Financial Problems and the Second Car

The vast majority of families in financial difficulty are two-car families.  To be honest I can’t remember the last family I spoke to with one car.  Australians own more cars per capita than even Americans!  Most people think that two cars are an essential, but never stop to think about the expense of running two cars and whether it’s even worth it!  Most people only consider the purchase cost of a vehicle, but there’s the registration, insurance, road side assistance, repairs, tyres and servicing, not to mention the biggest expense: depreciation.  Depreciation is the difference between what you buy it for, and sell it for later.  It’s a “hidden expense” because you don’t physically pay depreciation like petrol or registration.  According to recent RACV data, the cheapest family car, the Ford Falcon factory LPG, will take $30,069.00 out of your back pocket over 5 years.  If you financed the vehicle it will have taken $49,783.00 out of your back pocket.

2009’s cheapest car to own, the Hyundai Getz, will cost $114.65/ week, excluding petrol.  The Australian Bureau of Statistics (ABS) reveals that the average Australian spends $39.50/week on petrol. Therefore the absolute cheapest a car will cost to run is $154.15/week or $8,015.80/year.  That’s if it you bought it outright!  With cash!  If you purchased the Hyundai Getz with a car loan the cost rises to $231.85/week or $12,056.20/year.   The cheapest family car, a Ford Falcon factory LPG, costs $212.87/week excluding petrol.   Including the ABS average petrol consumption the cost is $252.37 or $13,123.24/year. Again that’s if you bought it outright with cash!  If you get a car loan, the cost blows out to $442.99/week or $23,035.48/year.

According to the ABS, the average Australian family has an income of $66,820/year.  If they have enough cash to buy a car a Hyundai Getz will consume 12% of household earnings; if they buy a Ford Falcon it will consume 20% of household earnings.  If they don’t have cash and buy a car with a loan, a Hyundai Getz will consume 18% of household income, and a Ford Falcon will consume 34% of household earnings.   These are the costs for running only one of the cheapest cars in their respective classes annually.  With this in mind, the impact of running two cars should quickly become apparent.

The assumption that a family requires two cars to exist successfully needs to be reexamined.  Second cars are a huge drain of the financial resources of a family.  If you feel you need a second car to get to work/school/entertainment this assumption should be explored again. Taking the example of work; if you were using a Ford Falcon financed with a loan to get to work, you could get rid of the car, take a job within walking distance for 35% less money and still be in the same financial position.  Plus, you wouldn’t have to sit in traffic for hours every day.  If you’re living far out of town because it’s the only place you can “afford,” could you move closer to public transport if you had $8,015.80 more to spend per year on accommodation?  Maybe you could spend $4,000.00 on accommodation and be $4,000.00 better off.