Show your finances the same love you show your car, by planning ahead for car running costs. Budgeting for your car expenses can keep you on the road without driving a hole in your bank balance.

Whether you have a new or used car, the maintenance costs all add up. Our handy tips will help you take into account the money you should save long term for any car expenses.

Creating an expense budget 

There’s more to owning a new car than paying the upfront purchase price. All cars bring a variety of ongoing expenses and running costs – some weekly (like fuel), others every six months (like servicing). And while costs like insurance and rego will be annual, there are other car costs to plan for like new tyres.

It can all sound a bit overwhelming, but it doesn’t have to be. The trick to handling all your car’s costs is by planning ahead with your very own car budget. It’s an easy way to keep your car – and your bank balance – in great shape. 

Check out the main expenses that should be listed in your car budget. 

Car cost

When you buy a car, the initial car cost is the first expense you will have to factor into your budget. Unless you paid for the car outright, the chances are that you may have a car loan which you will be needing to pay off.

Be sure to include your loan into the monthly budget as you’ll need to make those repayments as well as budget for running costs.

Gas costs

Annual cost estimate: $2,300

Fuel is the juice that keeps your car humming along. How much you’ll pay for fuel depends on your car, the kilometres you clock up each week, and where you fuel up. 

Hybrid cars can be big money savers in the fuel department. The latest RACV Car Running Cost survey shows hybrids can set you back as little as $36 a month in fuel. The catch is that the new car is likely to cost a lot more upfront. 

For standard cars, Australians spend an average of $2,300 annually on fuel. Though as always, averages don’t paint the whole picture. You could pay from $85 per month in fuel for a small passenger car, or up to $200 monthly for a big 4WD. 

Car insurance costs

Annual cost estimate: $1,560 - $3,600

You’re not going to get a car covered for insurance unless it’s registered, so rego and insurance go hand in hand. 

In terms of car registration, the cost varies across states. The general rule though, is the bigger your car’s engine, or the more it weighs, the higher the annual registration cost. 

Car insurance comes in two parts – compulsory third party (CTP) or ‘green slip’ cover. CTP protects anyone who is badly injured in a car accident. It doesn’t insure your car at all.

That’s why it makes sense to take out additional cover. One option is third party insurance, which protects you if you damage someone else’s car or property if you’re at fault in a bingle. It’s economical, but again, your car isn’t covered.

The gold standard of car insurance cover is comprehensive insurance. It protects you if your car is stolen, damaged in an accident, cops a few knocks from vandals or if a tree branch falls on it during a storm.

Yes, comprehensive cover will mean a bigger premium, but your car is a valuable asset. That means it’s worth protecting. And if you’re using a loan to buy your set of wheels, it’s a no-brainer to have full comprehensive cover. That way you won’t be left empty-handed – but still paying off the loan, if a serious fender bender sees your car sitting in the wrecker’s yard.

Shopping around for car insurance can help you save on premiums. Just be sure you know exactly what you’re covered for. That way there’ll be no nasty surprises if you need to make a claim.

The combined cost of car insurance and rego can work out to as little as $130 a month ($1,560 annually) with a small car like a VW Polo. Or you could be up for closer to $300 per month ($3,600 for a big 4WD like a Nissan Patrol.

Regular service and maintenance

Annual cost estimate: $230 - $1,000

Your car should be serviced every 10,000-15,000km or every six months to keep it in tip-top shape. Major ‘milestone’ services, which are likely to cost extra, typically occur with each 60,000km. That’s the first 60,000km service, then 120,000km service and so on.

No matter what number is on the odometer, it’s not worth scrimping on regular servicing. It can prevent small issues of wear and tear becoming far bigger, and more expensive, problems. 

The RACQ has crunched the numbers, finding annual service costs can range from about $230 for a Toyota Corolla Ascent Sport Hybrid through to $1,000-plus for a Toyota Landcruiser.

New tyre costs

Annual cost estimate: $480 - $1,000

Your car’s tyres deserve plenty of attention. By law, you need at least 1.5mm of tread for the car to be roadworthy. By way of comparison, new tyres have 8mm of tread. Your mechanic should note how much tread is left at every service.

You can stretch out the time taken to replace worn tyres by driving slowly over rough surfaces, avoiding hard braking, and resisting the urge to throw in a couple of burnouts outside the neighbour’s place. 

The cost of new tyres will vary depending on your car and the brand of tyres you choose. Remember too, it’s best to replace both tyres on the same axle to keep your car balanced. So, you’ll need to double the cost of a single tyre. Depending on your car’s size, allow between $480 and $1000 annually for new tyre costs.

Working out your monthly expenses

Once you know the likely annual costs, you can work backwards to divide these figures by 12 and discover how much you should allow in your car’s monthly budget for a variety of expenses. 

We’ve crunched the numbers in the table below, which shows you may need to set aside $4,570-$7,900 annually for car costs – or anywhere from $380 to $658 per month.

Bear in mind, these numbers can be very different depending on your car and driving habits. You can finetune your car costs budget over time as you get more of a feel for regular costs.  Or use an app like the free MoneySmart cars app to help build a budget from scratch.

Car Expense

Annual cost

Fuel

$2,300

Insurance plus rego

$1,560-$3,600

Servicing and maintenance

$230-$1,000

Tyres

$480-$1,000

Total annual estimate

$4,570-$7,900

Total monthly allowance

$380-$658

Putting aside money for car expenses

Ideally you should start saving for car expenses before you even buy a car. It's easy to keep putting it off until you buy one, but if you want to stay ahead then now is the time to start. Make sure you factor in all of your car expenses as well as insurances and maintenance costs so that you always know how much to set aside.

What happens if you don’t budget?

Without budgeting for car expenses, you could find yourself scratching for cash when key expenses fall due. Even worse, it can mean looking for ways to scrimp on expenses like maintenance costs, which can make your car less efficient over time.

The best part of drawing up a budget is that it helps you identify the type of car you can comfortably afford. Sure, you may have your sights set on a luxury sedan. But a zippy small car may be a better fit for your budget, meaning less stress and more fun on the road.

A Nimble Car Loan can help you get behind the wheel of a car that suits your budget – and your lifestyle.