Buying a car isn’t as simple as it used to be. With petrol prices on the rise, EVs becoming more popular, and government policies changing the game, there’s a lot to think about. Whether you’re looking to buy your first car or upgrade to something new, understanding what affects upfront prices and vehicle running costs is more important than ever.
Here in New Zealand, changes like the end of EV subsidies and the introduction of clean car fees are having a big impact. Let’s unpack the key factors that determine the price of a new car and what they mean for you in 2025.
Factors Influencing Vehicle Prices
Manufacturing Costs
Every car’s price starts with what it costs to make it, and that’s no small feat. Materials like steel, aluminium, and semiconductors are essential; when these go up in price, so does your car. Take the pandemic, for example. Global semiconductor shortages slowed car production everywhere, and Kiwis saw price hikes for new and used vehicles.
Import Taxes and Duties
Since New Zealand imports most of its cars, taxes and duties play a big part in determining prices. Like the US, vehicles from countries without free trade agreements often come with higher costs. A prime example is the Ford Mustang, which can be pricier because of these tariffs. On the flip side, Japanese imports like the Toyota RAV4 benefit from trade agreements, making them more budget-friendly, which is perhaps why it’s the most popular car in NZ.
Factors Influencing Vehicle Running Costs
Maintenance and Repairs
Keeping your car road-ready is another major expense. Petrol and diesel cars need regular servicing, oil changes, brake replacements, and engine tune-ups, which can add up to $1,000 to $1,500 yearly. With fewer moving parts, EVs are much easier (and cheaper) to maintain, costing around $300 to $500 annually. However, there’s a catch: EV batteries. Replacing one could set you back $10,000 to $20,000, so long-term planning is a must.
Depreciation
Depreciation is where vehicles quietly lose their value over time. Petrol cars typically drop 30-35% in their first year, while EVs depreciate even faster, with some losing up to 40% in their first year. Factors like the introduction of Road User Charges (RUC) and evolving battery tech contribute to this sharper decline.
Insurance Premiums
Insurance costs depend on what you drive and who’s driving it. Standard petrol cars like the Toyota Camry typically cost around $800 to $1,200 annually, while high-performance vehicles or newer EVs, like the Ford Mustang Mach-E, can push premiums beyond $1,500. It pays to shop around and compare policies.
Registration and Licensing Fees
Registration costs vary depending on what you’re driving. Diesel vehicles come with Road User Charges (RUC), adding $76 per 1,000km, while EVs used to be exempt until mid-2024. EV users pay a different amount depending on the type of vehicle; light EV users pay $76 per 1,000km, while PHEV (plug-in hybrids) pay slightly less at $53 per 1,000km – the difference attributed to the taxes paid by hybrid users.
Fuel Efficiency
Fuel prices are always a hot topic, and in New Zealand, they’re currently hovering around $3 per litre. A vehicle’s fuel efficiency will have a huge impact on the overall running costs over time. For example, a Toyota RAV4 uses 8.4L/100km, costing around $25.20 per 100km, while a smaller, fuel-sipping Suzuki Swift costs just $13.80 per 100km at 4.6L/100km. EVs, like the BYD Atto 3, blow both out of the water, costing only $5.36 per 100km when charged at the national average electricity price of 33.5c per kWh.
Impact of Government Policies on Vehicle Costs
Taxes, Levies, and Incentives
The Clean Car Standard adds fees to high-emission vehicles, with diesel utes like the Ford Ranger facing charges of up to $6,000. Diesel drivers also deal with ongoing RUC fees, further adding to costs.
While EV subsidies have ended, and they are no longer exempt from RUCs, other incentives remain. Investment in public charging stations and perks like discounted parking in cities such as Wellington are small but meaningful motivators for buyers considering the switch to greener transport.
You can learn more about the Clean Car Standard and its effects on the industry here.
Regulatory Changes
Stricter emissions standards, such as the adoption of Euro 6, push manufacturers toward cleaner technologies, but this comes at a cost. Vehicles that meet these new requirements are often more expensive to produce, which means higher prices for buyers. This shift is already evident in diesel models adapting to comply with regulations.
Future Changes in the Automotive Industry
The automotive industry is constantly evolving, and several emerging trends could shake up car prices and running costs in New Zealand over the coming years. One major development is the increasing adoption of software-based features and subscriptions. Many manufacturers are moving towards offering in-car technology and features, like advanced navigation or driver assistance systems, on a subscription basis. This change could lower the upfront cost of vehicles but add another ongoing expense to owning a car.
Owning a car in and of itself may soon become a thing of the past. Shared mobility services are on the rise and will only continue to grow as countries aim to reduce their carbon footprint. These services might reduce the need for car ownership altogether in urban areas, potentially affecting the used car market and how vehicles are priced.
Battery recycling and second-life use could also bring significant changes for EVs. As recycling technologies improve, the cost of manufacturing EV batteries is expected to drop, potentially lowering the overall cost of EVs.
What Really Drives Car Prices and Costs
Many moving parts go into the sticker price you see on a car, and even more factors affect how much it costs once you drive it off the lot! Understanding these factors will help you get the most mileage from your budget when buying a new car. The road ahead might have its challenges, but with the right knowledge and AutoFlip
here to maximise your sale price, you’ll be in the driver’s seat.
