According to a popular Australian consumer website, Australians spend an average of $40,000 on a new car, with consumers in Western Australia spending the most at an average of $57,000 per year.
Of course, a significant part of the expenses takes into account state and city taxes, which typically amount to around $2 to $3 per hundred dollars, so that’s a healthy chunk of change already.
In addition to petrol charges, which amount to an average of $1400 per month, there is car insurance which, depending upon both the vehicle as well as the driver’s age and gender, can range upwards of $2,000 per year or more.
Since Auto Insurance, the cost of petrol, maintenance fees, in particular tire replacement fees, altogether according to Budget Direct, a popular Australian budgeting site, the average Australian family with two cars spends a grand total of around $17,000 to nearly $18,600 per year just on driving their cars.
Since the average middle-class salary for a family in Australia is around $116,000, that’s around 15 percent of the average family’s income.
Seemingly, with 20 million cars registered, and only 15 percent of their total income spent on autos, even new cars are well within the reach of the average middle-class family.
But of course, just taking total income and dividing up the total costs of two autos, does not tell the whole story.
First of all, roughly 1/3rd or more of a family’s income goes straight out the door in Australian income taxes.
Then there is rent or a mortgage on a home. Since the average rent in Australia is around $2200 dollars per month, and the average mortgage payment is roughly $2500 per month, just keeping a roof over the family can be an expensive proposition.
Food is also the next important part of a typical Australian family’s budget and the annual food budget for a family of 4 is around $9,000 per year.
Then there is the cost of health insurance as well as life insurance. These also amount to a sizable percentage of their income.
Clothes, educational services, utilities, and gas, along with household furnishings also make up a great percentage of the average family’s budget.
What matters most in the discussion of whether cars are expensive for middle-class families in Australia is in discussing disposable income.
Although Australian middle-class income hovers at around $103,000 per year for a family, their actual disposable income is around $32,000 or less.
As the average new car alone costs $40,000 or more, Australians, (as in most industrial countries) actually spend a significant amount over the touted 15 percent of average spending costs.
When everything is averaged out, that 15 percent rate is probably closer to 25 or 30 percent.
Of course, Australians love cars, and in fact, for every 1,000 Australians, including small children, Aussies have 775 cars. So autos are an important part of the culture.
Of course, roughly one out of every 4, (one out of every 7 during the COVID pandemic) use public transportation several times a month.
But a car is pretty much a necessity in Australia, and many cities have spotty at best public transportation routes.
And one of the elements contributing to the car craze in Australia is not only is public transportation spotty, but as nearly 70 percent of Australians regularly work overtime, most feel that spending an extra hour or more commuting one way makes little or no sense.
One of the few saving graces of an Australian family’s being tied to autos is that that doesn’t mean they need to buy new.
In fact, only around 1 out of every 20 cars on the road in Australia are new or have been bought or leased this year. The average age of a car on Australia’s streets and highways is around 8 years.
And in fact, many savvy Australian families follow the advice of auto finance experts that the smart purchasing of used autos generally makes more sense.
An average new car in Australia is expected to last over 300,000 miles, and the yearly maintenance is only around $600 or less.
But if you buy a 2 or 3-year-old car, that car on the dealer’s lot may have gone down in price due to depreciation from $40,000 to around $28,000 or less, a 30 percent drop in the price.
Although all car owners shall consider car insurance to effectively and efficiently utilize their car.
Car Insurance is a necessity for all Australian drivers. However, with the proliferation of new car models and fluctuations in prices, it is critical to be aware of some additional benefits of having Car Insurance. Guaranteed Asset Protection (GAP) or other car insurance provides peace of mind if the depreciation of your vehicle exceeds the amount owed on your loan. Thus, don’t wait to compare quotes and get an ideal insurance for your car.
So, perhaps the question should be, not are cars expensive for middle-class families but rather, how rarely should you buy a new car.
It seems only logical that it will take another 50 years or so before there is a nationwide, efficient mass transport system, so cars will be a necessity for most for
many years.
But there are ways to take less of a bite of your family budget by buying smartly, and even if you buy new, keeping a vehicle as long as possible.