Cheaper car loans fail to offset rising transport costs

Australia’s transport costs were up over the 2017 December quarter, with rises to the cost of fuel, tolls and insurance outpacing falls in the cost of car loans, servicing and registration, according to the Australian Automobile Association (AAA).

According to the AAA December 2017 Transport Affordability Index, the average Australian metropolitan household’s transport spending over the quarter rose by $121 to $17,606, accounting for 14.2% of household income. Regional households were found to have seen their transport costs rise by $125 to $14,008, accounting for 12.3% of household income.

Overall, the transport costs that increased over the quarter included: 

  • Fuel prices
  • Comprehensive insurance
  • Toll costs

Costs that decreased over the quarter included:

  • Car loan payments
  • Registration, CTP and licensing fees
  • Servicing of the old vehicle and tyres for both vehicles

While car loan payments across Australia dropped slightly over the December 2017 quarter, they still remained the number one highest-priced transport expense for both metro and regional households. Melbourne and Geelong were found to be the most expensive metro and regional centres in terms of car loan costs (despite a large decrease in Melbourne), while the cheapest car loan payments were found in Hobart and Launceston.

Only Sydney, Wagga Wagga and Hobart recorded decreases in overall transport costs for the December 2017 quarter, by $58, $80 and $24 respectively. Despite this decrease, Sydney remained the most expensive capital city in Australia in terms of total dollars at $22,291 per year.

AAA chief executive, Michael Bradley, described the impact of transport on the cost of living as being “frequently overlooked” compared to utilities such as electricity:

“Unlike utility bills, Australian families do not receive all-encompassing transport bills every three months. The index highlights subtle movements in transport costs, which are otherwise easy to overlook.”

Total annual household transport costs

City Q3 Q4 Change
Sydney $22,349.84 $22,291.81 -$58.03
Melbourne $19,306.85 $19,461.26 $154.41
Brisbane $19,066.86 $19,312.22 $245.36
Perth $17,022.71 $17,218.64 $195.93
Adelaide $15,404.80 $15,624.97 $220.17
Hobart $15,001.63 $14,977.64 -$23.98
Darwin $15,288.65 $15,372.69 $84.04
Canberra $16,439.78 $16,589.75 $149.97
Capital Average $17,485.14 $17,606.12 $120.98
Wagga Wagga $13,015.16 $12,934.94 -$80.22
Geelong $14,839.34 $15,005.69 $166.35
Townsville $12,865.04 $13,038.05 $173.01
Bunbury $14,797.14 $14,920.99 $123.85
Mount Gambier $13,419.79 $13,743.69 $323.89
Launceston $13,675.84 $13,717.05 $41.21
Alice Springs $14,568.66 $14,692.93 $124.27
Regional Average $13,883.00 $14,007.62 $124.62

Source: AAA

Did you find this helpful? Why not share this news?

Advertisement

RateCity

The money talks which you don't need to avoid any more

Subscribe to our newsletter so we can send you awesome offers and discounts

Advertisement

Learn more about car loans

What is a balloon payment?

Some lenders will offer borrowers reduced monthly repayments in return for a one-off lump sum – or balloon payment – that the borrower has to pay at the end of the loan. Generally, the total repayments on a loan with a balloon structure will be higher than a loan without.

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 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 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.

What is trade-in value?

The trade-in value is the price you could realistically charge if you were to sell your car to a dealer while buying a replacement vehicle. Generally, a car’s trade-in value is less than its market value. That’s because the dealer has no interest in buying your car unless it can make a profit – which can only be done if the dealer has room to increase the price.

What is a refinance?

A refinance is when you swap one car loan with another. For example, you might take out a car loan with Lender X because it is the best on the market at the time – but two years later, you might switch to Lender Y because you discover that it now has the best loan. Conditions and fees often apply when you refinance.

What is an upfront fee?

An upfront fee is a one-off fee that many lenders charge when you take out a car loan.

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 pre-approval?

A pre-approval is a formal document that indicates how much a lender is willing to lend to a consumer – once that person has found the car they want to buy. A lender will assess a borrower’s credit history and financial circumstances before issuing a pre-approval. However, lenders are under no obligation to follow through on pre-approvals, so pre-approvals should be seen as statements of intent rather than rock-solid guarantees.

What is a green slip?

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

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 a novated lease?

A novated lease is a car lease that is ‘novated’, or transferred from one party to another. Novated leases are often used when companies provide a car as part of a salary package. The employer signs for the lease and makes the lease payments, but the employee assumes the responsibility of looking after the car. While most car leases involve two parties, novated leases involve three – employer, employee and financier.

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.

What is the principal?

The principal is the value of the loan that is still outstanding. So if a borrower takes out a $20,000 loan, the principal is $20,000. If the borrower repays $5,000 in the first year, the principal is now $15,000.