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What are the on-road costs for a new car?

Georgia Brown avatar
Georgia Brown
- 4 min read
What are the on-road costs for a new car?

Buying a new car can be a big financial commitment that requires careful budgeting. Make sure you’re prepared for all the associated expenses by factoring in unavoidable on-road costs.

On-road costs are essentially expenses paid in addition to the retail price of a vehicle that you’re obligated to cover prior to getting your new car on the road.

When you’re shopping for a new car, you may notice that some car manufacturers will advertise a price for a vehicle with a caveat that states ‘plus on-road costs’, while others may advertise a recommended retail driveaway price (RDP). The difference between these two pricing models is that the former doesn’t include on-road costs, while the latter does.

Either way, it’s important to understand what these additional expenses are so that you know exactly what you’re paying for.

Stamp duty

When you buy a car, new or used, you are required to pay stamp duty – a fee charged by state governments for the registration or transfer of registration on a motor vehicle.

The cost of stamp duty differs between states and territories, with most governments calculating the cost as a percentage of the purchase price of the vehicle.

As this is a one-off fee payable upon purchase and registration of the vehicle, you won’t have to worry about budgeting for it again in the future. At least, not until you’re ready to buy your next car.

CTP insurance

Regardless of where in Australia you are located, you must take out a compulsory third party (CTP) insurance policy before you get behind the wheel of your new car. The cost of this policy will be dependent on a range of factors including the type of car you drive and the insurance provider you choose.

A CTP insurance policy typically lasts 12 months, but you may have the option to choose a 6-month term if you prefer to break up the cost into two parts. Just be sure to check whether this will increase the overall cost of the policy.

In addition to CTP insurance, you may want to take out a car insurance policy that offers more coverage, such as third party property damage insurance or comprehensive car insurance. However, this is not a required on-road cost.

To find out more about the different types of car insurance and compare policies, visit RateCity’s car insurance hub.

Registration

Your car must be registered with your state government for you to legally drive it on Australian roads. Sometimes when you buy a vehicle, it may have previously been registered. If this is the case for you, and the car’s current registration is yet to expire, you will simply need to transfer the existing registration into your name as the new owner.

When it comes to buying a new car, however, it’s unlikely to have been previously registered (unless you’re buying an ex-demo vehicle). This means that you will need to register your car with your state government and pay a registration fee.

Like CTP insurance, car registration typically lasts 12 months, but you may have the option to renew it for a six-month period. The cost of registration will again depend on your vehicle and your location within Australia.

Luxury car tax

According to the Australian Taxation Office (ATO), the luxury car tax (LCT) is a tax on cars that have a GST-inclusive value above the current LCT threshold. It is imposed at the rate of 33% on the amount above the LCT threshold – which for the 2022-23 financial year is $84,916 for fuel efficient vehicles and $71,849 for other vehicles.

If the LCT applies to the car you’re buying, it will often be included in the total purchase price of your new vehicle. But be sure to confirm this with your car dealer. 

Can my car loan cover on-road costs?

If you’re planning to finance your new car, you may be wondering whether you can include on-road costs in your loan amount. Fortunately, some car loan lenders will allow you to borrow up to a certain amount above the retail price of the vehicle to cover the expense of on-road costs. 

But keep in mind, increasing your loan amount to cover on-road costs will likely cost you more in interest charges over the life of the loan.

Consider using RateCity’s car loan comparison table to compare your financing options and reach out to your preferred lender directly with any questions you may have.

Compare car loans in Australia

Product database updated 16 Jun, 2024

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