How to keep on a budget and save money on your car

While financial services, housing, food, and non-alcoholic beverages were the main contributors to the annual living cost rise across the household types, transportation, including maintaining and using cars was also cited as a major expense.

Based on the latest Transport Affordability Index published by the Australian Automobile Association (AAA), the average cost of owning a car in Australia as of the September Quarter 2023 is $24,262 per year for capital cities and $20,404 per year for regional areas.

With costs up by approximately $938 compared to the previous quarter, Australian price comparison site, Finder says that the largest components are rising fuel expenses and spikes in car insurance premiums.

“From the ever-fluctuating fuel prices to the annual fees and unexpected repair bills, keeping your car on the road can strain your wallet,” says Gary Ross Hunter, insurance expert at Finder.

An analysis of 26 comprehensive car insurance policies found a $1,871 difference between the cheapest and most expensive comprehensive policy, with average insurance costs for the Tesla Model 3 being $3,500. This is 157% higher than the average annual premium for a Toyota Corolla, according to the Finder Awards.

Car services and car upkeep costs are also having an impact with a separate Finder survey of 919 Aussies finding that 2 in 5 skips on vehicle upkeep, while 1 in 4 admitted not being able to afford car service costs.

So, if you’re planning on purchasing a new car, what’s the best approach during the cost-of-living crisis? And for others, how can you manage your car’s budget without skipping essential services and repairs?

When it comes to buying a new ride, Hunter recommends setting a budget from the get-go.

“Set a budget for your next car purchase and work through car running costs into your regular budget,” he says.

Consider that the true cost of owning including on-the-road costs such as registration fees, compulsory third-party insurance, car insurance, and road insurance, also need to be factored into your budget when considering the overall price.

“That new ride will definitely cost you extra and it pays for you to know how much you can really afford to spend on buying and running a car month after month,” Hunter says.

If you need a car loan to finance your new car purchase, be aware of the interest rate and fees associated with a deal.

"This adds a significant cost on top of the car's price itself. Shopping around for the best loan rates and terms can save you thousands in the long run.” says Hunter.

“Prices can vary a lot depending on the car make and model you buy,” says Hunter, and so can the prices of new cars versus used cars.

“New cars typically come with a higher price tag but may offer benefits like warranties and the latest safety features. Used cars can be a significant way to save, but you’ll need to factor in the potential for requiring repairs sooner,” he says.

For those who aren’t looking to purchase a new car but still want to save money with their existing vehicle, Hunter suggests these other budget-friendly tips.

“Petrol is likely the most frequent and noticeable expense which can fluctuate depending on prices and the fuel efficiency of your car,” says Hunter.

“Download fuel price comparison apps to find the cheapest stations near you. Many supermarkets and service stations offer loyalty programs and discounts on fuel purchases,” he says.

The more you drive, the higher the cost of maintenance. You will need to ask yourself whether your current budget and living costs absorb this additional cost.

Hunter says that the cost will depend on your car's value, your driving record, location, age, and the level of coverage you choose. 

To work out the best price, It’s crucial to compare quotes from several insurers and tailor your coverage to your specific needs.

While cutting back on other services and subscriptions may be on the table, when it comes to roadside assistance, Hunter says this “should be non-negotiable for drivers.”

“While plenty of people assume it’ll never happen to them and they can rely on family and friends to help them out, oftentimes a qualified technician may be required, and this can be a costly expense,” he says.

Related: What you need to know about Roadside Assistance programs

Related: 10 tips for cheaper car insurance

Related: Top five tips for drivers to save fuel