You need to spend money to make money – there’s no avoiding it. Whether it's paying your rent or mortgage to keep your housing, paying for groceries each week, for your phone bill, your power bill, your gas bill, most of the expenses that sustain your lifestyle are actually non-negotiable.

However, with inflation being a hot topic issue this year, it’s only natural for Aussie consumers to think critically about the expenses that they make over this next financial year. Inflation is a complex beast to say the very least, but put simply it equates to a rising cost of living. You've probably felt this at the supermarket doing your weekly shopping or noticed your utility bills steadily rising over the last few months.

But you might be wondering if the cost of car ownership is on the rise in Australia as well. The short answer is yes, sadly. Even so, it pays to know what you can expect as a prospective car owner. So read on to learn a little more about why and how car ownership costs are indeed on the rise.

Car Loans Are More Expensive

If you've looked into car finance recently, you've probably got a fair idea of how much a car loan will cost you in terms of weekly, fortnightly or monthly repayments. However, you might not know that interest rates have risen in the last year or so due to the Reserve Bank of Australia increasing the official cash rate. The Reserve Bank has done this to curb inflation and cool the rising cost of living. However, this means lenders are passing on interest rate rises to consumers, meaning that the cost of borrowing money has risen.

This shouldn’t deter you from buying a new car if you need one. It just means that you should budget for higher repayments on your car loan. Thankfully, there are ways that you can prepare to take on this loan without having to sacrifice on your lifestyle. For example, you could save up a higher deposit in order to take out a smaller loan. That way, you can still prepare to pay a similar overall amount on the purchase of your car than you would’ve with lower interest rates.

Car Prices Have Gone Up

The COVID-19 pandemic, and the global trade delays and supply chain shortages that came with it, resulted in a rise in car prices for both new and used models across the globe. This price increase was doubly felt in Australia, thanks in part to our position in the southern hemisphere and the extra shipping and freight services required in order to import consumer vehicles.

It was a seller's market in the pandemic, with used car prices soaring. But now that we're out on the other side of the pandemic, car prices are still on the rise, which has sadly led to a bit of market stagnation. And like any negative feedback cycle, a stagnant market will likely mean that car prices stay high for the foreseeable future.

Will inflation help correct this market imbalance? There are hopes that it will, but it’s undeniable that Australia’s automotive industry needs buyers above all else at the moment. Our advice to consumers is to keep an eye out on costs and look into purchasing once prices begin to balance out again for your shortlisted car models. With a little vigilance, you may be able to act during a market downturn where competition between buyers is still low, allowing you to snag up a deal with minimal fuss.

Accounting For Rising Fuel Costs

Along with the rising cost of living, interest rate rises, and car prices, fuel prices are another factor for the growing cost of car ownership. Any long-time car owner knows that the cost of fuel constantly fluctuates both in Australia as well as across the globe – but fuel costs is another one of our routine expenses that you can expect will continue to rise steadily along with inflation.

For instance, the average fuel cost in 2019 was around $1.35 a litre for unleaded 91 petrol, but this year it’s closer to about $1.82 a litre. You're spending more on average if you use premium or diesel too.

Will these prices level out? Well, industry analysts assert that it may not, as the global automotive market is veering towards hybrid and electric car production over the next two decades anyway. As for what consumers can do right now, it’s best to invest in fuel-efficient cars wherever possible, and keep your driving to a minimum – opting instead to utilise your city’s public transport network, or organise carpools to do your daily school run.

Insurance Premiums

This one is a touch more complicated. While insurance premiums also increase with inflation, many other factors impact premium charges. For instance, where you live, the rate of automobile theft there, whether your car is garaged or parked on the street, the car's make and model, and the number of claims you've made will all impact your insurance premium just as much if not more than inflation and rising interest rates.

Depending on these factors, the premium someone pays for an identical make and model owned by another individual will be wildly different. So, it's not as clear-cut as saying that car insurance premiums are increasing due to the rising cost of car ownership in Australia.

If you are looking to keep your car insurance costs low, then switching from a comprehensive policy to a third party fire and theft policy could be the right move for you. If you want to maintain your comprehensive insurance cover, however, then you may opt for a slightly higher excess in order to enjoy a lower premium. It’s up for individual consumers to determine what the right solution is for their own financial needs.

Maintenance, Repair and Servicing Costs

Part of owning a car means paying for ongoing maintenance and servicing. As complex machines with many moving parts, you can't afford to neglect this aspect of car ownership – especially if you have a vehicle with a combustion engine.

The cost of servicing and maintenance will also rise with the cost of living, as garage owners pass on increased costs of materials, parts and labour to their customers to maintain their own profit margins. However, these costs will vary from person to person.

For instance, if you own a vintage or premium car, the cost of maintenance, servicing, and any repairs will be much higher than if you own a run-of-the-mill sedan. Thus, it's hard to say if this cost is rising for all car owners.

There’s no denying that many aspects of car ownership are well and truly on the rise down under. But where there are price increases, there are also opportunities to practise a little savvy spending, and perhaps even opportunities to make a timely sale. For instance, if you’re looking to upgrade to a new model, you can sell your old car for a little more than you may have thought it would go for, and then use your profits to help finance your new purchase.

Similarly, selecting an economical car model that is fuel-efficient, locally manufactured, and has no shortage of spare parts, can help you keep your car ownership and maintenance costs to a minimum and ride out this inflationary period in style. So stay smart, do your research, and be ready to make a move when the right opportunity arises.