How to avoid breaking the budget on a new car
Getting behind the wheel of a new vehicle amid a cost-of-living crisis is tough, but you have options.
Buy the cheapest car that your ego can live with – that’s the advice of many financial experts, including Andrew Dunbar, senior financial adviser at Apt Wealth Partners.
But not many consumers heed this advice. Instead, they search for a lifestyle vehicle that will give them some street cred, opting for a car they can’t really afford, and then needing to finance the purchase.
Second-hand cars can be a good budget option, if your ego can handle it. Jason South
“The best financial advice is to buy a used car that will do you for a long time, but people can’t always live with that. They want a brand new, shiny toy,” Dunbar says.
Buying a car outright might be the savviest option, but leasing or financing to get behind the wheel are practical alternatives.
Leasing can be appealing because the monthly repayments appear more manageable than a lump sum, but it’s important to understand what your obligations are, Dunbar says. “Leasing used to be attractive as a tax minimisation strategy, but the rules have been tightened and the financial benefits have reduced.”
Data from the Australian Bureau of Statistics suggests that about 5 per cent of the new car market was supported by novated leasing in 2022, a slight increase on previous years.
Leaselab co-founder Alex Davis says novated leases are growing in popularity as more Australians look for tax breaks amid cost-of-living pressures.
“The uptake of novated leasing has boomed in recent years as more people realise how much money it can put back into their pockets, and how easy the process is,” he says.
“We’ve seen many people drawn to novated leases for the added benefit of bundling all their car expenses into one regular payment, so they don’t get bill shock when their service is due or their registration is up for renewal,” Davis says.
For many, cars are a non-negotiable expense. When you can compare the costs to traditional finance, savings can be very worthwhile, Davis says.
Meanwhile, Dunbar says that the jury is still out on the financial case for an electric vehicle. The upfront cost is much higher than a traditional car, but the ongoing costs of running an electric vehicle are lower.
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