What are the additional charges you need to pay when buying a car?

There are two types of costs you need to consider when buying a car - one-time or upfront costs like stamp duty, payable only at the time of purchase, and ongoing costs like fuel and maintenance that go hand-in-hand with car ownership.

One-time or upfront costs of buying a car

1. Stamp duty

Besides the purchase price, stamp duty is another high upfront cost you must consider when buying a car.

Stamp duty is a one-off tax levied by the state government. It is paid when transferring ownership, such as when you buy a car from a dealer or privately. 

Stamp duty rates differ across all Australian states and are generally calculated on the car's price or market value. Some states or territories may charge a different duty rate on old and new cars (like Victoria) or reward you for buying a green vehicle (such as the Australian Capital Territory). Others base the cost on engine type (like QLD). You can visit your state or territory government's website to learn more about stamp duty rates.

• New South Wales (NSW): www.revenue.nsw.gov.au
• Victoria (VIC): www.sro.vic.gov.au
• Queensland (QLD): www.qld.gov.au
• Western Australia (WA): www.wa.gov.au
• South Australia (SA): www.revenuesa.sa.gov.au
• Tasmania (TAS): www.transport.tas.gov.au
• Australian Capital Territory (ACT): www.revenue.act.gov.au
• Northern Territory (NT): www.nt.gov.au

2. Luxury car tax

If you buy a car that is considered a luxury car, you’ll also have to pay Luxury Car Tax (LCT). This tax applies if your car's GST-inclusive value exceeds the current LCT threshold. LCT is charged at a rate of 33 per cent on the amount above the LCT threshold. If LCT applies to the car you're buying, it's likely to be included in your purchase price, but it's worth confirming this with your car dealer.

3. Dealership fees

On top of government charges such as stamp duty and luxury car tax, some dealers also charge certain fees. For instance, many car dealers charge you a dealership fee on top of the car's price to cover their marketing costs. You can ask your dealer to let you know about any additional charges and try to negotiate a lower price to bring down your upfront costs.

4. Pre-purchase inspection costs for used cars

Hidden fees when buying a used car could include the cost of pre-purchase inspections and financial searches to check the car's title. A lot of people don’t budget for these because they’re not mandatory. However, the small upfront cost can help save you money in the long run. These checks will help you determine if a vehicle carries any encumbrance or has been stolen or written off before you decide to purchase it. 

You can run a car's Vehicle Identification Number (VIN) on the Personal Property Securities Registry (PPSR) for a small fee to find out if there's any security interest registered against it. You may also want to get a used car checked by a mechanic to ensure it’s mechanically sound and you don’t end up forking out for repairs once you own it.

Ongoing costs of owning a car

1. Registration fees

It’s a legal requirement that your car is registered with your state government before you can drive it. When you buy a used car, its current registration may still be valid. In that case, you’ll need to transfer the registration to your name as the new owner. You’ll then be required to pay to keep the registration current when it expires, usually every year.

If you're buying a brand new car, you’ll need to organise for the car to be registered with your state government’s road authority. How much you'll pay for registration depends on your vehicle and where you're located in the country. 

Car registration is an ongoing cost that you’ll need to pay annually (or whenever your car registration expires) to continue driving your car legally.

2. Insurance premiums

The only car insurance you’re required to have is compulsory third-party (CTP) insurance. You will have to have a valid policy before registering or driving your car, and it will need to be renewed with your registration each year or whenever that’s due. Some states do include CTP costs in the registration fees, but others require you to find your own, which allows you to compare policies each time to find the best deal. How much you pay for the policy depends on various factors, such as the type of car you drive, your driving history, where you live, and the insurance provider you choose. 

In addition to a CTP policy, you might want to consider a car insurance policy that covers you for third-party property damage. You could even take out a comprehensive car insurance policy that covers most kinds of accidental damage. A comprehensive policy may be helpful if you drive a luxury car that can cost a lot to repair. Be sure to understand the difference in costs for the different types of policies because you’ll need to renew these each year, also.

3. Maintenance costs

When it comes to the hidden costs of owning a car, maintenance and servicing are one of the main costs people get shocked by. However, spending some money on maintaining your vehicle can help improve its performance and avoid bigger repair costs in the long run. 

The cost of servicing your car largely depends on its make and model. Different cars also have variable car service intervals. For instance, some cars require scheduled maintenance every six months, while others need to be serviced annually. You can do some research before you buy to find a low-maintenance car if you’d prefer to keep the costs down.

Besides taking your car for its regular service, you can do a few things on your own to keep it running smoothly and safely. For instance, checking your tyre pressure, engine oil, and brake fluid are some basic tasks you can perform on your own regularly. 

4. Fuel charges

Fuel is an ongoing expense you're never going to get away from when owning and using a car. However, it's easy to forget to factor in the fuel cost when purchasing a car, which can strain your budget later. 

If you're buying a car, it could be worth comparing the fuel efficiency of different models to find yourself a fuel-efficient vehicle. You should also learn about eco-friendly driving practices that help optimise fuel consumption, such as driving at a steady pace, keeping your tyres pumped up, and regularly cleaning out your boot. Not speeding and driving safely can also help you avoid fines, saving you money. You can also shop around to find the cheapest fuel near you.

5. Car financing 

If you can't pay for your car upfront, you may consider taking out a car loan to finance your purchase. This is going to add to your ongoing costs in the form of regular monthly repayments. 

While there's not much you can do about car financing costs if you don't have the money upfront, you can still save by shopping around and looking for the most competitive deals. Also, remember to look out for car financing hidden fees, such as any account-keeping fees charged by your lender. 

If you choose to get your car financed from the same place you're buying it, beware of any additional charges the dealer may pass on to you. It's always a good idea to compare interest rates and the fees and charges associated with different loans to find a competitive deal. You should also check the size of your monthly repayments before you apply for a car loan to make sure you can afford it.