COST OF RUNNING A CAR

The purchase price is just the start of the financial commitment

Owning a vehicle involves a lot more than people might think, in terms of both expenses and responsibility.

Despite recent rises in used car values due to the impact from Covid, in New Zealand it is still affordable and relatively easy to purchase a secondhand vehicle. However, the reality for many buyers is finding themselves surprised when it comes to the cost of filling the tank of their new purchase. If this is the case then there is a good chance all the costs associated with vehicle ownership haven’t been considered carefully enough before making the purchase.

When calculating vehicle running costs, there are two separate factors that make up the total — fixed costs and flexible costs.

As an example, AA has used a new small petrol car and looked at the average costs you may incur on the third year of ownership, to provide a guide of what vehicle ownership costs can accumulate over time.

Fixed costs

These are the inevitable expenses that don’t change with vehicle use. You still pay these costs even while your vehicle is parked in the garage.

Common fixed costs include expenses like vehicle insurance, Warrant of Fitness and vehicle licensing. They can also include factors like vehicle depreciation and interest accrued if under finance.

With a new small car, you could end up having a fixed yearly cost of $5000, which equates to $13.70 a day. Of course, this is just an estimate and it will vary according to how old the vehicle is, how long you have owned it, and the purchase price.

Vehicle depreciation is the largest contributing factor to a new vehicle’s running costs. On average, new cars lose 9- 10 per cent of their value when you drive them off the showroom floor. This varies by make and model, but generally new cars also lose about 20 per cent of their value each year for the first year or two.

This slows down as the car gets older, providing it is adequately maintained.

Money is also lost on your outlay, because this could have been invested and gained interest, which is also reflected in the calculation of the fixed running costs.

You can look at fixed term interest rates to gauge how much this might be over a year.

While used cars may still lose their value over time, the percentage difference will be significantly lower, and significantly reduce the fixed cost, however these used vehicles can conversely have higher flexible costs.

Flexible running costs

These reflect all the consumables. Fuel, tyres, repairs, incidentals and maintenance — spending on these all adds up.

If a new small car is being driven about 14,000km a year, your total fuel bill will be about $2100, and it could be more if the price of fuel goes up.

If you averaged all the repair costs you might incur over five years including brake pad changes, it could be about $580 and tyres will cost about $380, providing they don’t experience premature wear due to alignment issues. If you combine the fixed and flexible costs, it would give a total of around $22 per day. This is all just for a smaller vehicle; these costs will increase for larger cars.

Other factors that may have an impact on running costs are driver license renewal, extended warranties, breakdown service subscriptions, diesel road user charges (if applicable), and even parking costs.

It’s important to look for a vehicle expert you can trust when factoring in service and repair costs. Maximise the lifespan and value of your vehicle with regular servicing. AA Auto Centre is a good start, with fully qualified mechanics that can service any make or model vehicle with the latest equipment. There are three levels of vehicle service options no matter the car’s age, condition or history. An extra bonus is that all work is protected by their quality guarantee for peace of mind.