The same factors driving up car prices are also forcing Australians to wait up to 12 months (or even longer) to buy the car of their dreams.
Some people opt for used cars instead, but wholesale prices are enormous even in the used car market. In Australia, cars are simply more expensive than elsewhere.
Why are cars so expensive in Australia? Keep reading to find out what's driving up the prices of cars.
How Much Are New Cars in Australia?
Australians pay up to 185 percent more for cars than consumers in the United States. This figure is relevant whether you are looking for a simple family vehicle or a luxury car.
By some estimates, the sticker price for a BMW M3 in the US is $88,368 (US$59,977.11), but the same model costs a minimum of $139,615 (US$94,759.47) in Australia.
Costs grow even further for models like the Porsche Carrera S. The Australian government imposes a luxury car tax on vehicles like this, pushing up the price that is already more expensive than it is elsewhere in the world.
What's more, luxury car tax and general car prices make vehicles more expensive even if they are produced in Australia. Take the Commodore SS, for example, which costs up to $10,000 more in Australia even though it's manufactured right here in the country.
How Much Are Used Cars in Australia?
Used car prices do not offer much relief. In the first quarter of 2022, used passenger car prices grew by 18%, while commercial vehicle prices also increased by 16%.
Wholesale prices are even 65% higher than their pre-pandemic levels, which means the Australian used car market is extraordinarily expensive.
Used cars vary in price depending on the model and its condition, but nevertheless, Australians pay more for used vehicles compared to consumers in other nations.
Why Are Cars in Australia So Expensive?
As it turns out, there are several factors driving up the cost of cars in Australia, for both used and new cars. Here are seven reasons cars are more expensive than in other countries.
1. Purchase Fees
Purchase fees affect luxury cars such as the Mercedes S Class or the Range Rover. A lot contributes to purchase fees, including the tax system in Australia and all the tax types it entails.
Approximately 20% of car prices go to the government. According to Porsche, many Australians are avoiding purchasing the 918, because $300,000 of the fees ($1 million in total) go to the government.
2. Australian Tax System
The tax system, specifically the luxury car tax, is a huge contributor to the cost of cars in Australia.
Some of the taxes Australians pay when buying a car include:
- Import tariffs
- Customs duty
- Goods and services tax
- Stamp duty
- Luxury car tax
The luxury car tax came in during the 1980s to replace the wholesale tax, and it works in conjunction with the goods and services tax. Notably, other luxury vehicles like helicopters and yachts are not taxed, which places more burden on luxury cars.
Luxury cars are defined as those costing more than $60,316, or $75,375 for fuel-efficient luxury cars that consume less than 7.0L/100km on the combined cycle. After that, a car buyer pays 33% tax to the Federal Government on every dollar spent.
3. High Price Tolerance
Even before these high taxes were introduced, import duties were as high as 59% for luxury cars. Australians tolerated these costs and continue to have a high tolerance for expensive price tags. Other luxury goods are also very expensive in Australia, but Australians are used to these costs.
Car companies assume these prices are welcomed, which is partly why they price them so highly to make a greater profit.
4. High Demand
There is high demand for specific vehicle models in Australia, with mid-range luxury vehicles being the major preference. Due to supply and demand, Australian prices for a new car are exceptionally high.
There are also current supply chain pressures brought about by global events such as war and the pandemic. There is a current shortage of semiconductor-grade neon, a compound used in car chips. Half of global semiconductor-grade neon is supplied by Russia and Ukraine, putting further strain on an already pressurized market.
Electric vehicles (EVs), in particular, are experiencing high demand compared to petrol cars as Australians embrace the electric revolution. However, the lack of climate policies in Australia compared to the rest of the world means EV manufacturers are more reluctant to ship large fleets to the country. Waiting lists continue to get longer, and prices get higher as demand swells.
5. Number of Cars Bought
Figures suggest that countries like the USA buy around 30 million cars annually. In contrast, Australia buys approximately 1 million new cars. Wholesale prices for a greater number of vehicles are lower on a cost-per-vehicle basis, which gets passed onto the consumer.
As a result, the lower number of cars purchased by Australia means car companies charge more per vehicle to account for covering all the costs.
6. Importation Costs
Whichever way you cut it, Australia is an isolated country. Although it is relatively close to car manufacturing plants in Asia, import tariffs remain very high. Car companies pass this cost onto the consumer, which drives up the prices even further.
It's also impossible to self-import a vehicle. The Department of Infrastructure and Regional Development prohibits self-importation for environmental reasons. It is assumed that car manufacturers will do all the necessary research to ensure cars shipped to Australia contain all the necessary eco-friendly parts and are up to standard, whereas this is harder to police on an individual basis.
There are a few exceptions to this rule. One may import a car if:
- They owned the vehicle in the foreign country where they lived for at least a year
- The car was manufactured before January 1, 1998
- The car is not sold in Australia and it meets all the requirements set out by the Department of Infrastructure and Regional Development
Import tariffs vary depending on the price of the car, which makes second-hand vehicles (and vintage models) slightly cheaper to import. Nevertheless, self-importing a car is much more expensive than buying models already sold in Australia.
7. Car Modifications
Luxury car models sold in Australia are often modified to meet the standards set out in this country. For example, German vehicles like Audi and Mercedes are modified to include cooling technology to combat the Australian heat.
Another example is that some Mercedes-Benz cars sold in Australia contain nine airbags, while the same car in the United Kingdom contains seven.
Some modifications are more about culture. Australians tow more than European consumers, so manufacturers fit their vehicles with towing packages.
All in all, the modifications made to cars sold in Australia make them much more expensive than they are in other countries.
How Much of the Price is Tax?
As noted above, there are several taxes to take into account when buying a car.
A portion of the tax is goods and services tax, and the rest is made up of import tariffs, stamp duty, registration and the luxury car tax. Roughly 20% of what you spend will end up at the Australian taxation office.
Is Now a Good Time to Buy a Car?
Although Australian car prices might seem disproportionately expensive, there is probably no better time to buy a brand new car.
An Australian earning the average wage would need to work 24.2 weeks to purchase a new Ford Falcon. This is the lowest figure since 1975.
This trend perhaps explains why Australians still prefer mid-range luxury vehicles despite the luxury car tax.
When you buy a modern car, you also benefit from the new features and technology, including safety initiatives, which makes luxurious cars better value for money nowadays than they were back then.
How Can I Make Sure I'm Buying a Good Car?
After considering waiting lists, passenger car prices, and expenses for imports, many Australians choose to buy used or second-hand vehicles.
That said, used car prices are still high, which is why all buyers should do their due diligence.
Carify can help you by providing up-to-date reports on any car you consider buying.
Our vast database can provide you with completely transparent information about any car you want to buy. This includes a write-off check, a stolen check, finance owing, safety information and product recalls. Enter the VIN number here to obtain all of this information at your fingertips.
Summary
Cars cost more in Australia for a variety of reasons. If you are thinking about buying a new car, make sure you consider current passenger and commercial vehicle prices, import tariffs, and taxes, alongside on-road costs and car running costs before you make the purchase.
Even though used car prices are higher than in other nations, buying second-hand can still save you some serious money.
Before you invest in a new car, use the Carify car history check to ensure your purchase is the right one.
FAQs
What are the cheapest car brands in Australia?
Right now, car manufacturers like Kia and MG are the cheapest, with many available for under $20,000 driveway. Other cheaper models include the Suzuki Ignis GL Manual, priced at just over $20,000.
Notably, consumers can expect to pay much more for a luxury brand or any electric vehicles. These both fall under the category of more expensive cars.
Are Car Prices Dropping in Australia?
Car prices hit an excessive high recently as the automotive industries were put under pressure from the pandemic and other global events. Some data at the end of 2022 suggest car prices will keep falling, but they currently remain higher than they were pre-pandemic.
What's the Best Way to Buy a Car in Australia?
Every consumer is different, so finding the perfect vehicle for you is a unique experience. While those with more disposable income can afford to spend time on a waiting list for the most luxurious vehicles with the highest price tag, many regular Australians must settle for something else.
The used car market is booming with plenty of affordable, modern vehicles. However, with used car prices still high, consumers need to be careful due to the wealth of stolen and damaged vehicles being sold. Check your car using Carify to find out more.
