New Car Pricing in Australia – why I’ve never bought a new car

Fiat 500 Abarth

I always felt a little guilty whilst writing my Saab blogs over the years. Here I was, writing about these fantastic cars and this great company, hoping that people would support the company and help to ensure it’s continued existence, and yet I hadn’t ever ponied up and bought one myself.

There were a couple of reasons for that.

1 – the website took a hell of a lot of my time and hopefully, made a good contribution to the marketing and promotion of the Saab company and the ownership culture. It was my hope that the site made a contribution at least equivalent to me buying a car myself. The time it took to put content together involved some family sacrifices and the trade-off with my wife was that we would direct our finances towards paying off the family home, rather than high-priced vehicle purchases. Thankfully, that decision has served us well and we’re nearly there with the house, which is a great feeling.

2 – New car prices here in Australia are crazy expensive when compared to some other places around the world. OK, they’re not Denmark-crazy or Norway-crazy, but every time I read articles from the United States about new models and pricing, it nearly makes me cry to see how much we’re paying downunder.

This article has been prompted by an announcement at the Detroit Auto Show today, about pricing for the Fiat 500 Abarth. Some of you may not have seen the Abarth yet, which is a great excuse for me to show the ad:

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Magnificent, no? Makes the J-Lo series of 500 ads look very shabby, in more ways than one.

Anyway, it was announced today that the 500 Abarth will go on sale in the US for around US$22,000. Whining about US pricing is nothing new. I did it with Saab plenty of times and yes, I’m going to do it again here.

Bear in mind that as I write this, the Aussie dollar is at parity with the USD and has been for the best part of a year. Canadians, you’re feeling this, too, aren’t you?

So the Abarth is going for $22K. It looks fantastic, is better equipped and with 160hp, a feather-light body and some go-kart chassis tweaks, I bet it gets down the road pretty nicely, too.

Picture: Autoblog

Here in Australia, Fiat’s latest offer is to get the basic trim 500, in diesel hardtop form for A$26,000. Other sites are showing it at around A$29,000 whilst the petrol model – with none of the fancy trim and some 60hp less than the Abarth – is going for around A$28,000.

The Fiat 500 convertible (like the Fiat 500C I drove around Mallorca last year) sells for even more, at A$33,000. The convertible starts at US$19,500 in the US.

Abarth is actually treated like a separate brand here in Australia. The Abarth 500 Esseesse (say: SS) has been available since March 2011 at a price of A$35,000 – a 50%+ premium over the US equivalent at a time when our currency is at parity (and has been for some time).

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It was even worse with the Saab Turbo X when that came out in 2008. The luxury car tax here in Australia helped to boost that to nearly double the US price, although our currencies weren’t as close then as they are now.

I don’t know if it’s a matter of US vehicles being sold for extremely low margins, or Aussie customers being gouged simply because we’re used to it and will accept it. I suspect the truth is somewhere in the middle. We have a 5% tariff on imported vehicles and of course, we’re a long ship ride away from the factories that build most of our car fleet. But those two factors don’t add up to a 50% premium.

In any case, our high initial prices in Australia and high depreciation rates make me wonder how we managed to sell 1,000,000 cars in each of the last two years. Based on current estimates, that’s one new car for every 23 people in the country. They also leave me feeling pretty sure that I’m not likely to buy too many, if any, brand new cars in my lifetime.

Perhaps if I lived in a larger city, with a longer commute. But here in Hobart, where I’m basically no more than 30 minutes from anywhere I need to be, it just doesn’t make economic sense.

US buyers – enjoy your opportunities while you have them (hopefully a very long time). I’m more than a little envious.

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13 Comments

    1. I can think of a few people who aren’t so happy, Thomas. But it makes buying a Viggen nice and easy here in Oz. See you soon, mate.

  1. The fact that you did so much for Saab heavily outweighs you not buying a new one. Those who blab otherwise can go get bent.

  2. Here’s a rough translation of the chick’s dialogue in the Abarth commercial:

    “What are you looking at? Huh?
    What are you looking at? (slap)
    Are you undressing me with your eyes?
    Poor guy, you can’t do anything.
    Is your heart beating?
    Are you dizzy?
    You’re lost thinking I’ll be yours forever.”

  3. US prices are always quoted without any sales tax, usually between 4 and 9%, depending on the state. Are the amounts for Australia you quoted including taxes? The Netherlands has taxes on cars of about 40-60%. Before taxes, pricing is not that far off compared to the USA.

    And as you mentioned, the exchange rate plays an important part, as well as transportation cost. Then there is the level of income, benefits and taxes on that income in each country. Comparing just the prices of certain goods leaves out a lot of details.

    1. Wulf raises good points. Some of the differences are also related to sales volume — there is efficiency there.

      By the way, I’ve not bought a new car here in the us in over 20 years myself. The only new car I’ve ever owned was my 1986 Saab 900 S three-door, 5-speed, 2.1l 16-valve NA, Admiral Blue, manhole-cover wheels. Great car.

  4. Yes I’m here in the USA, the land of cheaply priced cars. The problem with prices for the Fiats (and unfortunately Saabs) is that there is always another brand that will beat the price. The new Fiats maybe are currently viewed as too small for the price. The Abarth may change that..

    But don’t be too envious… the majority the new cars we see on the road are leased or a lower price point such as Hydundai or Mazda.
    Few can afford the new cars out there (think 6-7 year financing).
    Its the better built cars (Saab?) that one can afford used..

  5. I’d like to explore this topic a little further, but there are many reasons why I think that cars are too expensive, and many of them have to do with the way that auto companies market and service their product.

  6. Hi Swade,

    I know it doesn’t help, but it’s not much better in Germany:
    the top of the line 500 (NOT the Abarth) sticker price is 19.500 USD.
    (15.000 Euros)

    Best wishes Martin

  7. I think that distribution costs have a lot to do with the price differences. Australia (and Canada) have roughly the population of California, spread-out over a whole continent.

    That means that most of the fixed costs (overhead, warehousing, spare parts supply, management, homologation, web sites) are spread over 1/10 the number of units sold.

    Some of these factors create a vicious circle. Going by your numbers, Australian drivers only buy two or three new cars on average. I’m sure that number is higher in Canada, but we’ve got rust to contend with. Add it all up and Australian dealers/distributor need a higher markup just to keep the lights on.

    There’s an upside to this. Paying a small fortune for a new car means that drivers are much less likely to defer/avoid maintenance. A huge number of North American cars get junked prematurely for want of minor preventative maintenance. It’s a huge waste of resources.

  8. Swade,
    I have felt exactly the same pangs of guilt that none of the sixteen Saabs I’ve owned have had that ‘new car smell’. I’m an enthusiast with a limited budget… the 9000Aero I bought sold new for close to $90K in Oz, five years on, I bought it for less than $20K. Similar story with my 93SS.
    But it must be pointed out that it’s costly to type approve a car if you only sell 1-2000 of them. You’ve got to carry spares which may never sell. Train technicians. Australia is a long way from Europe, and every ‘prestige’ Euro manufacturer has a similar track record.
    The worst part was actually not the gouging, bad though that is. The year after the 9000 dropped by a quarter- a $20K discount from one year to the next, which is why I could get mine so cheap. Didn’t exactly give new car buyers the confidence to enter the showroom, with chequebooks drawn.
    Saab or Holden, ultimately I find it hard to reconcile the day one depreciation with the apparent pleasure of having your name first in the service book. Maybe if I had more money… I’m willing to experiment if there’s a generous benefactor out there.

  9. The pricing policies used by auto manufacturers have never ceased to amaze me. Really makes no sense.

    Now…as for that Fiat 500 Abarth piece…after watching it…why do I now feel like I need a cold shower…or maybe a Latte? 🙂

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