There are so many things to consider when buying and running a car – while most of us focus on what type of car we should buy (manual or automatic, petrol, diesel, electric or hybrid), there's a few other costs you should take into account.
The amount you pay for your car insurance can vary quite considerably and insurance companies will take all sorts of information from you in order to work out what your monthly, or yearly premium will be. These include;
- Personal details, including age and postcode,
- Information about the car you will be driving,
- The level of cover you’re looking for (there are different options from fully comprehensive down to third party only),
- Miles you think you’ll be driving each year,
- Any previous car insurance claims (whether they are your fault or not),
- Any accidents in the last five years,
- Criminal convictions (including points on your licence for speeding, jumping red lights through to drink or drug driving),
- No claims bonus – the number of years you’ve been driving without having made a car insurance claim.
This information allows the insurance company to build up a picture of how ‘risky’ you are, and they will calculate your 'premium' based upon this. The higher the company deems the risk is, the higher the premium will be.
Unfortunately, young and inexperienced drivers often pay really high premiums for their insurance because statistically they are more likely to have an accident.
If you receive a criminal conviction or points on your licence, or you have a medical condition that affects your ability to drive (including new medication) you MUST notify your insurance company otherwise you could find that they refuse to pay out if you have a claim or you could have your insurance cancelled and be liable for prosecution.
Car tax / road tax (officially known as Vehicle Excise Duty) must be paid on all vehicles registered in the UK that are either driven or kept on a public road.
It can be anything up to £2,000 a year or more, depending on how environmentally friendly the car is.
When you buy a car now, the tax will not be transferred with the vehicle so you must tax it before you can use it.
If the car is not being kept on a public road and is not being driven on UK roads, you must complete a Statutory Off Road Notification (SORN) with the DVLA (Driver & Vehicle Licencing Agency).
When the car is road-worthy and is planned to be driven again, you must notify DVLA and arrange for the vehicle to be taxed again before you can drive it. A reason may be that your car has failed its MOT and you need to take it off the road whilst you save up and get it repaired.
An MOT (Ministry of Transport Test) is a yearly test, by law for all vehicles that are over three years old. They must pass this test to ensure it’s safe and road-worthy. If the vehicle fails, it is not allowed to be driven on the road until the issues have been fixed and re-tested.
The standard cost is around £60 for a car. Garages can’t charge more than this to carry out the test, but many garages charge less than this, so it’s worth shopping around.
The type of fuel that runs your car can vary considerably and some are more economical than others. The standard types of fuel are petrol and diesel which you can obtain from garages and many supermarkets.
Alternative fuel types include electric, which requires access to charging points to recharge the onboard batteries, and hybrids which are a combination of electric batteries backed up by petrol. The bigger the engine on your car, the more fuel and power you will use.
Since 2019 there are also additional surcharges that could apply for diesel cars such as the £12.50 daily fee in the ultra low emission zone in London.
The emissions also impacts the road tax you pay each year, you can check out the different tax bands online.
Even when you have decided what type of fuel will power your car, there are still things you can do which will keep those costs down, these include;
Careful driving – gentle acceleration and not driving quite as fast, significantly reduces the amount of fuel that you use.
Carrying heavy items – don’t leave lots of heavy things in the car, and its also worthwhile taking off roof racks and boxes if you’re not using them. The heavier the car, the more fuel it will use.
If your vehicle has a sat nav, you can choose fastest routes or most economical so if you aren’t pressed for time so why not take the most fuel efficient route for your journey.
To keep your vehicle running efficiently and reduce the chances of a breakdown, it’s important to make sure your car is serviced regularly. An annual service can cost in the region of a few hundred pounds, and some services are smaller than others depending on the vehicle you have.
Often if you buy a new, or nearly new car, some garages will offer service plans where you can pay in each month and use that money towards your annual service. If you feel this will help your budgeting they can be a good option for paying for these costs.
The chances are most drivers have experienced at least one breakdown in their driving life. Breakdowns often happen at the worst time, and in the worst places, and they can be easily fixed at the roadside or require more technical help. As cars grow more and more complex in their sophistication, never has it been more important to make sure you are covered if this happens to you.
Breakdown cover ranges from basic policies which cover you for having an engineer take a look at your car at the roadside, to having you and your car picked up anywhere in Europe with a courtesy car to continue your journey in.
As you can imagine, the higher and more inclusive the level of cover, the more it will cost. Make sure you check what’s included in the level of cover you decide on and make sure it’s the one best meeting your needs.
Depreciation in value
When you own a car it loses value over time as it gets older – this is called depreciation.
Brand new cars will drop in value quicker than used cars as they are more expensive to begin with. You can get an idea of how much depreciation will affect your car by looking at the prices of models a few years older than yours.
It’s fair to say that some cars hold their money better than others, some makes and models fair better than others, and even colour can make a difference – if you buy an ‘out there’ colour, it’s likely to have less value in the future than more mainstream colours especially if that colour goes out of favour.
You can check the prices of cars on many well-known websites but make sure you use a trusted and reliable site.
Our articles cover a wide range of mainstream financial products and employee benefits. Terms and conditions of each product may vary depending on your provider. Please ensure you check the specific terms and conditions of any financial products and employee benefits available to you from your employer.