Australians love their cars. We love them a lot.
In fact, for some of us, the only thing we love more than our car is a new car.
There’s only one problem; new cars cost $20,000 more than used cars, new research from ME Bank has revealed.
The average amount we spend on a new vehicle is $34,000, compared to $14,000 for a used vehicle, and then there’s finance to take into account.
Nevertheless 53 per cent of car owners bought their vehicle new, and 35 per cent took out finance to purchase it. Among new car owners, that figure jumps to 41 per cent.
“Status is one of the key reasons we’re obsessed with new cars: 51 per cent of new car buyers said ‘the car they drive says something about them so they prefer to purchase new cars’, rising to 64 per cent among Gen Y,” ME Bank money expert, Matthew Read said.
Noting that almost half Gen Zs think they would be embarrassed to drive a used vehicle, he suggested that financial sense is forgotten when it comes to wheels.
“Owning a new car is a nice luxury, but could $20,000 be used for another savings goal like a house deposit or even simply covering the rising cost of expenses?”
The ME Bank research revealed one quarter of buyers were surprised by how much their vehicle cost to run, while misconceptions that their new vehicle will cost less over time also stinging.
Most car owners (61 per cent) thought used cars would have higher maintenance costs, but as long as the car is modern, buyers can generally expect them to run for many years before costly maintenance is required.
“Sixty-five per cent of respondents failed to identify depreciation as the biggest cost of owning a new car in the first three years, including 86 per cent among Gen Z,” Read said.
“A new car loses significant resale value as soon as you drive out the door, a pattern that continues over the first few years of its life, making it one of the biggest costs of owning a new car,” he added.
“You can buy a two or three-year-old car for much less and it won’t necessarily cost more to run, especially if a preventative approach has been taken to maintenance.”
According to adviser at Rask Invest, and Yahoo Finance columnist, Owen Raszkiewicz, buying a $25,000 vehicle can balloon out to $70,000 once high interest rates, registration, repairs and insurance are taken into account.