What Does Drive Away Price Mean?

Drive Away Pricing Explained

Imagine going to a car dealer, and after paying the dealer, you just drive away without extra costs. Who wouldn't want that? When you go shopping for a car, the expectation is that there is no other expenditure other than fuel or maybe a car wash. That is what drive-away pricing entails.

Suppose you encounter a car sales advertisement stating drive-away pricing or no on-road costs, or both. Will you make the purchase right away? The deal looks enticing, but it might be a mere ploy to get you into the car dealership to buy the car.

You have to ask questions beyond what is included in the advertisement. It is essential to ask the dealer what the real bargain is so that you don't end up spending beyond your budget.

Sometimes the deal looks too good, but in the end, some twists and turns emerge to tilt the agreement in the dealer's favour. The extra costs that you should avoid are what we call on-road costs. In this article, we'll outline what these costs entail and examples of these costs.

What Are On-Road Costs?

On-road cost is a term used to refer to the additional charges imposed before you take your newly purchased car home and legally start driving it. These costs, however, vary from one state to another. But then, before you visit a car dealership, you need to know which costs are covered by the dealer. This helps you prepare an expenditure budget for operating your car.

On-Road Costs Included In Drive-Away Price

Vehicle registration fees

When you purchase a vehicle, the law expects you to register it either in your name (if it's personal) or your company's name (if it's meant for business operations). Vehicles are not like shoes and clothes you buy, where people will automatically assume you own them.

Luxury car taxes

Luxury car tax is one of the main components of a drive-away price. LCT, as many people prefer to call it, has been in existence for about 20 years. If you have seen this on your car purchase receipt, it means that you surpassed a certain price threshold with that purchase.

When car dealers import and supply cars over a certain price threshold, they pay a luxury car tax of 33% on the car price. The purpose of LCT is to discourage consumers from overlooking locally produced cars by opting for imported vehicles. However, unlike what some people might think, the 'luxury' word in this sense isn't the literal or traditional meaning you know.

It refers to cars whose value exceeds a specific price. For instance, you'll find someone buying a Toyota Landcruiser paying luxury car taxes, whereas someone buying an Audi, BMW, or Mercedes is not spending on such taxes. We have given this example because cars like Audi, BMW, and Mercedes have a luxury brand status.

In the 2022-23 financial year, the luxury car tax in Australia is set at $71,849 for many vehicles and $84,916 for electric cars. If you love fuel-efficient vehicles or any luxurious vehicle, then be ready to pay extra costs in terms of LCT.

Compulsory third-party insurance

Aside from the vehicle registration, it would help if you had compulsory third-party insurance before you drive your car away from the dealership. This type of insurance is mandatory for all vehicles on Aussie roads, and it is enforced by the government. As a matter of fact, compulsory third-party insurance is standard in almost all countries.‍

Compulsory third-party insurance covers benefits such as medical costs when you are injured in an accident or when you hit someone while driving. In some states, the registration cost includes the cost of compulsory third-party insurance, whereas others require you to pay it separately.

Irrespective of how or where you pay it, the money ends up with the Transport Accident Commission and is used to cover medical expenses, as explained above. Even though the concept of compulsory third-party insurance varies from one state to another, the purpose and idea are one.

However, you should know that this type of insurance does not indemnify damage to your car. So, it is essential to seek comprehensive insurance coverage once you drive away from the car dealership. Compulsory third-party insurance just helps you be on the road legally but isn't enough to cover damage to your vehicle or damage to property.

Stamp duty

Stamp duty is unavoidable and is often calculated by the car dealership on your behalf so that you don't have to worry about how much it costs. It is a car charge by the state government. Stamp duty can be higher or lower depending on the value of your car, the state where you make the purchase, and your car's environmental impact.

It does not matter whether you purchase from a private seller or a known car dealership since you will still have to incur stamp duty charges. During calculations, payments are made on the market value of used cars and the list price of new vehicles. So, if you sell your car to a friend, the stamp duty is calculated on that car's current market value.

As mentioned before, the state or territory where you purchase the car will also determine the sum of stamp duty you will pay. For instance, if you reside in the Australian Capital Territory, you won't pay stamp duty if your car emits less than 130 grams of CO2 (Carbon Dioxide) per kilogram.

On the other hand, if you live in Victoria, you will pay a stamp duty of $10.40 per $200 for a luxury passenger vehicle. So, as you can see, the charges are not fixed, and the cheaper or, the more ecologically friendly your car is, the lesser the stamp duty you must pay.

Dealer delivery charges

Unlike the other on-road costs, which vary from one state to another, dealer delivery varies depending on the car dealership. There is no state government that enforces dealer delivery. On top of the purchasing price, the dealer charges you an extra cost for car delivery from the assembly plant to their dealership, detailing the car, mechanical checks, and other things such as a car wash.

Well, you'd obviously expect this to feature in the total cost of purchasing the car and not have to pay extra after buying the vehicle. That is why most car dealers exercise some creative discretion when pricing their cars to include dealer delivery costs. This ensures that you, as a customer, do not have to pay extra charges after spending thousands of dollars to purchase the car.

But what you might not know is that many car dealers charge dealer delivery so that they can have a flexible margin when customers bargain. Imagine bargaining for a car, and let's say the dealer waives $200. How does that make you feel? You'll be thrilled with the bargain when in reality, the dealer is the ultimate winner of the deal.

Uncover More About Vehicle Purchasing In AUS

You should also know the registration rules and charges of the state or territory you reside in. In states like NT (Northern Territory) and NSW (New South Whales), a mandatory technical check-up has to be done before renewal is approved.

On the other hand, states like the ACT (Australian Capital Territory), VIC (Victoria), and QLD (Queensland) require a compulsory mechanical check-up when you are either purchasing or selling a car.

Getting a new car can be an exhilarating experience. But this shouldn't cloud your mind to the point that you forget that there are other costs other than the purchasing price. Quite a number of car dealers intentionally exclude the on-road costs in the advertised price to attract more customers.

These costs end up emerging when you least expect them. So, it is essential to make inquiries before purchasing a car to avoid stretching beyond your budget. Remember that a car dealer is a business person; therefore, before customer satisfaction, there is profit. When consulting with dealerships, look beyond the drive-away pricing deal and find out who gains what from the deal.