Buying a car and running it can be broken into two main parts:
1. Upfront costs to get you on the road.
2. Ongoing such as fuel costs, road tax and insurance, servicing/maintenance, depreciation, and other driving expenses.
Below you will find all the steps involved in buying a new car.
In this step, we look at the cost of running a car. Predicate car cost to keep on the road month by month.
CarVeto database is a free service for private drivers buying or selling. Use the links below to find detailed information on each step towards a safe and legal purchase.
Upfront cost of buying a car
Includes how you plan to pay for the car (car finance), or cash, bank loan, credit card. Initial costs will include insuring, initial road tax and other extras.
Car running costs are broadly pitched at £3,000 + each year.
Aside from the purchase price, annual running costs (main expenses) include petrol or diesel (almost £1,000), insurance premiums (almost £500), and routine maintenance (almost £300).
Beyond standard costs, drivers need to fork out for car tax, parking permits/fees and DVLA fines (around £250). Add on the purchase price and car depreciation of around £1,100 per year and the tally quickly adds up.
Car finance repayments
You have a lot of choices including Hire Purchase, Personal Contract Purchase and Lease Purchase. Know what the fixed monthly repayment is and the date when it’s debited from your bank account.
Seriously consider Guaranteed Asset Protection (GAP) insurance; it bridges the gap between the value of your car and how much your insurance company will pay out in case of accident or theft.
GAP is an essential finance product, so be sure to take up a policy for the whole period (24, 36, 48-months) of your deal.
Image source: MGB Direct
Car insurance repayments
Active cover is a legal requirement when driving on public highways or keeping a car on the road (even if you don’t drive it).
Quotes are calculated on perceived risk – first-time driver premiums are more due to a lack of driving experience. A young driver in a luxury or big engine vehicle is the highest type of road risk.
Previous traffic accidents or penalty points on your licence also push up premiums.
Grab a quick online quote from Confused.com who will find the cheapest insurer from a large pool of providers.
Use the free reports from CarVeto database to check annual costs to run a car. Gov.uk has a nice consumption search feature too.
Mapping out your expected annual mileage will help understand how much you’ll spend getting around month by month.
It’s worth comparing more than one model, such as a Ford Fiesta versus a Nissan Micra or VW Golf versus a Ford Focus.
Once your car reaches three years old it’s time for an initial, annual MOT test. There’s a maximum fee your MOT test centre can charge. It depends on the type of vehicle you own. Fees include VAT.
- Standard maximum car MOT test fee: £54.85
- Standard maximum motorcycle MOT test fee: £29.65
See this comprehensive MOT checklist and vehicle preparation guide for the cheapest MOT test fees in your area (includes local authority test centres).
Annual car servicing
Keeping the engine, and working parts of your car in good working condition are crucial for reliability. Maintenance and thorough service history also lend a helping hand should you come to sell your car privately in the years to come.
Most petrol cars are due a service each year or after 10,000 to 12,000 miles. Modern diesels can extend service intervals up to two years or 20,000 miles.
Remember that the costs of servicing vary depending on where you get work done.
Clickmechanic was mentioned early in this guide as a reliable mobile mechanic service.
Image source: Inside DVLA
Some insurers throw in breakdown cover, and if you buy a new car, the manufacturer often includes a one, two or three year policy as part of the deal.
If buying a car second hand, AA and RAC are household brands, although a bit pricey. Green Flag can be up to 40% cheaper, offering similar cover.
Decent cover ranges from £14 to £25 per month.
See our best breakdown cover for cars guide for grades of cover to suit your circumstances.
Additional running costs
You could include these items within the annual servicing banner – tyres, wiper blades and bulbs will wear out and fail without warning.
You might allow £200, per year for pesky running costs.
Tyres – the price differences between budget tyres and premium brands like Pirelli can be huge. It’s well worth getting a range of quotes as prices vary. Ensure tyre fitting and wheel balancing with each quote.
Tyre price example:
1 x Tyre 195/65/R15
Pirelli: £108.12 fitted
Budget: £69.00 fitted
If you need a set of four, that’s a massive £156.48 difference!
How to find a competitive car finance deal
Car dealer margins
Dealers profit when you finance a car, and they will negotiate. There are savings to make over the whole period of a finance agreement if you can get even a slightly lower interest rate than the one offered. APR (Annual Percentage Rate) illustrates the total amount payable, including associated ‘set-up fees’.
Volkswagen is currently adverting an APR at 8.9% of their Pre-Owned Approved range. Take a look:
- A £10,000 loan at the advertised 8.9 APR over 36-months comes out at £315.94 p/month.
Negotiating a reduced interest rate saves a decent chunk of cash.
- A £10,000 loan at 5.9 APR over 36-months comes out at £303.07 p/month.
A small improvement in annual percentage of just 3.0% will put £463.16 in your pocket.
Lots of new car models are on offer at zero APR. Ford Options and Vauxhall are just a few to mention. But keep an eye out for new offers as manufacturers chop and change deals.
Used dealers tend to work with one finance company and fixed rates of interest. But a lower-interest bank loan could save money so be sure to check out all of your options.
Car finance tips
- Check the total amount payable over the full lending period.
Look out for hidden admin fees or optional extras woven into your agreement.
- Compare interest rates/offers on the dealer’s website – ensure you do not agree to a deal that may be improved.
- Remember, the lower the APR, the less you pay.
- If you settle your finance agreement early you save money (lending is based on the borrowing period. Paying off quickly reduces interest).
Watch our for early settlement penalties – they commonly occur if the agreement is paid off before the halfway mark.
- Haggling for cash off the screen price is most buyers standard route to saving on upfront spend. But, lower interest rates offer the best savings.