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Should I choose a petrol, hybrid, or electric engine for my new car?

Should I choose a petrol, hybrid, or electric engine for my new car?

Buying a new car is a big commitment, particularly if you plan to hold onto it for the next five to ten years. So, does it still make sense to buy a car with a petrol engine, or should you future-proof your purchase by considering a hybrid or electric vehicle?

More and more car manufacturers are rolling out hybrid vehicles at achievable price points, giving more Aussies the opportunity to make the environmentally conscious switch.

In fact, there are a number of hybrid versions of pre-existing car models that are only a few thousand dollars more in price, including the Toyota Rav4 GX (petrol from $38,716, hybrid from $41,163), the Toyota Yaris SX (petrol from $30,591, hybrid from $32,651), and the Honda Accord VTi-LX (petrol from $57,190, hybrid from $60,506).

Even battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) are slowly but surely becoming more accessible in Australia, with 28 models now available for purchase across the two categories. They do, however, have a higher price point on average when compared to hybrids, and require access to a charging station.

So, given the increasing accessibility and popularity of both hybrid and electric vehicles, along with the important environmental benefits, the question is – is it worth buying a hybrid or electric vehicle over a petrol vehicle?

Weighing up the trade-offs

While there isn’t a cut-and-dried answer to choosing between a petrol, hybrid or electric vehicle, there are some important considerations that may help you arrive at a decision.

Purchase price

Even though the purchase price of hybrid and battery electric vehicles are gradually becoming more competitive, they are still more expensive when compared to the petrol option of the same (or a comparable) vehicle. So, you’ll have to ensure the extra cost doesn’t blow your budget.

Fuel costs

It could be argued that it’s possible to recoup the purchase price difference in petrol savings, and while that may be true, it is likely to take several years. Plus, in the case of electric vehicles, you’ll also need to consider the cost of the electricity required to recharge, as well as the installation of a home charging station.

Resale value

With an increasing number of manufacturers offering hybrid and electric vehicles, there is a chance that, should you want to sell your car down the track, an alternative fuel powered vehicle could have a higher resale value than a petrol vehicle.

If you decide against opting for a hybrid or electric car, and the demand for them continues to increase, you may not see the same kind of return for your used petrol car.

Environmental impact

What is arguably one of the most important considerations is the environmental impact of each option.

Petrol engine vehicles tend to be the least environmentally friendly option as they produce the largest amount of greenhouse gas emissions.

In comparison, hybrid vehicles typically produce fewer greenhouse gas emissions than petrol-only vehicles, but they do still rely on petrol (alongside the electric motor) which is responsible for the production of exhaust emissions.

And while electric vehicles don’t produce exhaust emissions, they do contribute to emissions produced by the energy used to charge them.

Keep in mind that across the board, newer model vehicles tend to be more environmentally friendly than older models. The Australian Government’s Green Vehicle Guide provides information on the environmental performance of vehicles sold in Australia, with the help of a CO2 emissions meter. You might like to consider taking a look before you decide on a new car.

Financing options

Did you know that many credit providers offer green car loans specifically for the purchase of eco-friendly vehicles? Often, they will have more competitive interest rates on offer, too, as a way of incentivising buyers to make an environmentally conscious purchase.

However, it’s also worth noting that car loans for new cars will typically already have lower interest rates than car loans for used cars. So, even if you do decide on a petrol engine, you will likely still have plenty of competitive options available to you.

Benefits and disadvantages

To summarise, here are some of the top benefits and disadvantages of all three options:

Petrol vehicles

Pros:

  • Petrol vehicles typically have a lower purchase price compared to alternative fuel powered options.
  • There are many more makes and models of petrol vehicles currently available in Australia compared to hybrid and electric cars.

Cons:

  • They typically produce a higher level of greenhouse gas emissions making them the least environmentally friendly option.
  • They could be overtaken in popularity in the coming years, which could see the potential resale value reduced.

Hybrid vehicles

Pros:

  • Hybrid vehicles generally produce less greenhouse gas emissions than petrol vehicles, making them more environmentally friendly.
  • They allow you to keep fuel costs lower.

Cons:

  • They have a higher purchase price than petrol vehicles.
  • The range of makes and models available in Australia is more limited than petrol vehicles.

Electric vehicles

Pros:

  • They produce the least greenhouse gas emissions, making them the most environmentally friendly option.
  • They could have a higher resale value than petrol vehicles if the electric vehicle market continues to gain momentum.
  • They eliminate the need for and cost of petrol.

Cons:

  • The current purchase prices of most electric vehicles are likely out of reach for many Aussies.
  • The range of makes and models available in Australia is currently limited to just 28 models.
  • Buyers will need to consider the cost of electricity for refuelling, as well as the installation of home charging stations.

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Fact Checked -

This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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Learn more about car loans

What is a car loan?

A car loan, also known as vehicle finance, is money that a consumer borrows with the express purpose of buying a vehicle, such as a car, motorbike, van, truck or campervan. Car loans can be used for both new and used vehicles.

What is vehicle finance?

Vehicle finance, also known as a car loan, is money that a consumer borrows with the express purpose of buying a vehicle, such as a car, motorbike, van, truck or campervan. Vehicle finance can be used for both new and used vehicles.

Should I service my own car?

There are also costs associated with vehicle ownership, such as paying for petrol and the obligatory ongoing maintenance. But should you cut down on costs by servicing your own vehicle?

If you’re considering getting out the tool box, spanner, and grease-laden towel, you need to carefully weigh up the risks and benefits. A trained mechanic will need to complete certain tasks, while you may be perfectly capable to handle other aspects yourself.

If you’re short on time, it may be worth paying for the convenience of a full vehicle service. However if you’re trying to slash your expenses, there are some basic maintenance tasks that you can complete yourself.

You should call a mechanic if you’re unsure about a vehicle maintenance task you’re about to take on. However there are a number of maintenance tasks that you may be able to complete with your own two hands including:

  • Replacing your car battery
  • Changing the oil
  • Replacing worn windscreen wipers
  • Replacing blown fuses

Remember to keep your car’s body in good condition, by washing and applying a protective wax on a regular basis, too.

Always check your car warranty agreement as some new car purchases come with an extended car warranty provided your services are conducted at the vehicle service centre where you purchased the car. In these circumstances, you may find the service fee is capped, alleviating some of the maintenance woes.

What is dealer finance?

Dealer finance is a car loan organised through a car dealer – as opposed to car loans organised by a finance broker or directly by the lender.

What is a loan-to-value ratio?

The loan-to-value ratio, or LVR, is a percentage that expresses the amount of money owed on the car compared to the value of the car. For example, if you take out a $15,000 loan to buy a $20,000 car, you have a loan-to-value ratio of 75 per cent. Loan-to-value ratios change over time as you pay off your loan and your car depreciates in value. For example, two years later you might now owe $10,000 on your car, which might now be worth $15,000. In that case, although there would still be a $5,000 difference between the size of the outstanding loan and the value of the car, the loan-to-value ratio would now be 67 per cent.

What is a dealership?

A dealership is a car yard or a place where cars are sold.

What is a loan term?

The loan term is the amount of time the lender gives you to repay the car loan. For example, if you take out a $20,000 car loan with a five-year loan term, you would be expected to pay off the entire $20,000 (plus interest) within five years.

How do you get a car loan?

There are four different ways you can get a car loan. You can go straight to a lender. You can get a finance broker to organise a car loan for you. You can get ‘dealer finance’ – which is when the car dealer organises a car loan for you. Or you can organise your own car loan through a comparison website, like RateCity.

Whichever method you choose, you will need to provide proof of identification, proof of income and proof of savings. So you may be asked for any combination of passport, driver’s licence, bank statements, payslips, tax returns and utility bills. You might also be asked to provide proof of insurance.

Can you refinance a car loan with the same lender?

You may be looking to refinance your car loan to get lower interest rates or reduce the total monthly amount you have to pay. Often, this leads to the question ‘can I refinance a car loan with the same bank?’

While it’s always worth shopping around for a better deal or at least to compare offers from other lenders, you can sometimes refinance to a different loan with the same lender. It may be simpler,  as the lender already has your details and knows your repayment history. 

Having said that, knowing the terms offered by other lenders may help you negotiate a better deal with your current lender.

Can you get a chattel mortgage with bad credit?

Getting approval for a chattel mortgage with bad credit may be possible, given ‘chattel’ (usually a piece of equipment or car) is put up as security for the loan. That means if you fail to repay the loan, the creditor can recover the loaned amount by repossessing and selling the car or piece of equipment. This differs from unsecured car loans, where the asset is not tied to the loan and cannot be taken if you don’t meet the repayments. 

How to get a chattel mortgage?

Both businesses and individuals may use a chattel mortgage, provided that the car is being used predominantly for business purposes. 

To apply for a chattel mortgage, you need to first consider your options and choose a suitable lender that meets your requirements. Once you have selected a lender, you can apply for the loan online by filling out a form. If the lender doesn’t offer an online application process, you can either call them or visit their nearest branch. 

After you’ve applied, the lender will ask you to supply documents that confirm your identification, income, job profile, etc. If everything is in order, most lenders will arrange the loan’s settlement, so all you need to do is pick up your car!

How much is your car worth?

If you already own a car, you could potentially bring down the cost by selling your car in the process. Before that happens, though, you’ll need to find out how much your car is worth.

One of the first places to find this value is to research the value of your current car, giving you an idea of roughly how much it’s worth in its peak condition.

There are plenty of websites that offer a free online valuation, allowing you to enter your car’s make, model, year, badge and description, with results listing a price guide based on both selling your car privately and through a dealership.

Of course, dealerships will try to profit on your trade-in by buying it for less than they can sell it, making it highly unlikely that you’ll get the same price selling a car to a dealer as you would selling a car privately.

However, private car sales can be costly and can take months to sell, making car trading more convenient with a guaranteed return, even if you may not be able to realise the total value of your car’s worth.

Remember that everything is negotiable. If the dealership is offering you less for your trade than you wanted, try to negotiate elsewhere to gain that money back. Start by negotiating on the price of the trade and then ask them if they can give you a further discount on your new car.

How much is my car worth?

If you own a car, it may be something that can help you bring down the cost of your next vehicle purchase through its sale. However, before you can do that you’ll want to find out how much your car is worth.

Your car’s worth can depend upon various aspects, including:

  • Age
  • Condition
  • Model and make

A great starting place for aspects of this includes websites that offer online valuations, allowing you to enter your car’s make, model, year, badge and description, with the listed results displaying a price guide based on both selling your car privately and through a dealership.

Both have pros and cons, as cars can be very profitable, something that will no doubt impact any chance you have to make the most of your car’s value upon sale. Dealerships will try to profit on your trade-in by buying it for less than they can sell it for, so you shouldn’t expect the same price selling a car to a dealer that you would necessarily get selling a car privately.

What is the luxury car tax?

The federal government imposes a luxury car tax of 33 per cent on the value of a car above a threshold. As of the 2017-18 financial year, that threshold was $75,526 for fuel-efficient vehicles and $65,094 for other vehicles. So a fuel-efficient car worth $80,000 would be taxed only on the difference between the threshold and the value of the car ($4,474), rather than taxed on the entire $80,000. Similarly, an ordinary car worth $70,000 would be taxed on the $4,906 above the threshold, rather than the entire $70,000. The luxury car tax is paid by dealers that sell or import luxury cars, and also by individuals who import luxury cars.