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Are cars cheap in Australia?

Australia is a big, beautiful country with vast, expansive spaces and not a lot of people. It is flat, arid land, with peculiar rock formations and strange, dangerous wildlife. The outback stretches for mile after mile, baking under blue skies and bright sun.

Australia is an absolutely stunning country with plenty to see and do. That’s why it’s the number one backpacker’s destination in the world, and it has been for some time. Millions of tourists make the trip to Australia each year, and many of them are backpackers. There’s just one problem with Australia though – it’s size.

Australia is the sixth-largest country in the world, and travelling around it can be tricky. The transport links throughout the country are excellent, there’s no doubt about that, but if you want to get into the nitty, gritty corners of the country, if you want to experience the outback, if you want the freedom to travel where you want when you want, then there is only one mode of transport to take, and that’s driving.

The changes to the Motor Vehicles Standards Act come as the Australian industry winds down, and local production ceases next year. Under the new laws in 2018, consumers will be able to import a new car or motorcycle from countries with comparable Australian standards. It must be no more than 12 months old and have no more than 500km on the odometer.

A full list of countries with comparable standards is yet to be determined, but among right-hand drive producers, both Japan and the UK already meet the benchmarks.

While this won’t affect new cars in the low-end market, it will have a huge impact on the already booming high-end sector, with consumers able to bypass the hefty “Australia tax” local luxury brands charge for imports. The move will also drive down used car prices across the board, but again, mostly in the higher end of the market.

The government will also amend the 21-year-old Customs Tariff Act introduced by the Keating government to remove the $12,000 special duty on imported used vehicles from 2018.

Major projects minister Paul Fletcher said that while the duty is not often applied, it remains the law and costs more to administer than it raises.

“[The law] is seen by consumers as a hurdle to importing second-hand cars even in the specific circumstances where such imports are permitted. By removing this duty, we will provide more options for Australian consumers,” he said.

An additional requirement that an identification plate is physically affixed to an imported car will also be scrapped. Instead, the details will be entered on a new Register of Approved Vehicles, saving manufacturers an estimated $18 million a year.

While the laws were originally in place to protect the local car industry, but the government considers them redundant with all manufacturing plants closing.

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 the 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 the UK – $37,910 – a massive 65% hike on 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 upmarket 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 the USA, $62k in South Africa and $60k in the 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 the UK, $33k in South Africa and a mere $29k for the equivalent Toyota Tacoma in the USA. True, he would have had to pay $54k in Germany – but how many pools are there to serve 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 three 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, the conversation soon turns to money.

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

‘One point three million rands,’ 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.

The idea that you live in a place referred to as Treasure Island sounds exciting and glamorous, but the fact that this is the name given to Australia by many multi-nationals who can’t believe how much more we’re willing to pay for things – from jeans to shoes, to songs, to cars – than other countries is actually deeply depressing.

When it comes to the motoring industry, and the vexed question of why Australians pay too much for cars, you’ll find there are various answers, and plenty of people on the car company side who will tell you our prices are actually very cheap, on a global scale.

What the vehicle manufacturers really don’t like you to do – and which used to be so much harder pre-Google – is to compare the cost of cars in the US to the price we’re paying here, because it quickly becomes clear that good cars – sporty, premium-brand stuff – cost a good deal more in Australia.

According to CarandDriver.com, Americans can get into a BMW M3 for as little as US$64,995 ($88,368), an Audi S4 for US$51,875 ($70,524), or an Alfa Romeo Giulia Quadrifoglio for US$73,595 ($100,045).

If those prices sound pretty enticing, it’s because they are, compared to the Australian entry-level stickers of $139,615 for the M3, the Audi S4 at $99,900, or the Alfa Romeo Giulia Quadrifoglio (Verde) at $143,900.

What really stings, though, and makes you think it would be worth putting up with having even Homer Simpson as president just to live there, is the price of Porsches. Those lucky Yanks can have a new Cayman on their driveway for US$53,650 ($72,934), while our entry-level price is $110,000.

The idea of owning the ultimate driver’s machine, a Porsche 911, seems less unobtainium in the US, too, with an entry-point of just US$84,000 ($114,208). The cheapest new 911 in Australia is a base Carrera at $217,500.

To be fair, just about everything is cheaper in the US, and they sell a lot more cars, which means they have different economies of scale, but those cost differentials are still stark.

Ask any industry spokesperson about them, and they will be at pains to point out that our tax system makes our list prices a lot higher, and that our imported luxury cars tend to come with much higher levels of specification than the base models sold in America.

What we don’t know, and what the car companies will never tell us, is how much profit per unit the Australian arms of these businesses are making compared to their cousins in the US and Europe. Are we being plundered, like some treasure island, or are we getting a fair deal, in global terms?

How much extra would you pay for a new vehicle?

Does money equal love? If so, Australians may be able to claim that they love cars the most in the world. At least that’s what our car price comparison has revealed. We compared prices for car models here and in the USA, determined the AUD equivalent for the USA sale price and then calculated the difference.

The comparison found that no matter if you’re buying a luxury brand, say a Jaguar or a Rolls-Royce, or a standard passenger vehicle such as a Honda Civic, Aussies are coughing up to 185.14% extra for vehicles compared to our American friends.

If like many Australians, you finance the purchase of your vehicle with a car loan, the interest you pay on this price tag will make the difference even wider.

How much of the extra we pay is tax?

In 2015, Australian authorities raked in more than $6.5 billion in taxes, stamp duty and other charges from the sale of more than 1.15 million cars.

It is estimated that around 20 per cent of the cost you are paying for a new car finds its way into government coffers.

Part of that is the GST, but there are also import tariffs on cars from certain countries, and then there’s the very special Luxury Car Tax, which we’ve been paying great wads of since 2000, despite the fact that other luxury vehicles – like yachts and helicopters – are not similarly taxed.

The LCT applies to new cars priced over $60,316 (yes, it does seem a very random, and slightly low, price to define as ‘luxury’). However, it only kicks in at $75,375 if your luxury car is fuel-efficient; defined as consuming less than a claimed 7.0L/100km on the combined cycle.

So, for every dollar your car costs you above those amounts, you pay a 33 per cent tax to the Federal Government, which must make them almost as happy as it makes the luxury importers unhappy.

Porsche once told us that the reason it didn’t sell its wondrous and mental 918 track car for the road here is that when it told keen customers the price, they just couldn’t come at the idea of paying $300,000 of the $1m sticker to the government.

If that wasn’t more than enough, you also get to pay the government money in the form of stamp duty and registration, in short, all that other stuff that makes up ‘on-road costs’ with your new car.

However, the major car companies selling in Australia aren’t pleased with the proposed changes, with Tony Weber, CEO of the industry body the Federal Chamber of Automotive Industries (FCAI) condemning them.

“The FCAI has repeatedly called on the Government to carefully consider the facts before making a policy decision that will mislead everyday consumers,” he said.

“Not only is the Government taking a ‘buyer beware’ sentiment that would see many Australians caught in high-risk situations with their vehicles being outside established service networks; the government is misleading consumers by telling them a used vehicle with 500kms or one that is 12-months old, is new.

“Brands selling in this country make substantial investments in Australia by way of dealerships, workshops, technology and training to support and service their products. This means consumers can be certain their vehicles can be serviced and repaired appropriately, and that recalls you are captured, so consumers are informed if something needs to be fixed.”

Nonetheless, car lovers with cash will be eyeing off the possibilities and how much they will save on luxury vehicles, with the potential to shave tens of thousands of dollars off current local prices.

A brand new, max spec Tesla Model S P90D will cost around $244,000 to import from the UK into Australia, including all local taxes – that same car to buy in Australia will be just over $254,000. And that’s one of the closest comparisons.

German luxury brand Porsche argues that if the government intended to bring down prices in Australia, they would abolish the luxury car tax.

“If the government is serious about making motor cars, especially high-end motor cars like the Porsche, more affordable to the consumer, then why doesn’t the government abolish the luxury car tax?” Porsche Australia spokesman Paul Ellis said.

His business is one of those that will be most affected by the changes, with big price differences when importing from the UK if buyers are willing to give up a local warranty.

If you wanted a Porsche 911 Carrera S in Australia, you’re looking to pay $274,012 driveway. If you import? $230,425 including all government fees and freight. Even at the bottom of Porsche’s sports car lineup, they’re hit, costing around $115,000 to import a new Boxster 718 from the UK including government fees compared to $125,000 buying locally.

What about a Lotus Elise? Importing one from the UK will cost around $60,000 delivered due to it just scraping in under the luxury car tax. To buy locally, it’ll cost you a little over $80k.

Then there’s the BMW M4. Importing from the UK will cost around $153,000, while in Australia it costs $166,000 before on-road costs.

And let’s not forget that these prices used from the UK are all just standard prices, not factoring in specials that dealers might have.

Legislation to implement the changes will be introduced into Parliament later in the year.

So are all our cars more expensive than overseas?

It depends on who you believe, and what sort of car you’re looking at.

A 2015 report by Deutsche Bank, ‘Mapping the World’s Prices’, which found that Australia was the most expensive place on Earth to live (taking into account car prices, among other things), found that a new VW Golf would cost you $34,000 here, compared to $23,000 in Tokyo, which used to be the most expensive place on Earth.

Those figures were heartily refuted by the local industry, which said they were not comparing lemons with lemons, or similarly specified Golfs.

More research from 2015, however, conducted by Commsec, found that Australian car prices were very competitive when compared ‘like for like’ with other right-hand-drive markets.

According to the report, an Australian earning the average wage would have had to work for 24.2 weeks to purchase a new Ford Falcon, which was the best (i.e. the lowest number of weeks) figure since 1975.

“There probably hasn’t been a better time to buy a new car, at least not in the past 40 years,” Commsec analyst Craig James said.

“That explains why more Aussies are opting for generally costlier four-wheel drive or sports utility vehicles in preference to traditional passenger cars. And why sales of luxury cars are at record highs.

“The ABS stats tell us that clothing, footwear, small electrical items, computers and TVs are also cheaper now than they were 20 years ago.

“If you look at the features of a modern car, and the safety, you’re getting even greater value than the figures suggest, whereas a kettle back then was similar to the one now.”

The FCAI (Federal Chamber of Automotive Industries) has been espousing the virtues of some detailed research carried out by Auto Express in the UK.

In an exhaustive piece published late last year and titled, ‘Car running costs: how much does it cost to run a car around the world?’, the magazine looked at 11 countries including the UK, Japan, UAE, Germany, Russia, South Africa, the US, Venezuela, India, Brazil and Australia, using a VW Golf 1.4 as the benchmark car.

Of all the markets, India was the cheapest, with a price of $15,195, followed by Russia ($25,916) and, in third place, Australia at $25,925.

In May last year, a report by GoAuto similarly found that Australia has the lowest right-hand drive car prices in the world, using a system of comparison devised by The Economist.

The Chief Executive of the FCAI, Tony Weber, said that the Auto Express report offered further confirmation that Australia’s new car market is one of the most competitive in the world.

There’s not much doubt, however, that more expensive cars – the very top end of the market – are more expensive here than elsewhere, but car company insiders claim that premium comes down to the comparatively small market for those vehicles, and thus a lack of competition at the higher end.

Perhaps we need to start driving on the other side of the road.

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