Vehicle owners ignoring high running costs

A typical small car like the Toyota Corolla could cost as much as half its purchase price to run each year, according to a study by comparethemarket.com.au.

Taking into account all the associated expenses for operating a car in our capital cities, the running costs over 12 months of frequent and regular use could be $14,051 in Sydney – more than half the Corolla's on-road purchase price of around $27,984 for an automatic Corolla Ascent Sport.

RedBook has conducted a similar survey recently, also based on the Toyota Corolla (the Ascent Sport variant with manual gearbox). But the RedBook study (pictured below) goes into greater detail and includes depreciation, consumables and nett finance costs based on a lower interest rate.

While the comparethemarket.com.au study takes a somewhat pessimistic view, highlighting the annual running costs as a proportion of the up-front purchase price, the RedBook findings essentially calculate the cost of the vehicle in total over five years – which works out significantly lower for annual running costs. An important point that distinguishes the RedBook study is that it doesn't include fees for tolls and parking, and the data is based on expenses incurred in the Melbourne metropolitan, so it's not a national study like the comparethemarket.com.au counterpart.

In contrast with the comparethemarket.com.au annual running cost for Melbourne – $13,252 – the RedBook study calculates the running cost during the first year of ownership is actually higher, at $13,960, but the total cost of ownership in subsequent years is less than half the first year's figure. The full cost of Corolla ownership after five years, according to Redbook, is $38,621, an average of $7724 per year.

Calculating the cost of ownership depends on how the running costs are calculated, as Ross Booth, Data Services Director at RedBook explains.

"We don’t add parking or tolls and our figures on insurance, finance and petrol are different, however not too far away," he explained.

According to Booth the other study uses "a cashflow model rather than a total cost model" and makes no mention of resale value.

"After five years the cars is still worth something," he observed.

The comparethemarket.com.au study looked at the respective annual cost of vehicle ownership in the mainland state capitals. Sydney drivers face the highest costs, the study revealed, with Perth drivers at the other end of the scale, paying as little as $11,488 a year.

In descending order of cost, the findings were: Sydney $14,051, Melbourne $13,252, Brisbane $12,442, Adelaide $11,576 and Perth $11,488. Broken down, the numbers show that Melbourne drivers are paying $92 a month for comprehensive insurance, which is almost $40 more than Perth drivers pay for their monthly insurance premiums ($55). Sydney drivers typically pay more for tolls ($40) and Brisbane drivers pay more for petrol (currently 146.4 cents per litre on average). Adelaide is an expensive place to leave your car parked, at $18 for two hours.

The annual running costs were calculated with the inclusion of loan repayments for the full price of the vehicle ($26,000) over a five-year loan period and 8.49% interest. Across all five cities the loan amount for the 12-month period was the same: $6529.

These are the findings from the comparethemarket.com.au study, showing annual costs in descending order for each city, broken down and grouped by category in the study.

Comprehensive insurance
Sydney – $1035
Melbourne – $1104
Adelaide – $750
Brisbane – $682
Perth – $660

Registration
Perth – $919
Melbourne – $835
Sydney – $822
Adelaide – $800
Brisbane – $757

Maintenance and servicing
Perth – $837
Melbourne – $766
Sydney – $753
Brisbane – $630
Adelaide – $599

Petrol
Sydney – $1923
Brisbane – $1922
Perth – $1916
Melbourne – $1907
Adelaide – $1862

On-street parking
Adelaide – $936
Sydney – $749
Melbourne – $728
Perth – $520
Brisbane – $510

Tolls
Sydney – $2130
Brisbane – $1316
Melbourne – $1275
Adelaide – N/A
Perth – N/A

Roadside assistance
Sydney – $110
Melbourne – $108
Perth – $107
Adelaide – $100
Brisbane – $96