Is Luxury Car Tax Included in the Driveaway Price?

When purchasing a luxury car, one of the key considerations is understanding the total cost, including the driveaway price. The driveaway price represents the total amount you’ll pay to take your new vehicle off the lot, ready to drive. But does this price include the Luxury Car Tax (LCT)? This article delves into the details of what the driveaway price encompasses and whether or not it typically includes the LCT.

The driveaway price is generally advertised as the all-inclusive cost of purchasing a vehicle. This figure often includes the base price of the car, dealer delivery charges, registration, compulsory third-party insurance (CTP), stamp duty, and other government fees. Essentially, the driveaway price is meant to represent the final cost to the consumer, avoiding any surprises at the dealership.

However, when it comes to luxury cars, there’s an additional tax to consider: the Luxury Car Tax (LCT). In Australia, for instance, the LCT applies to vehicles that exceed a certain threshold, which, as of the 2024 financial year, is AUD $71,849 for fuel-efficient vehicles and AUD $84,916 for other vehicles. The LCT is calculated as 33% of the value of the car that exceeds this threshold.

Is LCT Included in the Driveaway Price?

Whether the LCT is included in the driveaway price depends on the dealership and the way the price is presented. In most cases, the driveaway price for a luxury vehicle will include the LCT, as dealerships aim to provide a clear and transparent total cost to the buyer. However, it is crucial for buyers to confirm this with the dealer to avoid any unexpected costs.

Example Calculation:

Let’s consider a scenario where you’re purchasing a luxury sedan priced at AUD $100,000.

1. Base Price: $100,000
2. LCT Threshold: $84,916
3. LCT Taxable Value: $100,000 - $84,916 = $15,084
4. LCT Payable: 33% of $15,084 = $4,978

In this example, the LCT payable would be $4,978, which would generally be included in the driveaway price quoted by the dealer.

What’s Included in the Driveaway Price?

Here’s a breakdown of what is typically included in the driveaway price for a luxury car:

1. Base Price of the Vehicle: The cost of the car itself before any additional fees or taxes.
2. Luxury Car Tax (LCT): For luxury vehicles exceeding the LCT threshold.
3. Dealer Delivery Fee: Charges for delivering the vehicle from the manufacturer to the dealer.
4. Stamp Duty: A government tax calculated as a percentage of the vehicle’s value.
5. Registration Fees: The cost to register the vehicle with the local transportation authority.
6. Compulsory Third Party (CTP) Insurance: This insurance covers liability for personal injury to others in an accident.

Why It Matters

Understanding what’s included in the driveaway price is crucial for budgeting and avoiding financial surprises. For luxury car buyers, the inclusion of the LCT in the driveaway price is particularly important as this tax can significantly increase the total cost of the vehicle. Ensuring that the LCT is included in the driveaway price provides clarity and helps in making an informed purchasing decision.

Final Thoughts

When negotiating the purchase of a luxury car, it’s essential to ask the dealer for a detailed breakdown of the driveaway price. Ensure that the LCT and all other costs are included so that you have a clear understanding of the total amount you’ll be paying. By being informed and asking the right questions, you can avoid any unexpected expenses and enjoy your new luxury vehicle with confidence.

In conclusion, the driveaway price is generally designed to be an all-inclusive figure, and for luxury cars, this typically includes the Luxury Car Tax. Always verify this with the dealer to ensure that you have the full picture of your financial commitment before driving away in your new car.