"..........in the current year Australians will pay more than $500 million in interest on these car loans. The average amount is more than $36,000 at an interest rate of 6.3 per cent."
".............good news for Australian new car buyers, the ABS inflation data indicate cars are actually cheaper than they were 18 years ago, the prices having decreased by about 16 per cent in todays dollars since 2000."
Cheers - John
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2006 Discovery 3 TDV6 SE Auto - 2008 23ft Golden Eagle Hunter Some people feel the rain - the others just get wet - Bob Dylan
How much does a car cost in relation to income. Also, do those figures take into account how much more taxes we are paying to run a car. Insurance, Fuel, GST, Parts Increases in Labour + service costs.
I worry that people often ignore the cost of vehicle finance and depreciation cost when traded in or sold.
Of course not everyone can afford to pay cash for such an expensive investment but maybe if the accounting was done and the real cost of ownership understood many would hesitate.
I have not kept up to date with government vehicle auctions and sales but many years ago a public company director recommended considering it for fleet replacement. We did and came to the conclusion that for a company tax concessions offset the benefit of buying a low kilometres vehicle. Our policy was 4 years of 100,000 kilometres before trading in on a new vehicle. However, for private use I still believe government vehicles are worth a look.
One can always plan ahead (continually save for the replacement car) & buy your car with cash. Every car I bought was with cash.
People who use finance for cars, purchase more expensive models & accessories. Probably in general the people who can least afford it!
We're a little bit similar. Have bought vehicles on Finance years ago, and also leased one a few years back (well worth it, given the kms we were doing at the time).
That said, the last number of vehicles we've bought (going back some 7-8 years) have all been cash-bought.
All 2nd-hand, too. Don't fancy wearing 20+ percent depreciation year 1 on a new car.
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It is better to have and not need, than to need and not have...
How much does a car cost in relation to income. Also, do those figures take into account how much more taxes we are paying to run a car. Insurance, Fuel, GST, Parts Increases in Labour + service costs.
etc.etc
Gday...
You raise good points Yuglamron. However, the purchase cost of a vehicle has dropped markedly over the past 20 years. Perhaps the 'cost of ownership' has not dropped to the same extent - my quick research has not found information I can compare.
Cheers - John
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2006 Discovery 3 TDV6 SE Auto - 2008 23ft Golden Eagle Hunter Some people feel the rain - the others just get wet - Bob Dylan
Like others have said we have been fortunate enough to pay cash for our last 4 or 5 new cars if I had to rely on finance through a dealership I wouldnt buy one until I had put together the money. I was even grilled by one dealership finance guy when signing the paperwork as to why I would bother using my own money when the finance companies rates were so low What you lose when you buy a new vehicle is not so much the depreciation which is the same every year its the Government taxes like GST or luxury car tax and the dealer delivery charges that you never get back. I dont let them talk me into treatments or window tinting etc. because its usually a lot cheaper to do that sort of thing after taking delivery. We bought 2 new vehicles last year but I had to spend 12 months working in the middle east to get the funds do it otherwise we would still be driving our old cars.
Buying any depreciating asset is bad enough, but it's hard to avoid given that most things we buy do depreciate. Using finance to buy any depreciating asset is a mugs game, it just doubles the loss. The real cost of that car/item we seemingly can't live without loses its lustre PDQ when the numbers are crunched. We bought two (fairly modest) brand new cars during the last 12 years - both depreciation disasters at sale time. We've always had a strict cash only policy, limiting ourselves to what's affordable. And now we have a policy of used vehicles only.
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Cheers,
Tony
"Opinion is the medium between ignorance and knowledge" - Plato
I find it interesting that people all talk about depreciation. When you buy an "asset" the cost is what we accountants call a "SUNK cost". Ie you can never get it back. I certainly do not buy vehicle transport based on what I might get as a trade in some time in the future. Thats the Toyota arguement, you loose less, BUT you often pay more than a comparable vehicle. Eg. In 2010, I bought a Great Wall X240. Cost $23990 on the road. I did about $15K of mods- Bull Bar, Winch, Rock sliders, LR tank, Lockers etc. Everybody said I was mad I would get nothing on trade in. Friend at the same time bought a LC 200 GLX and paid I think about $80K. He then put on all the mods I did. He traded his in in 2015 and got $55K. In 2016 I traded mine in (taking off the winch and a few other goodies) and got $5K trade in. Which was better buy? Let you work that one out and my car NEVER broke down or left me stranded.
Then we come to New V 2nd hand. Often people forget the stamp duty to add on. Also I know what my vehicle has done AND what servicing I have done if I buy new. I have worked in a company that buys cars and 2 years later gets rid of them. In the meantime they never have them serviced as it "costs money" I have seen these cars on a car lot later and suddenly the service book has been "doctored". And dont believe the little old lady driven, or drive by the managing director etc bull dust. A car is traded in for a reason and sometimes those reasons are not very obvious.
I do know some people buy a new car every 2 years. There is good and bad in that. Generally however, they get a good trade in as the car is only one model old. Their arguement is that they want the latest safety and technology and they are prepared to pay for it. I think most people keep a car for a lot longer. As such the value often flat lines, depending on model desirability, service costs, and general condition. Also buying 2nd hand means you are locked into what someone else wanted- ie colour, accessories. When buying 2nd hand I might avoid a certain colour as i just dont like it but I have often bought a car because of other factors than the colour which, if I had the choice would not have selected.
In the 2nd half of my expected life span, I have now always bought brand new, usually the last of a particular model (ie runout)as it has all the goodies on it without the price tag, and generally all the problems have been well and truely ironed out. Hence my current car.
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16.5 Discovery 4 with a few mods and New Age MR 16' Deluxe
I would say that the best option (IMHO) is to buy a second hand (depends on budget) vehicle that has excellent reliability scores BUT isn't one of the higher price ones. Nissan tied in 3rd or 4th place I think which was one of the reasons I ended up with a 2010 Navara D40 - not ideal from my point of view but so far it's been superb and having a timing chain instead of a timing belt is something I was looking for. It was also relatively inexpensive and mine came with a nice nudge bar, rear canopy and full length pull out trays as well as a roof rack. I just had to get a brake controller and Anderson connector fitted. Next purchase will be a 2DIN replacement head unit with GPS, rear view etc.
There is also a lot to be said for buying a make with a long warranty - Kia offer 7 years and others are starting to follow with upgraded warranties and capped price servicing. Many of these makes now include recovery (sometimes with the caravan) as long as you keep the servicing up via the dealer.
Years ago, my wife's boss bought a brand new Jag, took it out of the showroom to a car yard a few miles away for a valuation to find that he was offered less than 50% of the price he had paid an hour ago!!! Vehicle depreciation can hurt!
Just a word of caution if you have the 2.5 diesel motor....treat the timing chains on that motor as if they were belts....change them if you already haven't done so.
I know of at least 4 of these motors that have lunched themselves because of the timing chains breaking.
Don't take my word for it....google this issue and you should have a bit of a read.
What you lose when you buy a new vehicle is not so much the depreciation which is the same every year its the Government taxes like GST or luxury car tax and the dealer delivery charges that you never get back. I dont let them talk me into treatments or window tinting etc. because its usually a lot cheaper to do that sort of thing after taking delivery. We bought 2 new vehicles last year but I had to spend 12 months working in the middle east to get the funds do it otherwise we would still be driving our old cars.
