Costs of buying and running a car

There’s no cheap way to buy a car, and any deal is going to have a big impact on your money situation. So it’s important to make sure a car is going to fit into your budget. 

For any car you buy, you’ll need to pay: 

• insurance 
• car tax (officially known as VED but sometimes referred to as road tax) 
• repair and maintenance costs 
• fuel. 

If you’re buying a car on finance, you’ll usually need to: 

• make a large payment up front 
• make monthly payments. 

There are a lot of factors to consider when choosing the right car for you, all of which affect how much you’re likely to pay: 

• Used or new? New cars are expensive and lose value (depreciate) quickly, but are a bit less likely to have issues or breakdowns. 
• Petrol or electric? Petrol cars can cost less upfront, but refuelling is more expensive than recharging a car. 
• Dealer or private seller? You might get a better deal with a private seller, but you’re less protected if something goes wrong. 
• Make and model? Every make and model is different. You’ll need to do a lot of research to find out which one suits your lifestyle and circumstances. There’s guidance on choosing a car on Which?Opens in a new window 

As well as the variety of cars available, there are a lot of different options for how to pay for a car. 

The most common options are: 

• Buy with cash – if you have savings ready you can simply pay for a new car outright, but remember to keep enough savings for unexpected costs. 
• Get a personal loan – you can get a loan from a bank and use this to buy a car. Learn more about personal loans. 
• Get a Personal Contract Payment (PCP) – this is where you put down a deposit, make monthly payments, and pay a final payment (commonly called a ‘balloon’ payment) if you want to own the car. Learn more about Personal Contract Payment (PCP). 
• Get a Hire Purchase (HP) – this is where you hire the car, make monthly payments, and own the car at the end of the contract. Learn more about Hire Purchase (HP). 
• Lease with Personal Contract Hire (PCH) – this is where you rent the car with monthly payments and hand it back at the end of the contract. Learn more about leasing with PCH. 

It’s often tempting to buy a new car, and dealers will be keen to push you towards the newest model you can afford. 

A new car won’t need an MOT until the third year after it was registered (or fourth year if you’re in Northern Ireland). You can ask your dealer when this was, and when the first MOT will be due.  

A newer car will probably have fewer maintenance problems (or at least be covered by a warranty). 

However, you’ll want to think about ‘depreciation’ – this is the term used for how a car’s value gets lower as it gets older and travels more miles. 

New cars depreciate very quickly. Its value will be lower the moment you drive off the forecourt, and after the first three years it could be worth half its original value. 

This means that if you buy a new car for £20,000, and three years later it’s worth £10,000, you’ve effectively lost £10,000. 

Used cars depreciate more slowly. So it's usually a better money decision to get a used car, as it won't lose as much value over time. 

You can get an idea of how much your car's make and model will depreciateOpens in a new window on The Money Calculator website.

The kind of fuel your car uses makes a big difference on costs.

The most common type of car is petrol fuelled. Buying a petrol car tends to be a bit cheaper than other options. 

Petrol itself is cheaper than diesel, but you’ll usually get less distance out of a full tank. So in terms of fuel costs, petrol tends to be a bit more expensive overall.  

There are a few places in the UK where you’ll pay a Clean Air charge if you have an older petrol vehicle.

Buying an electric car is usually more expensive than cars using traditional fuel. 

Recharging an electric car costs a lot less than petrol or diesel, but they do take a lot longer to recharge. They often won’t travel as many miles as a full tank of petrol does. 

Electric cars are more environmentally friendly than cars that run on petrol or diesel. They’re exempt from Clean Air charges, which can make a big difference if you regularly drive into a clean air zone. 

They also need less maintenance than a car using traditional fuel, as there are fewer moving parts - so this can save you on repairs and servicing costs. However, insurance costs are usually a bit higher because repairs are more complex. 

There are also hybrid cars, which combine fuel and electricity. They use less fuel than traditional cars, which can help keep running costs down. 

You’ll usually pay a bit less in car tax for a hybrid (alternative fuel) car. 

Once you’ve found a car you like and worked out your budget for its running costs, there are still ways to save money and make sure you’re protected if something goes wrong. 

Our guide How to buy a car goes into more detail on haggling, getting extra consumer protection and avoiding scams.

Buying a car can be expensive, but it’s important to remember the running costs as well. It’s best to have some emergency savings for unexpected costs. 

Here’s a breakdown of these everyday costs that you’ll need to factor into your budget. 

Insurance can sometimes end up being one of your most significant costs when running a car. This is particularly true if you: 

• are a younger or newer driver 
• drive a lot of miles 
• are driving an expensive or powerful car 
• have recently had an accident.  

There are a few ways you can reduce your insurance costs. Our guide Car insurance – what you need to know explains how you can get cheaper insurance. 

Warranties cover you if something is wrong with the car. They’re usually optional, although new cars should come with a warranty from the manufacturer. 

Getting a warranty can help you avoid some of the unexpected costs that come with owning a car. Your warranty will usually cover any problems with your car’s: 

• engine or fuel system 
• clutch or gearbox 
• suspension 
• brakes 
• steering.

Some warranties come with conditions, such as needing to service the car regularly or a mileage limit. 

It depends on the deal and how long the car will be covered for. Most warranties only last a few years, which will cover the time your car is likely to work just fine. 

If your car ends up having issues, it could save you a lot of money. But look at the figures and anything you’d have to do to keep the warranty valid, and work out whether it’d be better to just save up in case of any problems.  

You’re required to pay car tax on most cars. The amount of tax you’ll pay depends on: 

• the year the car was registered 
• what type of fuel the car uses 
• the amount of CO2 the car emits. 

GOV.UK has an overview of the tax ratesOpens in a new window. You can choose to pay your car tax monthly or yearly.

You might not have to pay car tax if you have a qualifying disability. 

Electric cars are no longer exempt, so you’ll have to pay car tax on these. Get more information about vehicles exempt from vehicle taxOpens in a new window on GOV.UK. 

You’ll need to get an MOT:

• in the third year after your car was first registered, or
• if you’re in Northern Ireland, in the fourth year after your car was registered.

You’ll then need to get an MOT test every year after.

Check with your dealer if you’re not sure when you’ll need to book your first MOT test. Tests can be booked at MOT test centres in your local area.

The MOT itself is usually fairly cheap (the most they can charge is £54.85). However, if the car fails any faults will need to be fixed before it can be driven again. This can be expensive, so you should budget for any unexpected costs.

It can be a good idea to carry out some checks yourself before your car’s MOT, so that you don’t have to pay for these fixes on the day. MoneySavingExpert has guidance on MOTsOpens in a new window, including quick checks you can do to help your car pass. 

Fuel prices change quite regularly, so you’ll need to have a bit of spare budget in case they go up. Prices aren’t the same at all stations, so research ahead to find out where you can get the best price-per-gallon. 

You can download the PetrolPrices appOpens in a new window to see the cost of fuel at stations nearby. 

There are also some supermarkets that will reward you for using their fuel stations. Look into these schemes to see if they’ll help you save money. 

Keeping your car healthy can help you avoid an expensive breakdown further down the line. You can take some simple steps to make sure your car is well maintained, including: 

• changing the oil regularly 
• checking the air filters and fluids 
• checking the tyre pressures 
• replacing any dead lightbulbs. 

There's more car maintenance advice on RACOpens in a new window

You can ask local garages for a car service. This is where they’ll give your car a check-up to see if there are any problems or parts that need replacing. 

The service itself can be expensive. Be sure to shop around to find the best price.  

It’s not a legal requirement, but it can be a good way to:  

• keep your car running well and avoid expensive fixes later 
• keep your car fuel efficient 
• make your car easier to sell, as you’ll have proof that it’s been well looked after 
• keep any warranties you have valid.

There’s useful guidance on How often you should service your car on What Car?Opens in a new window

Unfortunately, it’s always possible that something will go wrong with your car. You might get a puncture, a flat battery or something similar. 

Repairs are often expensive, and you can’t be sure when you’ll need to pay for one. So it’s always worth having some money saved for the occasional problem. 

Breakdown cover and warranties might cover the cost of repairs. Depending on how the issue happened, you might also be covered by insurance. 

Learn more about getting cheaper breakdown cover on Which?Opens in a new window