How Much Does It Cost to Own a Car?

Getting a car is, for some households, an unavoidable necessity. For others, it is a life-improving quasi-luxury. Car ownership can open doors, from making further commutes for new jobs easier to rendering the school run a relative cinch. But getting a car, whatever your intentions with it, costs money.

Condescension aside, buying a car really is more expensive than it may seem on face value. First-time drivers are often only aware of the up-front costs associated with buying a car, but the well runs much deeper – and can lower some drivers into hot financial waters if not properly explored. Here, we will explore the various costs associated with buying and owning a car, reaching towards an overall understanding of cost.

1. Initial Purchase Costs

First, let’s touch on the obvious costs. There’s an up-front purchase price attached to cars, and that price changes dramatically depending on a wide variety of different variables. For instance, smaller hatchbacks will be cheaper than larger SUVs or executive saloons, but also more expensive new than many other types of used car.

Newer features will attract higher costs; EVs lead the charge on modern vehicle innovation, and carry the purchase price to prove it. Reputation also carries a lot of import, particularly in the used market – where cars with a reputation for reliability will retain their value for longer. Lastly, how you buy can affect the overall money spent.

Financing a car can see you paying small amounts over time, with the caveat that you’re paying additional interest on the value of the car.

2. Ongoing Maintenance and Repairs

The surprise cost for most vehicle owners comes in the form of ongoing maintenance. Your car will regularly need new parts and general services, the cost of which can again change based on where you live. Changing your tyres in Huddersfield can be cheaper than doing so in London, for example, even if only for decreased labour costs by region.

Regular changes and check-ups aren’t all, though. Just as boilers can suddenly fail in your home, so too can your car suddenly spring issues – which cost significant amounts in labour and parts.

3. Insurance and Road Tax

The major set of additional costs you will encounter after purchasing your car relate to insurance, and potentially taxation. Insurance is a legal requirement, and an ongoing cost paid either on an annual or monthly basis.

Different types of insurance with different levels of protection are more expensive, but cost sits on a sliding scale anyway – impacted by your age, driving experience, location and the quality of your vehicle. If you have an accident, your insurance premiums can increase owing to the higher risk of insuring you.

Taxation, meanwhile, relates directly to your car itself. Vehicle Excise Duty (VED) is applied to cars according to their emissions, with emissive vehicles required to pay an annual fee – and non-emissive vehicles exempt.

Breakdown of Different Insurance Types

Car insurance is not one-size-fits-all. In the UK, you can choose from several levels of cover:

• Third-Party: This is the minimum legal requirement and covers damage to other vehicles or property in an accident but doesn’t cover your own vehicle.
• Third-Party, Fire, and Theft: Adds protection for your car in case it’s stolen or damaged by fire.
• Comprehensive: This offers the highest level of protection, covering damage to your vehicle, even in incidents where you are at fault. The cost of insurance depends on factors such as your age, driving experience, car type, and location. Premiums may increase after accidents or claims, so it’s worth comparing insurance quotes regularly.

4. Depreciation

Depreciation is one of the most significant costs of owning a car, yet it’s often overlooked. The moment a new car leaves the dealership, it begins to lose value. On average, cars can lose 15-35% of their value in the first year alone, and up to 50% by the third year. Some cars, such as luxury vehicles or electric cars, may depreciate faster than others, while models with strong reputations for reliability retain their value better.

Depreciation impacts your car’s resale value, meaning it is a hidden cost that accumulates over time and should be factored into the overall cost of ownership.

5. Fuel Costs

The type of vehicle you own and the distance you drive will directly influence your fuel expenses. Petrol and diesel cars, for instance, have varying fuel efficiencies, with smaller, lighter cars generally offering better mileage. Electric vehicles (EVs), on the other hand, have lower running costs but require access to charging infrastructure.

The average annual cost of fuel for petrol cars in the UK is approximately £1,200-£1,500, but this figure fluctuates with fuel prices and driving habits. When calculating the cost of owning a car, it’s essential to factor in these recurring fuel expenses.

6. MOT and Inspection Fees

Cars in the UK over three years old must undergo an annual MOT (Ministry of Transport) test to ensure they meet road safety and environmental standards. The cost of an MOT test is capped at £54.85 for cars, but any repairs needed to pass the test can significantly add to this expense. Regular maintenance and servicing, although not compulsory, can help avoid costly repairs during the MOT.