Shocking cost Aussies pay for new cars
Australia's love of new cars comes with a big debt headache - we borrowed $8.1 billion to buy vehicles in the 12 months to November 2018.
Comparison website Finder reviewed Australian Bureau of Statistics data and found that 19 per cent of the more than 1.1 million new cars sold in that time were bought on finance deals.
Finder estimates that in the current year Australians will pay more than $500 million in interest on these car loans. The average amount is more than $36,000 at an interest rate of 6.3 per cent.
Graham Cooke from Finder says Australians pay a huge amount of interest on car finance.
"It's mind-blowing to think that more than $1.4 million in interest is paid back on these new cars every single day. That's around the same value as 39 new cars," says Cooke.
Car financing is useful for those who don't have the outright purchase price but Cooke has a warning.
"Just remember that each optional extra you add will increase the overall price and the amount of interest you pay over time," he says.
For every $5000 in options added to the price of a vehicle, the owner will pay on average an extra $1000 a year over the duration of a five-year loan, says Finder.
But there is some good news for new car shoppers. Stricter regulations on new car finance can potentially save buyers thousands in loan repayments.
Dealers previously could add hefty margins on the lender's rate in return for larger commissions but now can't increase the interest rate quoted by the finance company. Instead they may only reduce it by up to 2 per cent. Dealers will get a full commission only if they write the finance deal at the full rate, so it may pay intending buyers to negotiate hard on this rate.
In further good news for Australian new car buyers, the ABS inflation data indicate cars are actually cheaper than they were 18 years ago, the prices having decreased by about 16 per cent in today's dollars since 2000.
For example, a Toyota Corolla is listed for only a few thousand dollars more than it was in 2000, even after accounting for inflation and massive advancements in technology and safety.
A rarity in consumer goods, which have become dearer over time, this is a sign Australian buyers are getting better value on new cars.
"Cars have been gradually getting cheaper and improvements in technology mean Aussies are getting more bang for their buck," says Cooke.