Wednesday, November 28, 2007

Australian Car: Rent or Buy

Back to the theme of the budget, specifically with regard to transport.

A few months back, I was looking into the choice between renting a car for 12 weeks in Australia, and actually buying and reselling a car over the same period. The Rough Guide suggests that 8-10 weeks is the threshold over which buying and reselling starts to make economic sense. According to AutoBarn, the cutoff point is more like 6 weeks. But there are certain inherent risks involved as well, that rental doesn't entail:

  • Breakdowns are at your own expense, and will delay you more;
  • You may not get the resale price that you expected, especially if you have a plane to catch;
  • There is a lot more paperwork and additional expense involved in becoming the owner of a car rather than the renter.

But renting in Oz is not cheap, and is in very stark contrast to the cost of car rental in New Zealand. I wonder why this is. The markets should be similar: Lots of tourists who want to cover long distances over extended periods of time. Whereas in NZ, there seems to be excellent competitive downward pressure on prices, in Australia, there's nowhere to run.

I asked Simon in Brisbane what he though, and he was able to give me some numbers, based on some visitors they had a while back. This is how it worked out for them (all prices in Australian dollars):

  • Bought a car for around $11000
  • Spent about $1500 on services through the 6 months
  • Up for sale on a consignment lot, where you leave your car on their lot which they sell and take a 10% cut.
  • Sold for around 8000.

Total cost: (11000 + 1500) - 8000 + 800 = 5300.

Insurance and registration will add a few hundred dollars to that, let's say 5500 in total.

The travellers in question were in Oz for 6 months, so this price was pretty good value (I think it was a station wagon). But 6 months is a long way off the cutoff that either the Rough Guide or AutoBarn are suggesting. Bringing it back to 3 months, the value is less tempting, especially considering that an equivalent rental for that time (calculated here) would work out at about $4300.

When you are travelling with kids it's vital that the car be comfortable and spacious. We discovered in Canada that the people carrier we rented was a big kick for the girls - they had a choice of seats, good views out of the windows and lots of 'secret compartments'. For that kind of vehicle, you have to add another $1700 for a rental, but a lot more to a purchase price.

The solution we've come to in the end is to not rent any car while we're in Sydney (that's 5 weeks), to rent a people carrier while we're on the road (3 weeks), and to rent a smaller car for the 4 weeks in Brisbane. Allowing an occasional weekend rental in Sydney, the budget works out at €2100 or AUS$3500. I'm happy to pay that for the comfort and peace of mind of rental.


Duncan said...

The difference between Oz and NZ can be explained by the fact that we have a car industry to protect (tarrifs, and more subtle import rules) whereas the kiwis don't - hence they import shedloads of cheap and crap second hand cars from Japan ! Often with useless Japanese navigation systems and other quirks.

In Sydney, a $1000 month car rental can cover many $20 taxi trips. You can use my car during the week as well if you need - might encourage me to walk a bit more !

Brendan Lawlor said...

Hey Duncan! Thanks for the offer! We were told that in the city (if Randwick qualifies as such) a car is as much a liability as an asset. We were planning to rely on public transport a lot, and renting on w/e for trips to the Blue Mountains and other such things.

BTW: Where are you in Sydney?

Duncan said...

Randwick is definitely considered part of the city (more the inner suburbs) - a car is handy without being necessary. Public Transport is fine for going to the city and back but is painful for anything else - except hopefully to Coogee Beach (in your case).

I'm in Newtown - I posted a google maps link to your Sydney post a while back:
that shows how to get there and back.

I survived without a car for 2.5 years in Surry Hills so it is possible. Very handy now though for rushing around visiting friends with rug-rats on weekends.