The True Cost of Car Ownership in the UK
Thinking of buying a car? Our UK guide reveals the true cost of ownership, breaking down expenses like insurance, fuel, tax, MOTs, servicing, and depreciation.
Buying a car can be an exciting moment, representing freedom and convenience. But beyond the initial purchase price, a car is a relentless financial commitment. The daily running costs from fuel and insurance to unexpected repairs can add up to a staggering amount, often catching owners by surprise.
So, what is the true cost of owning a car in the UK today? At Plouta, we believe that understanding the full financial picture is key to making smart decisions. This guide will break down all the major expenses associated with car ownership in 2025, providing realistic average costs and practical tips on how to save money on the road.
What You Will Learn in This Guide ⤵
The Big Picture: The average annual running cost of a car in the UK.
The Upfront Cost: A look at new and used car prices.
The "Big Three" Running Costs: A deep dive into fuel, insurance, and maintenance.
The Hidden Costs: Unpacking depreciation and the new road tax (VED) rules.
Actionable Tips: How to significantly reduce your car ownership costs.
The Reality Check: The Average Annual Cost
Before we break it down, let's look at the headline figure. Excluding the cost of the car itself, recent industry analysis from sources like NimbleFins suggests the average cost of running a car in the UK is now over £3,350 per year, or nearly £280 per month.
This figure is made up of several key expenses, some obvious and some less so. Let's explore each one.
1. The Purchase Price (or Depreciation)
This is the largest and most visible cost, but it's often misunderstood. It's not just what you pay; it's what you lose.
Depreciation: This is the silent killer of car ownership costs. It's the amount of value your car loses over time. A new car can lose 15-35% of its value in the first year alone, and up to 50-60% after three years.
Annual Cost Example: If you buy a car for £20,000 and sell it three years later for £10,000, the depreciation cost is £10,000 over three years, or ~£3,333 per year. This is often the single biggest expense.
Average Used Car Prices (as of mid-2025): The market is stable but nuanced.
The average price of a used car is around £16,800.
Younger used cars (1-3 years old) average around £25,000.
Older used cars (5-10 years old) average around £13,500.
Average New Car Prices: Popular new cars typically range from £20,000 for a small car to over £30,000 for an SUV.
Electric Vehicles (EVs): The price gap is closing. As of early 2025, there are nearly 30 new EV models priced under £30,000. Used EVs are also becoming more affordable, with one in three now priced under £20,000.
How to Save: Buy a nearly new or used car (e.g., 1-3 years old) to let the first owner absorb the steepest depreciation hit.
2. Fuel: Petrol, Diesel, and Electricity
This is the most frequent running cost and one that is highly visible.
Average Fuel Prices (as of July 2025):
Unleaded Petrol: 134p per litre
Diesel: 141p per litre
Annual Cost: For a typical petrol car driver covering around 6,000-7,000 miles a year, the annual fuel bill is often in the region of £1,000 - £1,100. Diesel drivers covering more miles will pay more.
Electricity: Charging an EV is significantly cheaper, especially if you can charge at home on an off-peak tariff. Home charging can save up to £750 per year compared to fueling a petrol car. Public charging is more expensive but still generally cheaper than petrol or diesel.
How to Save: Drive efficiently (smooth acceleration/braking), ensure tyres are correctly inflated, remove unnecessary weight (like roof racks), and use supermarket forecourts which are often cheaper.
3. Car Insurance
This is a mandatory and highly variable cost, heavily influenced by age, location, and driving history.
Average UK Premium: Around £620 - £660 per year.
Young Drivers (17-24): This group faces the highest costs, with an average premium of around £834. For a newly qualified 17-year-old, this can be as high as £2,800+.
Over 50s: Experienced drivers with a good no-claims bonus are rewarded. Many drivers over 50 can find comprehensive cover for under £400, with the lowest premiums often found for those aged 65-74.
How to Save: Never auto-renew your policy. Use comparison websites every year about three weeks before your renewal date. Pay annually if you can, as paying monthly is a form of loan and costs more. Consider a telematics (black box) policy if you're a young or new driver.
4. Road Tax (VED) - The 2025 Shake-Up
Vehicle Excise Duty (VED), or road tax, saw significant changes from 1st April 2025.
Electric Cars No Longer Exempt: New and existing EVs (registered after April 2017) now pay the standard rate.
New EVs: Pay a £10 first-year rate, then the standard rate.
Existing EVs: Pay the standard rate from their first renewal after April 2025.
Standard Rate for All: For all cars registered after 1 April 2017 (petrol, diesel, hybrid, electric), the standard annual rate is now £195.
First-Year "Showroom Tax": This is a one-off tax for brand new cars, based on CO2 emissions. It ranges from £10 for EVs and the cleanest hybrids, up to a massive £5,490 for the least efficient vehicles.
"Expensive Car Supplement": If your car had a list price of over £40,000 when new, you must pay an additional £425 per year for five years (from the second year the car is taxed). This now applies to EVs as well.
How to Save: Choose a car with lower CO2 emissions to reduce your first-year tax. Be mindful of the £40,000 list price threshold when buying new.
5. Servicing and MOT
These are the essential maintenance costs to keep your car safe and roadworthy.
MOT Test: A mandatory annual test for cars over three years old. The maximum fee is legally capped at £54.85, but many garages offer it for less (£35-£45) to attract business.
Servicing:
Interim Service (every 6 months / 6,000 miles): Average cost £110.
Full Service (every 12 months / 12,000 miles): Average cost £170-£210.
Major Service (every 24 months / 24,000 miles): Average cost £210+.
Repairs: This is the great unknown. Budgeting for unexpected repairs (e.g., new tyres, brakes, exhaust) is crucial. A good rule of thumb is to set aside £30-£40 per month into a dedicated car maintenance pot.
How to Save: Use trusted independent garages, which are often cheaper than main dealerships for servicing and repairs.
Know Where You Stand: Take the Plouta Financial Wellness Survey
Taking our Financial Wellness Survey is a great first step. It will help you reflect on your habits and identify the key areas to focus on in your journey towards financial freedom.
Conclusion: Plan for the True Cost, Not Just the Price Tag
While the allure of a new car is strong, the reality is that the purchase price is just the entry ticket. The ongoing costs of depreciation, fuel, insurance, tax, and maintenance form a significant and relentless part of your budget, easily adding up to thousands of pounds every single year.
By understanding these true costs before you buy, you can make a much more informed decision. Choosing a reliable, fuel-efficient car, buying used to avoid the worst depreciation, shopping around for insurance, and budgeting for maintenance are all powerful habits. This foresight is a cornerstone of financial wellness, ensuring your car remains a convenience, not a financial burden.
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Disclaimer: This guide provides general information about the costs of car ownership in the UK, based on market research and data available as of July 2025. It is for informational and educational purposes only and does not constitute financial advice.
All figures mentioned including insurance premiums, fuel prices, servicing costs, and tax rates are averages and estimates. Actual costs can and will vary significantly based on your personal circumstances, including your age, location, driving history, the specific make and model of the vehicle, and overall market conditions. The value of used cars and depreciation rates are also subject to fluctuation.
Before making any decision about buying or running a vehicle, you should always conduct your own research and obtain personalised quotes for costs such as insurance. This article should be used as a guide to help you understand the potential expenses involved, not as a substitute for a personal budget. If you are unsure about the financial implications of car ownership, consider seeking independent financial advice.