The Real Cost of Owning a Car: What You Need to Know – Owning a car gives you freedom, but it also comes with a long list of financial responsibilities.
Repairs and car ownership can quickly eat into your budget, especially if you don’t plan for them.
Here is a breakdown of what you can expect, how to keep costs down, as well as how to protect yourself from unfair finance deals, such as being mis-sold a PCP agreement.
Purchase Price or Finance Payments
You’ll either buy your car outright or take a finance deal. Paying up front gives you full ownership, but it is a big sum. Finance makes things a little more manageable, but it often is expensive over time.
If you choose a personal contract purchase (PCP) agreement, make sure you fully understand the terms. Many drivers don’t realise how much they owe at the end of the deal or what happens if they want to exit early.
If you are concerned that you were mis-sold a PCP deal, you could be entitled to compensation. PCP Claimback can help you find out in minutes; it’s free for you to check.
Car Insurance
Insurance is a negotiable part of owning a car. Costs vary by age, driving history, location, and car type.
Young drivers pay more, and so do people with high-performance cars.
Make sure you shop around each year and compare your prices. Don’t accept your renewal quote without checking other providers first. Use comparison sites to have a look at all of your options.
Lastly, think about your excess. A high voluntary excess can lower your premium, but make sure you’re able to afford it if something goes wrong.
Road Tax
The amount you pay depends on your car’s emissions and when it was first registered. Some electric cars will pay nothing; however, older petrol and diesel vehicles often pay more.
You can pay road tax yearly, every six months, or monthly. Monthly might be more convenient, but you’ll pay slightly more overall.
MOT and Servicing
Once your car is over 3 years old, it needs to have an annual MOT. An MOT usually costs around £55, but if your car fails, you’ll need to pay for the repairs.
Regular servicing keeps your car running smoothly and can also prevent small issues from becoming big problems. You should be budgeting around £300 per year, depending on your car and how much you drive.
Fuel or Charging
Fuel costs depend on how far you drive, your engine size, and fuel prices. For example, a daily commute in a petrol SUV is going to cost more than short trips in a hybrid or electric car.
To reduce costs, drive more efficiently, avoid hard acceleration, remove roof racks when not in use, and keep your tires inflated to the right pressure.
Electric car owners save on fuel, but charging still adds up. Home charging is the cheapest option, especially if you charge it overnight on a smart tariff.
Repairs and Maintenance
Tyres wear out, brakes need replacing, and sometimes things break down. This means that you need to set aside money each month for unexpected repairs. Even minor fixes can cost you hundreds when it comes to a car.
If your car is older or no longer under warranty, consider a maintenance plan or extended warranty. Just make sure it is a good value.
Depreciation
This is the hidden cost of car ownership. Most cars lose value over time; a new car can lose between 20 and 30% of its value in just the first year.
This matters when you go to sell your car or even if your finance deal ends and you don’t own the car at the end. Leasing or PCP can protect you from resale losses, but if you’re buying outright, you need to factor depreciation into your long-term cost.
Parking and Tolls
If you live in a city, parking can be expensive and very difficult to find. You might also need to consider buying a permit or face congestion charges.
Toll roads, tunnels, and city clean air zones all add more hidden costs, especially if you drive long distances or through urban areas. You need to make sure that you check the routes that you take often and plan for those fees in your monthly car budget.
Penalties and Fines
Speeding, parking tickets, missed MOTs, or unpaid tax can all result in fines. However, they are very easy to avoid, but even easier to overlook.
Set reminders, use apps to track your MOT, tax, and insurance renewal dates, and make sure you are organized and avoid unnecessary charges.
Final Thoughts
Owning a car is a smart choice, but only if you are going into it knowing the full financial cost. Make sure you add up all the costs, not just the monthly payment, and plan for any extras that you may face down the road. You need to ensure that you are frequently looking at your car budget to make sure that it all fits in with your lifestyle.
We hope you enjoyed reading “The Real Cost of Owning a Car”. Click here to read more of our articles about motoring.
