SUVs are burning a hole in your back pocket

Regionally, the price drops to $421.17, with Wagga Wagga in New South Wales spending the least, at $387.22 per week.

While these figures include expenses such as petrol, registration, insurance, tolls, roadside assistance, maintenance and tyres, driver's licences and public transport, in all major cities and regional centres the lion's share of these costs goes towards paying off the car loan, which is a whopping 46.2 per cent.

The next biggest expense is, you guessed it, fuel ($100 to $103.06 per week), and the bronze medal goes to insurance ($39.04 to $47.54 per week).

While there are notable differences between regional and major cities in expenses such as public transport and road tolls, when it comes to paying off a car loan, Australians spend roughly the same: an average of $211.87 a week for those living in major cities and $211.76 a week for those living in regional areas.

Given that the difference between urban and regional residents is only 11 cents a week (or $5 a year), we could just split the difference and call it a day.

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I'm not here to criticize anyone's food, and I'm certainly not going to throw around hackneyed and often offensively simplistic phrases like “why don't you just sell your car and take public transportation?” when discussing how to cut transportation costs.

Because beyond the cultural connection we have with driving, public transportation, walking, or biking options are simply not available to millions of us. But do I think we can find potential savings when it comes to lowering the cost of our cars during a protracted cost-of-living crisis? Sure.

First, let’s tackle the $11,000 elephant in the room: car loan payments. According to the Australian Bureau of Statistics, the number of Australians taking out a personal loan for a road vehicle in July 2024 rose by 4.9 per cent. In total terms, that’s $1.5 billion.

With new car prices up nearly 20 percent since April 2020, it's no surprise we're spending so much on car loans now. But what's notable is that prices have risen by as much as 25 percent in smaller car models.

This may go some way to explaining why there are so many SUVs on our roads right now. Of the more than 1.2 million new cars purchased in 2023 alone, SUVs accounted for 56 percent (627,187) and passenger cars for just 17 percent (195,116), according to data from the Federal Chamber of the Automobile Industry. Of the top ten best-selling cars for the year, the top three spots were taken by SUVs, and the rest by off-roaders.

On paper, when you compare car loans for once-reliable smaller models like the Hyundai i30 (which starts at around $27,000) with loans for SUVs like the best-selling Toyota RAV4 (which starts at around $35,000), the difference may seem minor in the grand scheme of things.

But if you compare the two options at a new-car loan rate of 5.6 percent, with no interest rate changes for five years, the monthly payments for the smaller model would be $527 and $680 for the SUV. I don't know about you, but I wouldn't turn my nose up at an extra $153 a month.

In addition to payments, the fork in the road really comes when you start factoring in fuel and insurance costs. Not only are SUVs significantly more expensive to fill up at the pump, they also have much higher insurance premiums.

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This is partly because statistically, you are less likely to get into an accident when driving a sedan or hatchback than when driving an SUV. What's more, if you do get into an accident when driving an SUV, the size and weight of the vehicle means there is likely to be more damage, meaning your insurance premiums will also go up.

Big cars may be all the rage right now, but when it comes to saving money, smaller cars can be more convenient for your daily commute and saving money.

Victoria Devine is an award-winning retired financial adviser, best-selling author and host of Australia's leading finance podcast. She's in business. Victoria is also the founder and co-director of Zella Money.

• The advice given in this article is of a general nature and is not intended to influence readers' decisions regarding investments or financial products. They should always seek their own professional advice that takes into account their personal circumstances before making any financial decisions.

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