RACQ surveyed high school students in Queensland on how they would buy their first car, finding 43% would turn to their family for some of the cost, while 39% would save up the funds themselves.
Very few students said they would take out a car loan to buy their first car.
RACQ Club Spokesperson Clare Hunter said while 39% of young motorists were willing to fork out to buy their car, they were “more frugal” when it came to driving lessons and running costs.
“Close to half told us they expected their parents to stump up the funds for driving lessons,” Ms Hunter said.
“They also expect their friends to chip in for fuel if they’re getting regular lifts.”
RACQ uncovered these findings as a part of its new financial literacy program Cash IQ, which it formed in mid-2018.
Financial literacy among children is important, as one in five Australians aged 15-16 don’t have a basic understanding of finance, according to a worldwide OECD study.
Cash IQ is a 50-minute presentation given to year 11 and 12 students to help them “make informed financial choices” and looks at how these choices affect them in the long term, according to RACQ.
Ms Hunter said Cash IQ gets students thinking about how they make choices on spending and saving money, as opposed to focusing on bank accounts and products like other financial literacy programs.
“The results over the past six months have given us vital insights about how teenagers think about money and also how they resolve tricky situations with friends, and we’re confident these students will make good choices when it comes to spending their hard-earned cash,” she said.
How much we spend on car loans
The ABS’s Lending Finance data shows the total amount loaned to prospective car buyers in November 2018 alone was:
- $624 million for new cars and station wagons
- $464 million for used cars and station wagons
- $25 million for motor cycles
- $116 million for ‘other’ vehicles such as trucks, vans etc.
That’s more than $1 billion in car loans in just one month – throughout 2018 it was more than $14.2 billion.
Further analysis by Stratton Finance in 2017 found the median car loan size in Australia was $31,000, while the most popular was $20,000.
Interest rates on car loans vary significantly. Rates can be as low as around 4.5% for those with good credit scores or as high as 15-16% for either unsecured loans, loans for people with bad credit scores or loans from less reputable dealers.
Here’s a breakdown of how a loan of $31,000 might cost over five years.
| Interest rate | Monthly repayments | Total repayments | Total interest paid |
|---|---|---|---|
5% |
$585 | $35,100 | $4,100 |
6% |
$599 | $35,959 | $4,959 |
10% |
$659 | $39,520 | $8,520 |
| 16% | $754 | $45,232 | $14,232 |
For feedback or queries, email will.jolly@savings.com.au
Photo by kevin laminto on Unsplash
Denise Raward
Harry O'Sullivan
Harrison Astbury
William Jolly
