Economists call for petrol tax hikes

Economists call for petrol tax hikes

Many drivers will tell you they are feeling the pain of rising petrol costs, but economists at the Australian National University say motorists would benefit from a higher tax on petrol.

It’s a tough call but, after comparing global petrol prices, they say if consumers were forced to pay more at pump we would use less petrol and buy more efficient cars.

The study spanned 13 years and 132 countries looking at the effect of petrol prices on the take up of fuel-efficient vehicles.

One of the authors of the study, economist Dr Paul Burke said: “Higher prices lead to consumers using less petrol and also consumers deciding to purchase cars that are more fuel efficient”

“We expect that to happen, but we worked out how big the effect is in our study.”

The study also looked at the impact of the 2001 decision by former Prime Minister John Howard to stop the automatic indexation of the petrol tax which, he says, effectively froze petrol excise duty at 38.1 cents a litre. 

“Across the economy the effect is quite big. So we estimate that the fuel economy of new vehicles now sold in 2013 is about 2 percent worse that it would have been,” he said. “We’re using, now, probably about 3 percent more petrol as a result of that decision.”

He wants to see the petrol excise duty once again rise with the rate of inflations, which he says would generate more than $5 billion of extra revenue annually.

Critics have hit back at the findings, claiming there are other ways to encourage motorists to reduce their reliance on petrol.

Among those is Wendy Machin, the president of NRMA Motoring and Services, who said it would be better to reward motorists who opt for fuel-efficient vehicles such as with access to transit lanes or the best parking spots.

“I think you go out and ask a lot of families if they want to pay increasing amounts for their fuel, they’ll say no,” she told the ABC.

“People I don’t think feel it is their responsibility to pay for these changes. I think they are looking to their leaders and to public policy to come up with some better solutions other than just taking them to death.”

Tips to slash car costs

  • Shop around: finding the cheapest petrol price in your neighbourhood is now as easy as downloading a smartphone app or comparing online. For instance, MotorMouth’s Petrol Price Finder enables motorists to search by suburb or postcode online or sign up to receive email alerts as petrol prices move.
  • Drive more economically: the federal government’s Green Vehicle Guide offers tips for motorists to reduce running costs. These include driving at a safe distance from the car in front so as to anticipate traffic movements and avoid sudden breaking and accelerating, which can use more fuel. Removing excess weight from the car, removing roof racks when not in use and keeping tyres correctly inflated can all help to reduce petrol consumption.
  • Save $1000 on your loan: while it won’t reduce your petrol consumption, refinancing to a lower rate car loan will likely give you the biggest bang for your buck. For example, on a $10,000 personal loan RateCity shows that switching from the average interest rate of around 12.73 percent to one of the lowest rates at 6.34 percent, could save borrowers more than $1000 over three years. The savings are even greater if you’re switching from one of the highest rates of interest at around 18 percent, which is why it pays to compare personal loans using a site like RateCity.
  • Go green: before driving away in your new or used car consider the vehicle’s fuel economy. All new light vehicles sold in Australia are required to display a Fuel Consumption Label to help motorists makes informed choices about the environmental impact and running costs. Or check out RateCity’s recent story about the cheapest new cars to run.

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Learn more about car loans

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 dealership?

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

What is proof of income?

Before giving you a car loan, lenders will ask for proof of income – documentary evidence that you earn as much as you claim you earn. Lenders will typically want some combination of tax returns, pay slips and bank statements. The reason lenders want proof of income is because they want to be sure you have the means to repay the car loan.

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.

What is CTP insurance?

CTP insurance, also known as compulsory third-party insurance or a green slip, is compulsory if you want to register a vehicle in Australia. If you’re responsible for a car accident, your CTP insurance will be used to pay any compensation due to anyone who might be injured or killed. However, CTP insurance doesn’t cover you for vehicle damage or theft.

How to find a great car loan

Historically, finding a great car loan would require excess research ranging from visiting an excess of websites or making phone calls, but technology has moved on. Using RateCity, Australia’s leading financial comparison service, you can check out great deals from a range of lenders on the one site.

To start, select the amount you want to borrow and the length of the loan, narrowing your search to show just fixed or variable interest rate results.

Once you’ve indicated your search criteria, you’ll see an immediate list of lenders, ranked by interest rate or application fees. You’ll also be able to view the monthly repayment amount for each result, helping you to know what you can afford.

Up to six products can be compared side-by-side, complete with more information about each car loan, giving you more information about your options.

When comparing your car loan options, it’s ideal to keep in mind some points find a great car loan for your needs. Consider the following:

  • Choosing a low interest car loan can reduce costs
  • Selecting an option with low fees and charges is ideal, because these can really add up
  • Be aware of penalties, such as early exit penalties if you pay off the loan sooner than expected
  • Consider the features that best suit your situation

There are many ways to ensure that you get a great car loan. Ultimately, you’ll end up with the best deal by doing your research and selecting the most suitable product for you.

What is a car loan calculator?

A car loan calculator is an online tool that helps consumers understand how much they would have to repay under different scenarios. Consumers can create these different scenarios by entering different borrowing amounts, interest rates, loan terms and repayment schedules into the car loan calculator.

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.

Can I buy a car as a student?

Buying a car is a huge financial decision, and shy of marriage and purchasing a house (or perhaps around the world travels), it may be the biggest financial decision you make. But if you’re looking at your empty pockets, don’t despair! Your dream of owning your own car could become a reality, if you look for and compare the right car loans for your circumstances.

Where can I get a student car loan?

Student car loans are not a necessarily a product in and of themselves, but what you may be looking for is a guarantor car loan.

A guarantor car loan has a third-party act as a form of guarantee for your loan application, telling the bank or lender that if you default on your loan, someone will pay the loan repayments.

Going guarantor on a car loan is no new thing, and before internet-based credit scores, guarantor car loan applicants would apply for loans with a guarantor or property owner who could vouch for the person borrowing the loan.

To get a guarantor car loan, you’ll need someone willing to act as a guarantor for your car loan.

What is an unsecured car loan?

An unsecured car loan is a loan that is not connected to a form of security, or collateral. Not all lenders provide unsecured car loans – and if they do, they generally charge higher interest rates for their unsecured car loans than their secured car loans.

Where can I find lenders who offer no credit check car loans?

You can find lenders who offer no credit check car loans through comparison sites like RateCity or by doing an online search.

One thing to bear in mind is that lenders who offer no credit check car loans are likely to charge higher interest rates and higher fees than on car loans that include a credit check. Also, lenders who no credit check car loans might expect you to pay a higher deposit. You might also be expected to provide security.

Lenders regard no credit check car loans as riskier than other car loans, which is why it’s a niche product that often features special conditions.

What is an interest rate?

The interest rate is the price you have to pay for borrowing money. The interest rate is expressed as an annual percentage of however much of the loan remains to be paid. For example, if you took out a $10,000 car loan with an interest rate of 8.75 per cent, you would be charged 8.75 per cent of $10,000, or $875 of interest per year. But if you then reduced the outstanding loan to $9,000, your annual interest bill would be 8.75 per cent of $9,000, or $787.50.

What is an LVR?

The LVR, or loan-to-value ratio, 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 an LVR of 75 per cent. LVRs 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 LVR would now be 67 per cent.