If you’re considering buying a car or already own one, it’s crucial to understand the ongoing costs that come with car ownership in the UK.
While the cost of purchasing a vehicle might be the largest initial outlay, the ongoing expenses are what can really impact your budget.
The cost of purchasing a car
This year, the cost of cars in the UK has seen a slight increase due to factors such as inflation and the ongoing impact of supply chain disruptions.
The average cost of a new car in the UK in 2024 is around £35,000, while a used car typically costs between £12,000 and £20,000, depending on the make, model, and age.
When buying a car, you also need to consider additional costs such as registration fees, which are approximately £55, and the first year’s road tax, which varies depending on the vehicle’s emissions.
Financing and depreciation
If you’re not paying for your car outright, you’ll likely be using some form of financing, whether it’s a personal loan, hire purchase, or a personal contract purchase (PCP). The cost of financing can add significantly to the overall expense of car ownership.
For example, with a PCP deal, you might pay a deposit of around 10% of the car’s value, followed by monthly payments of £300-£500 over three to four years.
It’s important to note that interest rates on car loans have risen slightly in 2024, making borrowing more expensive than in previous years.
Depreciation is another key factor to consider. Cars lose value over time, and this can be one of the biggest costs of ownership. On average, a new car loses about 20% of its value in the first year and up to 60% after three years.
This means if you buy a £30,000 car, it could be worth only £12,000 after three years. Depreciation is often higher for new cars, so buying a used vehicle can sometimes be a more cost-effective option.
Insurance costs
Car insurance is a mandatory expense for all car owners in the UK, and it’s one of the most significant ongoing costs.
In 2024, the average annual car insurance premium in the UK is approximately £600, but this can vary widely depending on factors such as your age, driving history, location, and the type of car you drive.
For younger drivers or those with a less-than-perfect driving record, premiums can be substantially higher, sometimes exceeding £1,500 per year. Conversely, older drivers with a clean driving record may find that their premiums are lower.
It’s also worth considering the different levels of cover available: third-party only, third-party, fire and theft, and comprehensive insurance. Comprehensive insurance is generally the most expensive but offers the best protection.
Fuel expenses
Fuel costs are another major factor in the total cost of owning a car. In 2024, petrol and diesel prices have remained high due to various global factors, including fluctuations in oil prices and the UK’s continued transition towards renewable energy sources.
The average price of petrol in the UK is around £1.55 per litre, while diesel is slightly more expensive at £1.62 per litre.
How much you spend on fuel will depend on your car’s fuel efficiency and how much you drive. For example, if you drive an average of 10,000 miles per year and your car gets 50 miles per gallon (mpg), you can expect to spend around £1,400 on petrol annually. However, if your car only gets 30 mpg, that cost could rise to over £2,000.
Electric vehicles (EVs) offer a different cost structure when it comes to “fuel.” While the initial purchase price of an EV is typically higher, the cost of charging is significantly lower than fueling a petrol or diesel car.
In 2024, the average cost of electricity for charging an EV at home is around 34p per kWh, which means that for a typical EV, the cost per mile is roughly 4-5p compared to 12-15p for a petrol car. However, if you use public charging stations, costs can be higher, particularly if you use rapid chargers.
Maintenance and repairs
Maintenance and repairs are inevitable parts of car ownership, and they can vary depending on the age, make, and model of your vehicle. Regular servicing is essential to keep your car in good condition and avoid more costly repairs down the line.
In 2024, the average cost of a full service in the UK is around £200 to £300. If your car needs more extensive work, such as brake replacement or a new clutch, costs can quickly escalate into the hundreds or even thousands of pounds.
Tyres are another significant maintenance cost. On average, a set of four new tyres can cost between £300 and £600, depending on the type and brand.
Budgeting for regular maintenance and unexpected repairs is crucial, especially if you own an older vehicle that may require more frequent attention.
Road tax (vehicle excise duty)
Vehicle Excise Duty (VED), commonly known as road tax, is a compulsory charge for all car owners in the UK. The amount you pay depends on your car’s CO2 emissions, with higher-emission vehicles attracting higher rates.
In 2024, the road tax for a new petrol or diesel car ranges from £165 to £2,245 per year, depending on the vehicle’s emissions.
For electric vehicles, road tax remains a significant advantage, as they are exempt from VED for the first year and only pay a reduced rate thereafter.
However, this is set to change in 2025 when electric vehicles will start to incur VED charges, although they will still benefit from lower rates compared to traditional petrol and diesel cars.
Parking costs
Parking is another cost that can vary widely depending on where you live and work. In urban areas, especially in cities like London, parking can be a significant expense.
If you need to park your car on the street, you might need a residential parking permit, which can cost between £100 and £300 per year, depending on the borough.
If you regularly use public car parks, especially in city centres, the costs can add up quickly. For example, parking in central London can cost £5-£10 per hour.
For those who work in the city, this could mean spending £100 or more per week just on parking. Many people also opt for private parking spaces, which can be rented for around £100 to £200 per month, depending on the location.
Conclusion
Owning a car in the UK in 2024 is a significant financial commitment, with various costs that extend far beyond the purchase price.
When you add up the costs of insurance, fuel, maintenance, road tax, depreciation, and parking, it’s clear that car ownership can be expensive.
However, by understanding these costs and planning your budget accordingly, you can make informed decisions that help you manage your finances effectively.
Whether you’re considering buying a new car, a used vehicle, or even an electric vehicle, it’s important to weigh all the associated costs and consider how they fit into your overall budget.
The key to affordable car ownership is not just in choosing the right car, but also in understanding and managing the ongoing costs that come with it.
