Saving for a car is a short-term savings goal, and one way to save for these goals is by drawing up a budget.
Your budget can help you understand what money is going into your account/s and what goes out the other side in spending. It also shows if you are spending more than you can afford. This way you can direct your money to where it matters most, so you can stay on top of your bills and start putting money towards your new set of wheels.
If you’re not sure how to write a budget, check out Westpac’s Online Budget Planner for some guidance.
If it turns out you need to trim some expenditure, you may consider cutting out non-essential items such as entertainment, dining out, memberships or subscriptions. It is often easier to stay on top of your spending if you use cash, EFTPOS or a debit card when shopping instead of using a credit card.
According to motoring group RAC, a ‘micro’ car such as a Suzuki Celerio hatchback costs around $102.02 in weekly running costs – that’s $5,201.09 annually. If you drive a bigger SUV such as a Ford Territory, you could be paying as much as $228.67 each week or about $11,890 annually1.
The biggest running cost for cars is depreciation. It can cause a significant drop in the value of your car when trade-in time arrives, and it can represent as much as 40% to 50% of the total running cost of your vehicle2.
Fuel and car loan interest are other major costs. There are also other costs such as tyres, registration, servicing and maintenance costs to consider and insurance costs, which can be higher than expected.
As with any financial product, car insurance depends on your personal needs and circumstances. The best policy for you is the one tailored to your needs, driving lifestyle and budget.
There are a number of different types of car insurance policies you’ll need to tick off such as ‘Comprehensive Cover’, Third Party Property and ‘Compulsory Third Party’ (Greenslip).
This is generally the highest level of insurance cover for cars. It may include covers such as accidental loss or damage, loss or damage caused by fire or theft and malicious damage.3
This covers the insured vehicle for damage caused to other cars and property. Third party property cover is generally less expensive than comprehensive cover...3
CTP insurance is personal injury insurance that is mandatory for every motor vehicle registered in Australia, though each state and territory within Australia have their own rules relating to this type of cover. Generally, it covers vehicle owners and drivers who are legally liable for personal injury caused to any other party in the event of a motor vehicle accident. It will cover you for personal injury claims made against you by other road users such as drivers, passengers, pedestrians, cyclists, motorcyclists and pillion passengers involved in an accident.3
There are no hard and fast rules as to whether you should buy a new or used car. It comes down to personal preferences, needs and budget.
Cars depreciate (lose their value) most rapidly in the first couple of years on the road, so you can expect to spend less money by buying a relatively late model used car compared with a brand new one.
Most new cars come with a full manufacturer’s warranty for several years, which gives you some cover should you run into problems with the vehicle. On the flipside, with a used car, depending on its age and the number of kilometers it’s clocked up, it might be in need of maintenance, and this could end up costing you money.
It pays to know you’re not buying a lemon, and this is where a vehicle condition appraisal could be worth considering before buying a used car.
Most of the major motoring bodies such as the NRMA (NSW and ACT), RACV (Victoria), RACQ (Queensland), RAA (South Australia), RAC (WA), RACT (Tasmania) and AANT (Northern Territory) offer this service. You may be eligible to receive a full report on the car’s general condition and safety components from a qualified mechanic.
1Costs are associated with operating a car in Western Australia, including depreciation. Costs are calculated for a 5-year period from new, and based on driving 15,000 kms per year on private use. The RAC 2015 vehicle running costs guide - http://rac.com.au/motoring/motoring-advice/buying-a-car/running-costs
2The RAC 2015 vehicle running costs guide - http://rac.com.au/motoring/motoring-advice/buying-a-car/running-costs
3ASIC’s MoneySmart website – Car Insurance - https://www.moneysmart.gov.au/insurance/car-insurance
This information is current as at 15/08/2016.
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