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Budgeting for the True Cost of Buying a Car


The car industry is picking back up again. After 18 months of uncertainty and reduced demand, intent to purchase vehicles is more or less at pre-coronavirus levels – meaning many motorists and prospective motorists alike are looking at their budgets with a view to investing in a new car.

But buying a car is more than just the list price; here are the factors that make up the true cost of a vehicle.

Vehicle Price

Perhaps the most obvious cost on this list, the price of a vehicle makes up the bulk of your total expenditure on it, and can often represent a large upfront cost. However, purchasing a vehicle can include hidden costs wrapped up in the car’s price, especially where finance agreements are concerned. Car dealerships may offer a “drive now pay later” scheme, or a monthly financing program – but these programs often result in relatively high interest rates, meaning you end up paying more than the vehicle’s retail price before you own it outright.

Maintenance and Repairs

Of course, expenditure on physical aspects of your vehicle doesn’t stop with its list price; there are ongoing maintenance and repair costs, some of which can occur without warning, and some of which are legal requirements. If your car is between 3 and 40 years old, it must be taken for a yearly MOT to assure its roadworthiness – an annual cost of £55 and, in the event of MOT failure, the service costs incurred in making your car road-legal. Parts of your vehicle will also succumb to wear over time; you will need to replace your car tyres regularly, as well as indicator and head-lamps, and occasionally brake pads.


Your vehicle will also be subject to a vehicle tax, which is dependent on its emissions and fuel type. Tax payments are annual; the first payment is based on your car’s CO2 emissions, with three separate sliding scales for diesel, petrol and alternative-fueled cars respectively, while subsequent annual payments are a flat fee based on fuel type alone – £155 for petrol or diesel, and £145 for alternative-fueled. Full-electric vehicles are exempt from this tax, owing to their zero-emissions status.


Fuel is perhaps the most significant ongoing expense your vehicle generates during its life – especially as fuel prices continue to increase quicker than wage inflation. The amount you spend on fuel is dependent on the amount you drive, as well as the fuel economy of your vehicle – which can be controlled by a number of methods, from decreasing drag to monitoring tyre pressure and driving consistently.


Car insurance is another ongoing expense you will need to consider and allow for before purchasing a vehicle. Insurance is a legal requirement to drive on the UK’s roads, and can be variably priced depending on the car’s value, your age, driving experience and history of accidents. Younger drivers buying their first car will find insurance far more expensive than a veteran driver of 30 years with a history of no claims.


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