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Budgeting for the cost of running a car

24 October 2017

Buying a car is a big financial undertaking, and the costs don’t stop once you’ve made the initial purchase. There are lots of ongoing expenses that come with running a car and keeping it in good condition.

Before you decide on a car to buy and how much to spend on it, you should consider these extra running costs. Doing this will help ensure you can give yourself enough breathing space to cover the expenses that crop up after you’ve bought your car.

Here are the main running costs you should think about.


How much you spend on fuel will depend on the type of car and the size of the engine. Generally the bigger the engine the bigger the fuel bill. What you pay on fuel will also obviously depend on how much you drive your car.

For most vehicles you can expect to pay 6 - 10c per kilometre in fuel, so a typical annual fuel bill for a single car could range from around $800 - 1,400.

Some car types, like those with hybrid petrol-electric engines, can mean a smaller fuel bill. Because fuel prices go up and down regularly, you can also save by waiting until prices are low before filling up.


You won’t get very far without roadworthy tyres on your car. But paying to maintain them is a cost that you may not immediately think of when you’re budgeting for running a car.

For most vehicles the cost of maintaining/replacing your tyres would be about 1 - 2c per km, which would work out around $140-280 each year on average. Big four-wheel drive vehicles with specialist tyres would cost a bit more.


The general rule of thumb is to make sure your car is serviced properly every six months or every 10,000km, whichever comes first. For most car owners, the six months will come around first.

Worked out on a yearly basis, servicing your car can cost from about $750 a year for a small car, up to $1,500 a year for some of the bigger ones.

It’s also worth bearing in mind that some of the less common car brands may be more expensive to service as replacement parts can be harder to come by.


Car registration is a legal requirement and must be renewed regularly. How much it costs will depend on the size and type of the vehicle. It also varies from state to state. The costs are also different for a new registration and registration renewals.

Taking out a registration that covers a 12 month period usually works out cheaper per day than registering your vehicle for three or six months.


Insurance is another necessary cost to driving a car, but how much it will set you back will depend on many factors, one of the main ones being the level of cover you choose. At a minimum, all vehicles on the road in Australia must be covered by Compulsory Third Party Insurance. This is often paid for as part of your vehicle registration, although this may vary from state to state.

When it comes to additional insurance for you and your vehicle, a higher level of protection usually means a higher cost. The cost will also come down to the type of vehicle being covered, the age of the driver(s), where you live, where the car is parked at night and a range of other factors.

A rough guide would be that insurance costs around $170 - $220 per month for most vehicles.

You can get a quick online quote to get an idea of how much insuring your car might cost.

Get a quote for motor insurance


It’s a sad fact that cars lose their value over time, due to wear and tear and other factors. This ‘depreciation’ is another cost of owning a car, albeit a hidden one. Some cars hold their value better than others but almost all cars will drop in value to some extent over time.

Here are two factors to consider:
  • New cars lose a lot of value in their first year.
  • White, silver and red cars tend to maintain their value better as these colours appeal to a broader audience – useful when the time comes to selling your car on.

While the drop in a car’s value happens from the moment you buy it, you’ll only incur the actual cost when you go to sell the car on.

Other variable costs of running a car

  • Roadside assistance (this can often be bundled with your insurance)
  • Loan repayments (if you have variable rate loan, these could go up or down)
  • Driver’s licence fee
  • Road tolls
  • Parking
  • Car washing
  • Optional road trip snacks

Working out all your ongoing costs should make budgeting for owning a car much easier. It’ll also mean that when you’re out car shopping, you’ll be able to focus on the vehicles that best fits your budget.

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Important information: Please note that this is only intended as a general guide in relation to issues you may want to consider when running a car. It is not intended to be an exhaustive list of all relevant issues and you should take into account your own particular circumstances, and obtain independent expert advice where needed, before proceeding.

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