Car running costs and depreciation

What it costs to own a car, by segment

RACQ analysed 55 popular petrol, diesel, hybrid, plug-in hybrid and electric models for its 2025 running costs report, costed over five years at 15,000 km a year, the ABS average, on conventional finance and separately on a novated lease. The figures include the estimated on-road price with dealer delivery and registration, the residual value after five years (the difference being depreciation), loan interest, registration and insurance, fuel, servicing and tyres. Checked against RACQ's published report on 20 September 2026.

RACQ's worked example shows where the money goes. A Suzuki Swift Hybrid at an estimated on-road price of $28,350.05 has a calculated residual of $13,500 after five years, so $14,850 of depreciation, or about $2,970 a year. With loan interest, registration and insurance, fuel, servicing and tyres, the five-year total is $52,467.86, which is $10,493.57 a year or $874.46 a month. On a car that cheap, more than a quarter of the cost of ownership is the value it loses, and on dearer cars the share is higher. The novated lease column is lower because the running costs are paid from pre-tax salary; the novated lease guide covers who it suits.

How depreciation works

Depreciation is the purchase price minus the resale value, and it is front-loaded. Youi publishes the rule of thumb that a new car loses about 15% of its value as soon as it is sold and roughly 15% a year after that, with the curve flattening as the car ages; Budget Direct puts the drive-off loss at 10 to 15% depending on the model. Compounded, a car losing 15% a year is worth about 72% of its price after two years, 44% after five and 27% after eight, before adjusting for the model or the extra drive-off loss. The factors Youi lists are supply and demand, kilometres, and maintenance history, plus the brand's pricing of new stock: when a manufacturer cuts new prices, as happened with electric vehicles, used values fall with them.

The car depreciation calculator projects a value by year from the price and a rate you choose, with the 15% rule of thumb and the ATO's 25% as presets.

Depreciation for tax: the ATO rates and the car limit

A business, or an individual using a car for work, depreciates it for tax on a schedule the ATO sets rather than the market. The effective life of a car for an individual taxpayer is eight years, Budget Direct cites from the ATO, which gives a diminishing value rate of 25% a year (200% ÷ 8) applied to the written-down value, or a prime cost rate of 12.5% (100% ÷ 8) applied to the original cost. The formulas are base value × (days held ÷ 365) × (200% ÷ effective life) and cost × (days held ÷ 365) × (100% ÷ effective life). Two ATO limits sit on top: the car limit of $69,883 for 2026-27 caps the cost that can be depreciated on a passenger car, and the GST credit is capped at one-eleventh of it, $6,353; a small business can instead use the instant asset write-off on an eligible vehicle costing no more than the $20,000 threshold for 2025-26. The business vehicle loans guide covers the structures and the luxury car tax guide the other threshold on expensive cars.

Matching the loan to the depreciation

A financed car has two curves: the loan balance falling with each repayment and the car's value falling with time. The aim is to keep the balance under the value, so a trade-in, a sale or a write-off clears the loan. Three rules follow. Keep the term to the years you will own the car; a seven-year loan on a car you will replace in three leaves a large balance against a much smaller value. Size any balloon below the expected resale value: a car losing 15% a year is worth about 44% of its price after five years, so the 50% balloon Pepper Money publishes on short terms, or a 40% balloon on five years, needs a slow-depreciating car to work. And put the deposit or trade-in in, because the drive-off loss of 10 to 15% happens the day you take delivery. The car loan calculator shows the balance at the end of the term against a balloon, and the depreciation calculator the value at the same date.

Cutting the running costs you control

• Depreciation: buy a model with a record of holding value, buy near-new rather than new to skip the drive-off loss, keep kilometres and service history clean.
• Loan interest: secure the loan, take any EV or hybrid discount, and compare comparison rates; the interest rates guide shows a $30,000 loan costing about $5,200 or $10,900 in interest depending on where you land in one lender's range.
• Insurance: market value falls with the car each renewal; agreed value costs more but fixes the payout, and gap cover matters while the loan exceeds the value.
• Fuel or charging: RACQ costs both; electric running costs are lower per kilometre but the purchase price and depreciation on some EVs have been higher.
• Servicing and tyres: capped-price servicing is included in RACQ's figures where offered; tyres scale with the car's size and the kilometres.

Your Finance Guide refers you to one licensed broker partner who structures the loan term, deposit and balloon to the car; we do not lend, insure or sell vehicles.