Car running costs and when you may need a new one

From insurance to car tax, regular MOTs to servicing, owning a vehicle can be expensive.

The cost of a car can be “higher than you think”, said Transport for London (TfL), working out at £2,922 on average per year when you include expenses such as tax, fuel, maintenance and insurance.

New drivers could face paying £300 per month on average, said KwikFit, with “a significant portion” going towards the “eyewatering cost of fuel”.

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That’s after you have forked out to buy a car in the first place.

Here are the costs of running a car and when it may be time to sell.

Maintenance

The “best way” to ensure your car runs smoothly and maintains its value is to follow its maintenance schedule, explained AutoExpress.

Legally, your vehicle will need to have an MOT on the third anniversary of its registration and every year after.

An MOT checks your vehicle “meets road safety and environmental standards”, explained Gov.uk, and issues a certificate to confirm it is roadworthy.

The maximum MOT fee for a car is set at £54.85 and £29.65 for a standard motorcycle. However, you will need to pay for any repairs if the car fails its MOT.

Skipping an MOT can lead to a fine of £1,000 if you are caught driving without a valid certificate, warned the AA, plus this would “invalidate your car insurance”.

Additionally, a regular car service will check the running of your engine, and monitor oil and water levels.

There is no legal requirement to get your car serviced but without annual checks its performance could “decline considerably”, said Wyatt Auto Services.

The cost of a service depends on the make and model of your car and how you drive it. “More miles means more wear and tear”, Checkatrade said, which estimates the average cost of servicing a vehicle as from £170 for a small car to £395 for a large one.

Fuel

Unless you are driving an electric car, you will have to fill up with petrol or diesel.

Fuel prices can have a big influence on how much it costs to drive your car.

Average petrol prices rose to 149.13p a litre at the weekend, the highest since February, and diesel reached 150.61p, the highest since May, ThisIsMoney reported, “on the back of rising oil and wholesale costs”.

Insurance

It is illegal to drive a car without valid insurance.

The cost of car insurance depends on factors including your age, the vehicle you drive, your job and where you live.

The average cost of car cover in the UK was “£456 between January and November 2022”, according to Go.Compare. That works out at £38 a month, although “interest will be added on top” if you pay monthly so it may end up costing more.

Car cover is now costing “more than ever” said BBC News, which the industry blames on inflation and “a massive rise in vehicle repair costs”.

Tax

Motorists pay vehicle excise duty (VED), a tax that helps “fund road maintenance, research, and public transport”, explained the RAC.

The amount of VED you pay depends on the type of vehicle and the fuel it uses. Generally, “the more emissions a vehicle produces, the more VED you will pay”.

VED charges on a new car range “from £0 to £2,605 in the first year” depending on its emissions, said Carbuyer. All cars then move to a flat annual rate for the second year onwards, which is currently £180 for petrol and diesel cars and £170 for hybrids.

There is also an extra £390 tax charge for five years for cars with a list price of more than £40,000.

Electric car drivers don’t currently pay VED, but this is changing from 2025 as the government looks to ensure fairness with no exemption for having an electric vehicle.

Road charging

There may also be charges for driving in certain parts of the country such as toll roads, as well as the congestion charge, costing £15 daily, in central London.

Low-emissions zones have been introduced in several cities in the UK, including Glasgow, Birmingham and London.

An Ultra Low Emission Zone (ULEZ) is also being introduced across all 32 London boroughs from 29 August, meaning anyone with a non-compliant vehicle will need to pay a £12.50 daily charge to drive within the area.

The move has been “controversial”, said MoneyWeek, during a time of “squeezed budgets”.

Petrol cars and vans registered after 2006, diesel cars and vans registered after 2015 and all electric cars are ULEZ-compliant but you can check whether your vehicle is compliant on the TfL website.

The Mayor of London has also launched a scrappage scheme for London drivers to get up to £2,000 to scrap their non-compliant cars or a maximum of £1,000 for a motorbike.

How to know when to sell your car?

The value of a car falls as it gets older – known as depreciation – at an “alarming rate”, said MoneyHelper.

You can preserve some value by looking after your car, monitoring how far you drive and spotting the best time to sell, the financial website explained, “for example, convertibles in the summer and 4x4s in the winter”.

It may also be worth selling your car “before its replacement model arrives in the showroom”, added MoneyHelper.

Regular car troubles and “frequent breakdowns”, could also be signs that it is time to get a new car, explained Auto Trader. Spotting the signs early can “save money” on repairs, added the car website, and means you can hopefully “sell or part exchange for a good value”.

Marc Shoffman is an award-winning freelance journalist, specialising in business, property and personal finance. He has a master’s degree in financial journalism from City University and has previously written for FTAdviser, ThisIsMoney, The Mail on Sunday and MoneyWeek.