Ask LH: Why Does My Car Registration Cost So Much?

Ask LH: Why Does My Car Registration Cost So Much?

Dear Lifehacker, I just received my vehicle registration renewal notice from VicRoads today. $696.50 for an year, including a TAC charge of $422! Why do we have such high renewal fees in Victoria? I was curious and discovered a few sources on the web showing that the average amount a Texan pays for car registration is $US52.75. Why do we have to fork out almost 15 times the amount people pay in the US? Thanks, Contemplating Texas.

Picture by Stephen Edmonds

Dear CT,

Frustration over the rising costs of car ownership is common. That said, trying to compare the cost of living between entirely different economies is rarely constructive. Knowing the basic cost of a single item doesn’t mean much if you can’t put that into the broader context of typical wages, other living expenses and the size of the population (Texas has more residents than the whole of Australia). More problematically in this case, you’re not actually comparing identical items.

The Texas Department of Motor Vehicles does indeed indicate that the registration fee for a standard passenger vehicle is $US52.75. That’s not an average, by the way: it’s a fixed amount. On top of that you’ll also pay an additional fee (between $5 and $11.50) depending on which county you live in. Even with that added, it is a lot lower than the Victorian charges (though it’s worth noting that in other US states, the figures can be much higher and the methods more complex).

The Victorian calculation uses a more granular approach which factors in the location of the vehicle. For a conventional passenger vehicle in the metropolitan area, that does work out at $696.50.

However, the amount you pay in Victoria doesn’t just cover registering the vehicle (as it does in the Texan example). That $696.50 is made up of three components: a $232.30 registration fee, a Transport Accident Charge (TAC) of $422, and insurance duty of $42.20.

The vast majority of the total comes from the TAC, which, as the VicRoads site explains: “are used to pay for treatment and support services for people injured in transport accidents”. While some states (such as NSW and Queensland) let you choose your own insurer to cover the cost of injuries to others in accidents, Victoria has centralised that function in the TAC.

Does that mean you can escape similar costs in Texas? No. As the Texas DMV site explains elsewhere: “In Texas, you must show you have insurance coverage for a minimum of $30,000 per injured person, up to a total of $60,000 for everyone injured in an accident, and $25,000 for property damage.” You’ll still be paying for third-party insurance, just via a separate organisation. Even moving to another Australian state won’t necessarily get you a better deal; as this comparison of rates around Australia shows, there’s at least one state (WA) charging even more for basic registration.

Car registration fees are undoubtedly annoying, but comparing a simple registration fee from the US with a selected example from the Australia that incorporates insurance costs and safety funding doesn’t make sense. You’d be better off expending that energy finding a car that’s cheaper to run overall, or campaigning with your local member to ask why that basic registration fee ($232.30) is so high. Just make sure you’re campaigning about the actual issue at hand, not a largely spurious comparison with an overseas location.

Cheers Lifehacker

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  • You’ll also find the roads in Australia are significantly better maintained overall that in the US – their federal road budget only allows for 19% of repairs to be completed, and most local/state governments are struggling to pay for anything, let alone road repairs. As a result, wealthy areas will have well laid roads while others will be cracked and worn without a chance of recovery.

    The large majority is insurance anyway – but frankly I don’t see how this couldn’t be included in comprehensive insurance which should be mandatory for everyone with a vehicle anyway.

    • Why on earth would I have comprehensive insurance at $2000/year on my car worth $2000? As it is, on my third party, fire and theft policy if I am in an accident of any but the most minor type, it would be cheaper for me to buy a new car than pay the excess to get it repaired.

      • Because you can cause a lot more than $2000 worth of damage with your $2000 car. Unless you’d prefer to pay $50,000 out of your own pocket for that other car you just wrote off in an accident. It’s comprehensive insurance for a reason.

          • There’s different kinds of third party insurance. CTP only covers injuries sustained by people injured by your vehicle, it doesn’t cover property damage, including damage to the other vehicle. Third Party Property insurance will cover vehicle damage costs but is usually loaded with caveats about negligence and proper maintenance of your own vehicle. Neither of them cover your own medical expenses, which get extremely high sometimes.

            I wasn’t sure which third party insurance Lir was talking about so I assumed CTP.

          • There are two basic types of policies – comprehensive (~$1500-2500 pa) or third party, fire and theft (~$200-$500 pa, depending on where your car is garaged and how old you are). Third party, fire and theft covers third party property damage. If someone is injured , TAC covers it. Get comprehensive if you have a car worth more that $15000 or a modded car and you want to be covered for all eventualities (flood, tree branch falling on it, vandalism). Don’t get it if you drive a $2000 pos because you largely don’t care about your own car, you only want to make sure you don’t get sued if you get involved in a bingle. I’m fairly certain that comprehensive car insurance does NOT cover injuries to drivers. I expect if it did, the cost of it would be at least $1000 pa higher.

          • Aha, I just found out what CTP is. I’m from Victoria so I’d never heard of it. I was referring to third party property. Injuries are what the TAC is for.

    • Syvergy wrote: “You’ll also find the roads in Australia are significantly better maintained overall that in the US – their federal road budget only allows for 19% of repairs to be completed, and most local/state governments are struggling to pay for anything, let alone road repairs”

      Where do you live? Not in reality apparently.

      Roads in Victoria, for example, are significantly less well maintained that roads in the area of Texas I lived in for a decade up until 2006. And they’ve not gone downhill since then. In fact highway construction throughout the Austin and surrounding areas has grown since then even during the depths of the GFC.

      While I cannot speak for the remainder of the country I travelled extensively for work during that time in the US and all the roads from small Farm to Market roads, through to Texas Highways and Interstates were from a good standard to excellent. So I am not sure where you got your information from but it is incorrect.

      Additionally our road systems have to cover way more physical distance per head of poulation than does the road in the US. And while road mantenance on the interstates is covered by the Federal Highway Administration, the states, cities and counties cover their own road budgets. These are driven by local taxes, state income tax where applicable, and rates (the same as
      our local council rates).

      Overall, my driving experience in the US was way more enjoyable than my driving experience in Australia. How much driving did you do in your life in the US?

    • I am not sure where you got this information from, i drove in California in 2004 and i don’t remember seeing a single pot hole any where, all the roads had line markings on the edges and all roads had turn out lanes as well as overtaking lanes to allow faster traffic past. Contrast this with the roads where i live, many don’t even have centre line marking but they do have foot wide six inch deep potholes a plenty. I dare you to drive on the Princess, Pacific or Bruce Highways and tell me these are well funded roads.

    • The US might have money to fix their roads – which are “necessities” if it weren’t for the fact that they spend so much on “amenities”. The same goes for states, counties, and cities. They now charge a small fortune in my state for registration; It’s like paying for the vehicle twice. Registration has nothing to do with the amount you use roads; they should get all the funds from the gas taxes – people who use roads more would then pay more for said use. Right now you can’t have a decent newer vehicle w/o paying through the nose.

  • The real problem is figuring out why there is such a difference in price between the different states. I was paying around $700 a year when I lived in Victoria, moved to New South Wales and am now paying around $1100 a year all up. For the same car…

    • Simply put, you are driving on different roads covered by a different compensation scheme(s) for accident victims and property so it would only be coincidence if you did pay the same rego. The costs will always be different in each state as long the relevant part of regulation is managed at the state level and not federally.

      • Yes, but (correct me if I am wrong) what I am paying for in any state is the right to drive one car on a road and be covered for medical expenses for any person that is injured as a result of my driving that car (CTP). Why should there be that big a variation between the states when it is the same thing that is being paid for?

        • Not entirely on the rego just being the right to drive since it also partly pays for the upkeep of the roads themselves. The state and feds also pay for some of this (Feds particularly for large projects like highways, bypasses or bridges), but the proportion changes state to state for dozens of reasons including different usage and damage, so the rego differs too to cover the different upkeep and expansion costs.

          Its a partial user pays system. And if it wasn’t, it would just mean the state would have have to ask Canberra for more tax revenue and the ATO in turn would ask us each for more to pay for it that way, or every road would have to be a toll road. So it’s a bit more equitable in the long run, though certainly not perfect.

    • I want to know why registration (and insurance) is so cheap in WA.
      It’s a fraction of the cost I’m now paying since my move to Victoria.
      You can’t say it’s because the roads cost more to maintain – WA has fantastic driving surfaces, Vic has mediocre roads and don’t get me started on the roads in NSW.

      is this just another example of the Victorian government failing to plan and learn?

  • the biggest part of it is insurance the real question is why most states in aus dont let everyone find there own insurance thus leading to price wars and better deals for us , the answer of course is idiots who would think of insurance as unnecessary were it not compulsory, so like most things your car rego is expensive because of idiots

      • It seems the only way to get a semi decent greenslip price in NSW is to change providers every year. Easy enough to get a great sign up price, difficult to find a company that wont jack it up your second year.

    • TAC isn’t run for profit, whilst insurance companies are. You’ll be very hard pushed to find better rates than what would be on offer from the TAC if normal insurance companies had to provide the same level of insurance.

    • No it’s cheaper if provided by a non-profit organisation. Private insurance companies don’t provide services without making a profit (and shouldn’t be expected to) – so they charge their costs + a profit margin. The Government owned TAC, just charge their costs, with no profit margin.

      Same as things like electricity – notice how the price went up when the Government owned electricity companies were privatized, and opened up to competitors? These companies need to make a profit now. Previously they didn’t. They only needed to break even.

      That’s why I don’t understand the Government criticising the banks for making a profit – if they’re so opposed to it why doesn’t the Government start their own bank, and not privatise it this time, like they did last time?

  • Maybe a little more research into the breakup of the charges that make up the total. Lat year I read a article saying that only 8% of rego went back to road and rail. the rest was used elsewhere by the state government. This would mean it is a tax not car registration.

    • Maybe a little more reading of the post. Self-evidently in the example cited the majority of the cost is the TAC charge, which isn’t a registration fee in the first place (though it is a condition of registration). Another is quite explicitly identified as a duty (which is a tax).

  • It really does depend on where you live and how the registration charges are calculated.

    In Queensland for example, registration fees are calculated based on the number of cylinders your engine has. Therefore you pay more for a V8 over a V6. In Queensland last time I was there registering a 2004 V8 SS Commodore was just over $1200 a year. That includes the ~$240 CTP Insurance. God forbid you owned a V12 Lamborghini…

    Travel over to Western Australia and registration is calculated on your TARE weight of the vehicle. That means you pay less for a smaller car than you do for a large road killing 4WD. This method actually makes more sense than cylinders. The heavier the vehicle the more “wear” on the roads. Having more cylinders is really only going to affect how much rubber one would leave on top of the road surface 🙂 Registering the same SS Commodore in WA is just over $500 a year including CTP.

  • I just got my latest rego bill (NSW). $59 rego + $412 tax, then add $526 CTP insurance + $1000 comprehensive insurance. This makes public transport look real good. Which is probably the idea.

  • “The Victorian calculation uses a more granular approach which factors in the age and location of the vehicle. For a conventional passenger vehicle in the metropolitan area, that does work out at $696.50.”

    Registration fees in Victoria DO NOT factor in the age of the vehicle. Please fix.

  • I have two vehicles. Why do I have to pay rego twice and 3rd party twice? I can only drive one vehicle at any given time!

    3rd party insurance should be part of the licence renewal based on the most expensive to insure vehicle that you will be driving. This also means I can own a vehicle without paying insurance if I don’t have a licence because I won’t be using it on the roads to drive anyway.

    Rego should be part of the fuel – so more fuel you use, you pay more rego, on the assumption that you will be polluting more, and using the roads more. Less you drive, less rego you pay. Also tourists would be paying rego that otherwise they wouldn’t be in the current system.

  • I would have the insurance based on the fuel to…. The more time you spend on the road, the more ‘likely’ you are to be involved in an accident….
    That would also prevent you from having to pay for the secondary vehicle that’s not currently being used… Would also help pensioners etc out that travel far less than the average wage earner…

  • Isn’t $422 per vehicle registered in Victoria a large amount of sum for TAC to collect. Victoria has 4.3 million registered motor vehicles (source[email protected]/mf/9309.0/)
    That amounts to 1.81 billion dollars collected … that is a huge sum of money just for compensation for injured. VicRoads just say that TAC is for injured people. Where does rest of the money go?

    The government is already collecting huge amounts of Income Taxes and Other Taxes for creating infrastructure and services.

    Are we too reliant on taxes for the country to function?

  • My main issue with registration is that there’s no option to pay it more frequently. I’d happily pay a bit more if I could pay it monthly, or even quarterly, rather than being slugged with $650 at once around the time I have other large expenses.

  • The TAC is Victoria does a great job and does a little more than just pure insurance. It pays for drug and alcohol targeting policing and runs road safety campaigns. They also pay for the TAC trauma centers, which are amazing places. Worth the money if you are injured.

  • Premiums Australia Wide

    The table below shows a State by State comparison of compulsory thirdparty insurance premiums for private motor cars (exc. GST).

    State As at July 2012*
    Australian Capital Territory $479
    Northern Territory $456
    New South Wales $480**
    South Australia $419
    Victoria $372
    Tasmania $313
    Queensland $293**
    Western Australia $223
    * Exclusive of GST

    ** For Queensland and New South Wales, lowest premium on offer amongst private insurers is shown.

  • Got the rego papers NSW) for my Golf the other day.

    Rego will cost me $700
    CTP is (according to the RMS Calculator) $480
    Comprehensive will be approximately $900.

    I hate January.

  • what needs to be done, is for Third party and Third party insurance names to be different.

    esp in NSW as people won’t get PROPERTY cover because they think that part of their rego is PROPERTY not PERSONS cover.

    also to make it compulsory to have PROPERTY cover as well as PERSONAL cover.

    • Bob;

      There is no stat income tax in Texas. There is a 8.5% sales tax on all sales, along with a smaller county tax on sales. Total is the same in most areas the GST. And yes Victoria does require that retailers levy a tax – the GST. It then gets a portion of state generated tax back from the Federal government.

  • I say, be grateful for what you have. A registration fee of 600+AUD and a car that can cost as low as 20,000+AUD is good by any standard. In contrast, Singaporeans have to pay for what their government calls a Certificate of Entitlement (basically a piece of paper saying: Hey! You’re allowed to own a car!) which costs 92,000+SGD.

    Yes. Ninety-two thousand. Convert that to AUD and you’re still looking at 70,000 dollars. All that for a piece of paper to allow you to buy a car.

    Hell, some cars cost less than that piece of paper.

    • Well you can’t blame SG: look at the size of their country (719 km^2 and 5.5M people), compared to oz, Vic (or even Melb at 9990 km^2 with 1.5M less people)! If they (sg) all were allowed to use cars like here… WHERE would they park them?
      Though i don’t know how good their public transport sys is, but have been told tis better than Melbourne’s (better be, with such high pop density)…

      Also, don’t forget 2 other things: driving is a privilege than a right (which we too often forget), largely because it’s such a necessity in a continent-sized country like oz…

  • I thing I don’t get about the TAC in Victoria is that it is an insurance policy that is not affected by risk factors apart from the location of the vehicle. For Example in the metropolitan area we pay a higher rate because there is a significant risk of being in an accident.

    Why aren’t the charges based on the driving performance of the owner of the car?

    For example a person that has been issued 3-4 fines throughout the year should incur a higher TAC charge for their next registration renewal than someone that occurred no fines whatsoever during that year. Wouldn’t unsafe drivers who have received fines for breaking road laws be at more of a risk of causing an accident?
    Instead if you have no fines for the entire time of your license at renewal of the license you get a massive few bucks of your license renewal. Woopie.

  • In the USA you have to pay for insurance separately and is a requirement by law. We’re talking $100+ per month for insurance so you’re looking at at least $1200+ for keeping the car on the road each year.

  • I agree Darren, Rating 5 Insurance, no tickets, no demerit points etc, Why should i have to pay a TAC fee for other morons on the road. I also dont see why we should cop the bill for the “new and improved vic roads website etc” coming in 2014.. what a crock. As for our roads, they are bloody disgraceful so i’d love to know where the non TAC component of rego goes, (aside from the website)

  • The problem lies in the states them selves, each one has to have its own separate motor department, driver licensing laws and compulsory insurances schemes. All for exactly the same thing registering and running a car. Why can’t they just combine all the departments and rules into a single national transport authority N.T.A . This would simplify the whole process of running and registering a motor vehicle. At the same time they could combine all the accident victim insurances schemes, compulsory third parties, this would save billions. It worked for Medicare and Centre link and road safety is just as important a priority either of these. The flow on effect would be that with all the money saved in pointless state duplication, could go into funding a national interstate highway system something we desperately need.

  • TAC costs are spiraling out of control with over-servicing, dubious education programs and pointless feel-good functions. You can even buy 4 brand new tyres to improve your vehicle’s safety for the cost of the current TAC fee. I know of a corrupt manager with a history of falsifying witness statements get a job in TAC’s claims department after she wanted a sea-change from Melbourne. So why are we paying for all this!!!

  • it all bullshit the amount of money we pay for rego,this year it cost me in vic $ 690,my car is not worth $500,i can not afford to buy a car,it all stupid how these politicization run the state and federal,i think it time to bring back socialism,and have no state government,

  • TAC is out of control and has turned into a refugee camp of overservicing doctors and media spin jockeys that’s why their fee has to go up and up and up.

    • Quentin if you think its just TAC and the Rego branch think again, we once lived in a country they called (Lucky) however that is long gone , now the (average person) is struggling to keep there head above the poverty line and that must hurt, but if your lucky enough to have a regular job with an average salary you will find yourself struggling to pay the (Highest prices in the World) for : car rego, insurance, hospital private,home,domestic,business, and that’s just the start, you can ad every thinkable payment to the federal government , state and local governments, lets not think about the greedy councils and price of all fuels , auto and domestic, electricity, o did i forget about those mad water prices, and while we are at it what about those land rates whats going on there, talking about all those (highest) prices, we pay more to empty a rubbish bin than any country in the world , hope your not felling to sick ? but theirs m?????????????????e and we were called the lucky country once.
      we are all suckers in this once lucky place.

  • I am pretty sure, if they (TMR) move to using thin clients instead of expensive macs for doing data entry/customer service they could save costs which could be passed to customers.

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