Australians are lying to themselves about the true cost of owning a car, according to new research from Australian mobility software company Loopit. It has found that a massive 85 per cent of motorists underestimate their yearly car ownership expenses by more than $5,000.
The latest Australian Automobile Association Transport Affordability Index shows transport costs have exploded in the first quarter of 2021, increasing by over $2,000 on average since last year. The average cost of car ownership in Australia is approaching $17,000 per year, yet the vast majority of motorists underestimate this figure by a significant margin. Loopit’s research found that the highest number of Aussies - 36 per cent - believed the average car costs between $2,000-$3,000 to run, followed by 27 per cent who said $3,000-$5,000. Just over one fifth of respondents (21.5%) believed that car ownership costs less than $2,000, while only 11 per cent said $5,000-$10,000.
According to Michael Higgins, Co-Founder and Managing Director at Loopit, the research shows that there is a clear misconception that buying a new car through traditional means like finance or an outright purchase is the most affordable way to get behind the wheel. Alternatives like car subscription are rapidly gaining momentum both here in Australia and around the world, with few realising just how much more affordable these can be in real world terms.
“Many car owners and buyers use ‘back of the napkin’ math when estimating the cost of car ownership,” says Higgins. “Once you consider interest, loan repayments, fuel, insurance, maintenance, servicing, registration and depreciation - it all adds up. Even in a straight apples-to-apples comparison, car subscription is quickly becoming the more affordable way to get behind the wheel of a new car.”
Car subscription allows you to get behind the wheel of a new car through small weekly payments with no long-term contract, no interest, no balloon payments and all on-road costs included like registration, insurance and maintenance. This means you can return a car when you no longer need it or swap it for a different car if your needs change.
According to the new research, insurance and registration costs (52.7%) and servicing and maintenance costs (49%) are cited as the most disliked parts of car ownership, followed by the big financial commitment (33.6%) and worries about unexpected repairs (33.4%). Not only are expenses including insurance, registration or servicing all covered with a car subscription, but it is around half the cost of buying a car on finance.
Subscribing to a new car with HelloCars can save over $10,000 in the first year compared to buying it outright. This is based on a 2021 Subaru XV with a total financed amount of $34,000 with a 5.5% interest rate, including apportioned weekly costs such as registration, insurance, depreciation, maintenance and interest fees and repayments. In comparison, the same model starts at $168 per week on subscription.
According to Paul Higgins, Co-Founder and Managing Director at HelloCars, these costs are allowing people to upgrade to premium cars and save money. “When you consider the added benefits of car subscription like upgrading to a new car every few months, or pausing your subscription when you no longer need a car, the advantages over owning a car become even more apparent,” he said.
“Cars are improving rapidly with safety, and technology, so it is difficult for the average consumer to keep up to date. However, the flexibility and affordability of subscription mean you can update your car even more often than your phone,” he continued.
Car subscription services such as HelloCars have been increasing in popularity since the COVID-19 pandemic. In fact, over the lockdown period, Loopit saw a massive 52 per cent increase in enquiries. The minimum commitment on a car subscription is similar to most mobile phones plans, at approximately $2,000 or equivalent to an iPhone 12 Pro. You don’t need to go directly to a car subscription company either, with many car dealerships now offering the service. There are over 8,000 cars available for subscription across Loopit’s network of dealerships around Australia. So, Aussies can head to the local dealer showroom or even their website and subscribe directly from there.
