How cost competitive are cars in Australia?

How much do motor vehicles cost in Australia compared with other countries? Is it true that luxury cars are much more expensive than in other countries? Or is that just a pre-mining boom urban myth?

The Fleetcare team decided to investigate these questions on your behalf. Using the most reliable new car price guides we could find for five different countries – Australia, USA, UK, Germany and South Africa – and armed with exchange rates courtesy of the Reserve Bank of Australia, what we discovered was a fascinating mix of the reassuring, the bewildering and the downright depressing.

Let’s start with the good news. Small, economy cars in Australia are very competitively priced compared with other countries. A Toyota Corolla which will cost you $22,990 in Australia has a lower price tag only in USA, where you can buy the same car for marginally less - $22,430 (all figures in Aussie dollars). Go to South Africa and the same car will cost you $28,521, Germany - $32,080 and UK - $37,910 – a massive 65% hike on the what it costs here in Australia.

A Mazda 3 Hatch costs less in Australia than in any of the other four countries, and a Ford Fiesta is also fairly priced in the global scheme of things.

Moving up to SUVs, one of the most popular on our roads at the moment, the $32,190 Hyundai ix35 is only somewhat more expensive than in USA ($29,218) and South Africa ($31,491), but significantly cheaper than in UK ($48,930) or Germany ($52,377) where it costs 63% more.

So far, so good. It is when we move up market that things look less rosy for the Aussie driver. If, after a lifetime wearing a suit and attending boring conventions, your now-successful Aussie corporate exec decides to reward herself with a nice, shiny, Mercedes Benz E Class car, she will discover that the price tag is $100k. Compare this to the $84k cost in Germany, $73k in USA, $62k in South Africa and $60k in USA and you can see why your corporate exec may start to question where all that hard-earned cash is going to. Could the Australian Taxation Office possibly have something to do with it?

What about the tradie launching his own pool servicing business? Surely he should be on safe ground buying an iconic ute like a Toyota Hilux? Sadly, not. He will have to shell out $48k for a new ute, compared to $35k in UK, $33k in South Africa and a mere $29k for the equivalent Toyota Tacoma in USA. True, he would have had to pay $54k in Germany – but how many pools are there to service in Berlin?

But you’ve not heard the worst of it. Time to reach out for that box of Kleenex, folks, because what we are about to reveal may cause you to shed a tear. You are 28 years old, and a Master of the Universe working for an investment bank in the CBD. You haven’t had a life for the past 3 years and have been sleeping under your desk, living on All Bran and Chinese take-aways, but now its bonus time and that’s all about to change. Down to the Porsche dealer you go to pick up your 911 Cabriolet for a cool $296k. Flying down the freeway, you can’t resist using the hands-free to call your mate in Johannesburg to brag about your new toy.

‘Snap!’ He tells you. ‘Great minds and all that. I’ve just bought exactly the same car.’

Because you are both in the business, conversation soon turns to money.

‘How much did you pay for it?’ you ask him.

‘One point three million rand,’ he replies.

It is, let’s face it, an impressive sounding slab of cash.

‘What’s that in real money?’ you want to know.

After some calculator tapping from the other end comes the reply, ‘$117,000,’ he tells you. ‘How much did you pay?’

‘A bit more than that,’ you have to confess, realising that he could have bought two 911 cabriolets and thrown in a luxury overseas ski trip for the same amount of money you transferred earlier that afternoon.

The problem for Australians is Luxury Car Tax (LCT) which adds around 33% to the cost of any vehicle with a value of over around $63k. That’s when things start getting seriously uncompetitive when we look at what Australians have to pay compared to some of their global counterparts.

Is there anything you can do to get around LCT? Not right now. But the federal government is looking to change the law, so only time will tell. But for the moment, looking at the global picture, when it comes to affordability in Australia, it all comes down to LCT. Below the threshold, you’re doing well. Above it, you’re paying dearly for the privilege of road presence.

Fleetcare Global Affordability Index - February 2016