understanding the full costs of car ownership is crucial when budgeting for a vehicle. While owning a car can offer freedom and convenience, it's essential to be aware of the financial commitment. A novated lease could provide a cost-effective and manageable alternative.
If you're considering buying a car, take some time to evaluate the ongoing costs and consider whether a novated lease could be a better fit for your budget. Easi is a novated leasing company with many years of experience in all things related to car leasing and financing.
We have a wide range of fuel-based and electric vehicles for you to choose from, meaning you can get the car you want while being able to manage the costs more effectively. If you’re looking to save on the costs of your next car with a novated lease, contact us today to learn more!
