Cars offer freedom and convenience. But those benefits come at a cost – insurance, registration, maintenance, finance.
For some people, it can be hard to know which is greater – the benefits of owning a car or the costs.
So we’ve decided to do a quick cost-benefit analysis to help answer that question.
Let’s start with fuel. The average Australian driver uses 1,798 litres per year, according to Australian Bureau of Statistics data. That adds up to $2,697 of petrol per year, if we assume a price of $1.50 per litre.
Let’s also assume $1,500 in compliance costs – $500 for registration and $1,000 for comprehensive car insurance.
Finally, let’s assume that the typical car owner spends $1,000 per year on new tyres, spare parts and visits to the mechanic.
That adds up to $5,197 per year. To keep things neat, let’s round it up to $5,200.
How much would it cost to give up your car?
The question, then, is whether you’d spend less than $5,200 per year if you replaced your car with a mixture of walking, public transport, taxis and car-sharing services?
Or to put it another way, would you spend less than $100 per week?
If we assume that public transport to and from work would cost $50 per week, that would leave you with another $50 to…
- Do the weekly grocery shop
- Take the kids to Saturday sport
- Go out on the weekend
- Run errands throughout the week
Even if you were determined to walk and use public transport whenever possible, it’s likely you’d need access to a car several times per week. That would mean hailing a taxi or using a ride-sharing service – which would quickly eat up that remaining $50.
So for many people, it would be cheaper to own a car than to give it up.
Is your car a vital expense or unnecessary luxury?
Of course, all these numbers will vary significantly from person to person.
You might spend a lot more or less than $5,200 per year, depending on where you live, the age and model of the car you drive, and how much you drive it.
It’s not hard to find out. Just go through a year’s worth of bank and credit card statements to find out how much it costs to run your car. Don’t forget to include any car loan repayments as well.
Once you’ve done that, divide the figure by 52 to calculate your weekly car expenditure.
Finally, have a look at all the ways you use a car in a typical week, and how much it would cost to switch to alternative modes of transport.
Now you can make an informed decision about whether your car is a vital expenses or an unnecessary luxury.