The repayment is only part of what a car costs you. Car running costs, the servicing, repairs, fuel and insurance that come with owning a car, are rising faster than prices overall, according to the latest figures from the Australian Bureau of Statistics. For anyone planning a car loan, that matters twice: once for your own budget, and again when a lender works out whether you can afford the repayment.
In short: annual inflation was 3.5% in the year to July 2026, but vehicle maintenance and repair costs rose 5.9% and fuel prices jumped 7.5% in July alone. Budgeting for those costs before you choose a loan amount leaves you more room if prices keep climbing.
What the latest inflation figures show
The ABS Consumer Price Index for July 2026, released on 26 August, showed prices rose 3.5% over the 12 months to July, down from 3.8% in the year to June. Trimmed mean inflation, the underlying measure the Reserve Bank watches most closely, held at 3.6%. We covered the headline numbers in Australian inflation eased to 3.5% in July.
The headline hides a lot of variation. Some of the fastest rises were in costs that come with owning a car and running a household, which is where most car buyers feel it.
Car running costs are outpacing inflation
The ABS transport group rose 1.6% over the year to July, up from 0.1% in the year to June. Within that group, the costs of keeping a car on the road rose much faster:
- Maintenance and repair of vehicles rose 5.9% over the 12 months to July 2026.
- Other services in respect of motor vehicles rose 6.0% over the same period.
- Automotive fuel rose 7.5% in the month of July, after falling for three months in a row. The ABS said this was driven by higher world oil prices and the partial unwinding of the federal government's fuel excise relief measures.
- Insurance rose 4.2% over the year, as part of an insurance and financial services group that rose 3.1%.
Fuel is one of the most volatile items in the index, so one month does not set a trend. Repairs and servicing are different. They are regular costs you pay whether fuel is up or down, which makes their rise worth building into any car budget.
The household costs sitting alongside your car
Car running costs sit on top of the rest of the household budget, and several of the biggest categories are also rising faster than inflation:
- Electricity rose 6.1% over the year to July. The ABS said this was largely due to the ending of Commonwealth and State Government electricity rebates. In the month of July, electricity prices fell 1.6% after annual price reviews.
- Water and sewerage rose 5.8% and gas and other household fuels rose 2.8% in July, both following annual price reviews.
- Childcare rose 7.3% over the year.
- Rents rose 3.6% over the year, unchanged from the annual rise to June.
The next CPI release, covering August 2026, is due from the ABS on 30 September 2026.
Why lenders care about your running costs
When you apply for a car loan, a lender works out your surplus: the income left after tax, existing debts and living expenses. Your living expenses are a big part of that figure, and lenders do not simply accept the number you write down.
Many lenders compare your declared expenses with a benchmark, most commonly the Household Expenditure Measure, and use the higher of the two. They also check your bank statements for regular spending such as fuel, insurance, rego, servicing, utilities and childcare. If your statements show higher running costs than the budget you declared, the lender may adjust your expenses upward, which can reduce the loan it is prepared to offer.
Rising costs work through that assessment quietly. Your income may not have changed, but higher bills for power, insurance and car servicing leave a smaller surplus to cover a repayment. We explain the benchmark in more detail in household expenses and your loan application.
How to budget for the full cost of a car
A realistic car budget covers the whole cost of ownership, not just the loan. Before you settle on a price and a loan amount, add up:
- the loan repayment, which you can model for different amounts and terms with our loan repayment calculators
- insurance, remembering that lenders commonly require comprehensive cover on a financed car, as we explain in our guide to car insurance on a financed car
- registration and compulsory third party insurance for your state
- fuel or charging, based on your real weekly driving rather than the best case
- servicing and repairs, including tyres and brakes, which cost more as a car ages
- a buffer for price rises and surprises, since several of these costs are climbing faster than inflation
If the total leaves you with little room each month, a cheaper car, a larger deposit or a shorter wish list may be a better answer than a bigger loan. Our guide to how long a car loan should be explains how the term changes the repayment and the total interest.
Newer car or older car?
Running costs are one reason the cheapest car to buy is not always the cheapest to own. An older car may cost less up front, but repair costs are rising quickly and older cars often need more of them. A newer car may cost more to finance but less to keep on the road for the first few years. There is no universal answer, so compare the total monthly cost of each option, including the repayment, insurance and a realistic repair allowance.
Electricity prices are also worth a look if you are considering an electric vehicle. Charging costs depend on your tariff and when you charge, and the end of electricity rebates has pushed household power bills up over the past year.
What you can do before you apply
- Review three months of bank statements and trim spending you would not want a lender to see. Our guide to what lenders check on your bank statements explains what they look for.
- Declare your living expenses honestly and completely. Understating them does not help, because lenders check them against your statements and a benchmark.
- Compare advertised ranges on our car loan rates page and the lenders we compare, looking at the comparison rate and fees as well as the headline rate.
- If you already have a car loan and rising costs are squeezing your budget, refinancing may lower your repayment, depending on your credit profile and the costs of switching.
Rising costs are not a reason to give up on a car, but they are a reason to plan for the full cost of owning one. A loan that fits comfortably alongside realistic running costs is easier to keep up with, and easier for a lender to assess.
