Why Driveaway Pricing Can Cost More Than You Think

Why Driveaway Pricing Can Cost More Than You Think

Purchasing a new car is an important financial decision to make. There are a variety of factors to take in mind before diving in car dealerships in the search for a new vehicle. Car buyers need to be aware of the exact pricing they are willing to pay for a car purchase since it comes hand in hand with a variety of road costs, stamp duty and CTP costs.

How much are you willing to spend on a new car?

When purchasing a new vehicle, car buyers tend to have in mind their current monthly income and possible future expenses. In Australia, nowadays, most car purchases are made through financing options such as leasing or car loans. Regardless of the car’s price, motor vehicles go down in price quickly after being purchased and you should be wary of the additional costs that come with purchasing a new car.

Driveaway pricing means that you can pick the features of the car, the colour of the paint and that’s it you are good to go and drive away from the showroom. Be wary of “free on-road costs” which means that the dealership pays only for the registration of the vehicle, CTP and stamp duty and you are left to deal with everything else that needs to be done like dealer delivery charges, luxury car taxes and car insurance are left out of the deal.

Most car buyers make the mistake to only take into account the monthly repayments of the purchase price and they forget additional costs such as compulsory third party insurance, lct for high-end vehicles, car insurance, luxury car taxes,  and even dealer delivery charges.

During a novated lease, for example, all additional costs such as maintenance and car repairs are deducted from your pre-tax income. The drive-away price contains a variety of other costs you need to cover before actually hopping into the new car and driving out of the showroom.

After a comfortable test drive, most car buyers expect to get out of the dealership and just pay for gas and running costs. There are a variety of other charges that most car dealers do not mention right away.

Stamp Duty, compulsory third party insurance and other additional costs

Drive-away deals include both of these things. In order to register your new car, compulsory third party insurance is obligatory and can cost more than $700 per year. Dealerships can generally obtain lower prices on those additional services required and sometimes squeeze in a profit from there too.

Stamp duty, on the other hand, is different in different Australian states and could add up to hundreds of dollars, depending on the purchase price, state, and how environmentally friendly your new car is. You can check the exact detail in the Australian government’s green vehicle guide.

Dealerships nor manufacturers have the ability to change anything regarding the pricing of stamp duty. There is no way in avoiding it either. But it usually goes much higher for high-end expensive cars with larger engines and more horsepower. Meaning the more luxurious a vehicle is the higher the drive-away pricing gets.

Luxury car tax is another rather unexpected cost for most car buyers. Neither car dealerships nor car companies would advise you to consider buying a cheaper model since their profit depends on it and that is perfectly understandable. Any car with a purchase price of over $63,184 would be taxed with 33 per cent instead of 20.

Dealer Delivery Charges are also something often left out of the equation when calculating the total drive-away price of a new car. On newer models, this feature could cost all the way from $1,500 to $10,000 in case you are purchasing a Ferrari, for example. And despite being called a delivery charge, it is nothing of the sort, and mostly used by car dealerships to squeeze in a larger margin to their profit.

What are drive-away promotions and are they worth it?

Often car companies like Nissan, Mitsubishi, Mazda and many others offer drive-away pricing. It is a much easier way to clear stock in the showrooms, especially for lower-end vehicles, since the car buyers of high-end ones are not as troubled by the increased purchase price.

Moreover, most dealerships aim to get rid of last year models and offer cheaper deals when a new model is about to get into the market.

So if you are really in love with a model and do not mind that it is last year’s vehicle, go for it and try to strike a deal in getting one of those bargains that include everything with it on a lowered overall purchase price.

Most big car companies like Hyundai, for example, have a drive-away price calculator featured on their website, where you could choose the car model you would like to purchase with all the options and paint included and calculate how much the total purchase price would be in the end.

Moreover, that is also a good idea to check on the dealers that directly work with the manufacturer of your chosen brand. They are usually listed on the website and you can check their availability for each state.

But whatever car dealership and brand you choose, have in mind that the officially advertised price is not always the drive-away one and does not include additional costs like warranty, stamp duty, and ctp.