Rising cost of car ownership outpaces inflation

Australians spend an increasingly large portion of their household budgets on owning and operating cars, new economic modelling from the nation’s peak motoring body shows.

The latest Australian Automobile Association’s (AAA) Transport Affordability Index revealed that the typical Australian household spent $415.37 each week on transport in the third quarter of 2023, or 16.3% of their household budget.

That’s up from $381.05 in the third quarter of 2022, when it was 14.9% of the household budget.

In our cities, the figures are higher. The typical household in Melbourne now spends $528.90 a week on transport, or 17.7% of its budget. In Sydney, transport is costs the typical household $533.27, or 16.5% of its budget.

The increase of 4% in the September quarter is nearly 3.5 times the increase in the Consumer Price Index (CPI) of 1.2% in the same period. The index shows that rising transport costs have outpaced increases in the cost of living over the previous three quarters.

A breakdown of the household transport costs shows that 90% goes towards car ownership through things like loan repayments, fuel, tolls, insurance, servicing and tyres, registration, and roadside assist. Nearly 10% goes towards public transport.

The increasing costs of car ownership are being driven by rising fuel costs and purchase prices, higher interest rates on car loans and increases in insurance premiums.

The hypothetical household used in the modelling is based on data from the Australian Bureau of Statistics, the Bureau of Infrastructure and Transport Research Economics and industry figures. It characterises the typical Australian household as a couple, with children, who have two cars and work full time and commute each weekday.

We know that lifestyle factors like where we live and work, family, sporting commitments and caring responsibilities can all have a bearing on whether or not we can do without a car. 

But research on transport costs continues to show that compared to a car, riding a bike at a cost of around $1000 a year, can bring considerable savings. And people who require a more capable vehicle for school runs, grocery shopping and hilly journeys, are finding e-bikes to be a suitable and far more cost-effective option.

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