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When budgeting for a new car, the purchase price is just the beginning of that journey. Understanding the true cost of car ownership helps you make an informed decision and avoid any financial surprises down the road!
The real cost of owning a car goes far beyond what you'll pay to drive it off the forecourt, so as a driver, what do you need to know? To help, we’ve created this comprehensive guide to explain more about the car running costs you need to know before your next purchase.
We'll break down all those expenses that can catch new car owners off guard – from the obvious ones like fuel and insurance to those sneaky costs that people often forget about (including depreciation!). Read on to find out more…
When calculating the real cost of owning and running a car, there are many factors to consider first. From essential expenses such as fuel and road tax to hidden costs such as parking permits and unexpected repairs, these can quickly add up to thousands of pounds each year.
Don't forget about depreciation – the amount your car loses in value each year – which can be your biggest cost despite going unnoticed. If you're financing your vehicle, you’ll also need to factor in monthly payments and interest charges.
Even minor expenses like buying car cleaning supplies and paying for toll roads can add up over time. Having a true understanding of these costs before committing to car ownership can help you budget better. In this section, we break down the car running costs you need to know about, starting with car insurance…
Let's start our car running costs guide by discussing one of the biggest non-negotiables associated with vehicle ownership - that being, car insurance.
As you no doubt already know, having car insurance is a legal requirement, and there's no getting around it. Prices can vary depending on your driving experience and if/how many claims you’ve made.
Your premium might only be a few hundred pounds a year if you're an experienced driver with a modest car, or it could stretch into thousands of pounds for newer drivers or more powerful vehicles.
When taking out car insurance, it’s important to shop around. We recommend using comparison websites as a starting point, before settling on an insurance provider that ticks all of your boxes and suits your needs. Remember that the cost of car insurance can vary depending on:
For new drivers or high-performance vehicles, annual insurance costs can often exceed £1,000, while experienced drivers with cars falling into lower insurance groups might pay around £300 to £500 instead.
It probably comes as no surprise that as a car owner, your biggest regular expense will likely be fuel. Whether you're filling up with petrol, or diesel, or plugging into an electricity point, this is where your mileage really matters.
A driver covering 12,000 miles a year might spend between £1,800 and £2,200 on petrol, though this can vary hugely depending on the engine size, your car's efficiency (MPG) and of course, local fuel prices.
Then there’s road tax to consider - or Vehicle Excise Duty (VED) as it's officially known. While the value of this tax might go unseen, the money you pay towards this as a driver is largely used to keep our roads maintained, and how much you'll pay depends largely on your car's emissions (the lower the better!).
If you're buying a brand-new car, brace yourself for what is known as the 'first-year rate'. This is where the government either rewards you for choosing a cleaner car or, penalises you (where the price is concerned, anyway) for purchasing a car with higher emissions.
Currently, owners of electric cars pay nothing at all as EVs are exempt from road tax (for now at least), while someone buying a powerful SUV might need to hand over more than £2,000 for road tax in the first year.
After the initial 12 months, VED charges become a bit simpler. Most petrol and diesel cars move to a standard rate of £165 annually. But here's a heads up – if your car costs more than £40,000 when new, you'll need to pay an extra £355 per year for the first five years after registration. We like to warn people about this one because it can come as quite a surprise!
For the classic car enthusiasts among us, there's some good news – if your vehicle is over 40 years old, you won't pay any road tax at all. Just make sure you apply for historic vehicle status first before the charges are waived.
As a car owner, there’s no avoiding MOTs and servicing at some point. Here’s what you need to know when it comes to costs :
Once your car is three years old, it needs an annual MOT test – there's no getting around this one as it’s the law in the UK. The good news is that the price is currently capped at £54.85, and many garages offer it for less, especially if you're booking a service at the same time.
An MOT (which stands for Ministry of Transport test) checks everything from the car’s brakes to windscreen wipers, ensuring your vehicle is safe to drive.
Unlike an MOT, servicing isn’t a legal requirement, but it’s unlikely you’ll be able to drive your car for miles on end without needing some kind of check-up. Most cars need servicing annually or every 12,000 miles, whichever comes first. Here's what you can expect to pay:
It’s worth being aware that premium brands like BMW or Mercedes-Benz often cost more to service. A hybrid or electric vehicle might have a higher service cost initially, but it often needs less maintenance in the long run due to having fewer moving parts. As for unexpected repairs, we recommend you budget around £300 to £500 annually as a contingency - better safe than sorry!
Remember, a well-maintained car with a full-service history can potentially add hundreds or even thousands of pounds to your car's resale value. So even though you might begrudge the cost during ownership, you will no doubt reap the rewards when it comes to selling your vehicle!
You may not realise it, but the largest cost of car ownership is depreciation. New cars can typically lose 40% to 60% of their value in the first three years. That means if you buy a car for £30,000, you might lose between £12,000 to £ 18,000 just through depreciation, even if you keep it in near-perfect condition.
Though it’s hard to stomach, depreciation is a natural part of car ownership. If you’re conscious of depreciation, then it’s worth knowing that premium brands often hold their value better, and electric vehicles currently experience higher depreciation rates (though this is subject to change the more popular they become).
Then there are all those smaller costs to consider that can catch you by surprise. As a driver, you’ll understand that parking isn't free in most places these days. Depending on where you live, residential parking permits can cost anywhere between £30 to £200 annually - maybe even more in some places!
And don’t forget those pesky congestion and low emission zone charges too. For example, if you drive in and out of central London on a daily basis, you could be looking at paying £15 per day!
If you're buying on finance (and most people do these days), remember to factor in your monthly payments and any interest charges. This isn't technically a running cost, but it'll certainly impact your monthly car budget and is worth considering.
If you're interested in buying an electric vehicle, the cost structure is a bit different. While you'll save on fuel and road tax, you'll need to factor in home charging installation (which typically costs around £800 to £1,500) and slightly higher insurance premiums.
It goes without saying that your electricity bills will go up; typically you'll spend about £500 to £800 a year on charging, although this is less than half of what you'd spend on petrol or diesel at the fuel pumps.
Generally, EVs benefit from lower maintenance costs but your insurance may be higher and as we’ve already highlighted, the initial purchase price will be more costly compared to a petrol or diesel equivalent.
When you add it all up, the total annual cost of running a car can easily reach £3,000 to £4,000 for an average driver – and that's before any finance payments. As such, it’s really important to understand exactly what a car will cost to run before you commit to buying it. After all, the best car isn't just the one you love driving – it's the one that fits comfortably within your budget too!
When making your decision about what car to buy, we recommend you consider and action these five key points:
As you’ve gathered by now, running a car isn't exactly cheap, but there are plenty of clever ways to keep those costs under control. To help, we’ve shared some of the smartest ways to reduce your car running costs that could save you hundreds of pounds each year…
Maximise the most MPG from every tank of fuel :
Follow these tips to lower your car insurance premium:
Preventative care can save you money in the long-run, here’s how:
A : No, road tax (Vehicle Excise Duty) doesn't automatically decrease after five years. The amount you pay depends on your vehicle's CO2 emissions and fuel type, not its age. However, cars registered before April 2017 may pay different rates based on their emissions bands. If you own a classic car over 40 years old, it becomes exempt from road tax altogether.
A : Luxury and premium car brands typically have the highest maintenance costs in the UK. Based on average annual repair and servicing costs, the most expensive car brands to maintain are BMW, Mercedes-Benz, Audi, Land Rover, and Porsche.
A : The maximum fee for a car MOT is set by the DVSA (Driver Vehicle Standards Agency) and is currently £54.85, though many testing centres offer it for less. Some garages provide deals when combining an MOT with a service. Remember, while the MOT itself is fixed-price, any repairs needed to pass the test will be extra.
A : Based on reliability data and average repair costs, the cheapest cars to maintain are the Toyota Yaris, Kia Picanto, Honda Jazz, Dacia Sandero, and Hyundai i10.
A : Car Service costs can vary depending on the type of service and your exact make and model. On average, an interim Service (every 6 months or 6,000 miles) is £100 to £200, a full service (annual or 12,000 miles) is £150 to £300, and a major service (every 2 years or 24,000 miles) is £300 to £800. Premium brands and larger vehicles typically cost 30-50% more to service than more mainstream models.
A : Most manufacturers recommend servicing your car either every 6 months or 6,000 miles for an interim service if you do high mileage, and every 12 months or 12,000 miles (whichever comes first) for a full service. Check your vehicle's manual for specific requirements, as some newer cars have variable service intervals based on driving style and conditions.
A : The top factors affecting your car insurance costs are your age, driving experience, postcode and where the car is kept overnight, insurance group (1-50), annual mileage, claims history and no-claims bonus, and also your occupation.
A : You can check your car’s fuel efficiency in a number of ways :
A : Generally, yes, it is cheaper to charge an electric car than fill a conventional engine vehicle with fuel. Based on current average UK rates, charging an electric car costs around 5p to 8p per mile, whereas fuelling a petrol car costs around 12p to 15p per mile, and fuelling a diesel car costs around 11p to 14p per mile.
Understanding running costs is essential when choosing your next vehicle – and at Wilsons Epsom, we're here to help you make an informed decision that works for your budget long-term.
Our experienced sales team doesn't just sell cars – we help you understand the true cost of ownership for every vehicle in our range. We appreciate that nobody likes nasty surprises, especially when it comes to car costs!
Whether you've got a specific model in mind or just starting to look, we'd love to help you find the perfect car – one that keeps both you and your wallet happy. Pop into our showroom in Surrey for a chat today.