Buying a car is an exciting purchase, whether it’s your first or your fifth, but have you had time to consider all the costs…
Step 1 - The Car
Whether you choose to lease or buy a car outright, you need to think about how you’re going to pay. If you’ll be paying monthly, keep in mind what is included as well as any limitations. For example, is the mileage limited yearly? Have you thought about what you will do at the end of the contract - do you plan on making a one-off payment to keep the car? Will there be added fees at the end of your contract? Make sure to research this to find out exactly what you’ll be paying.
Step 2 - Car insurance
It is no secret that to drive your new car around, you need to be insured. The most important thing when researching insurance options is to use comparison sites. Once you’ve got a rough idea, play around with a few factors to see if the price can be reduced - perhaps add another driver (a parent or a sibling that's been driving for a long time) or look into the option of having a black box. Also, always try to speak to someone on the phone about your quote because most of the time you will be able to negotiate a better price.
Step 3 - Tax
The average road tax as of April 2022 is £165 from the second year onwards. The first-year cost depends on the CO2 emissions of your specific car and this ranges from £0 to just over £2000. You have the option to pay this tax monthly or yearly, but as with most payments, it tends to work out cheaper yearly. If you choose the one-off payment, maybe think about creating a sinking fund to put aside the money monthly.
Step 4 - Car maintenance
Services, MOT’s and a trip to the car wash can all constitute another monthly cost. Even though you may only need a service once a year (or for every 12,000 miles you drive, depending on your vehicle), the price can add up very quickly. The low cost of an MOT can also be deceiving, as if your car doesn't pass, you'll need to be prepared for hefty additional costs. Again, a sinking fund may be something you want to think about so that you're ready for the unexpected.
Step 5 - Petrol
With the ever-rising cost of petrol, this is something you must consider when buying a car. If buying a petrol car, consider how fuel-efficient it is. How much does it take to fill up the tank on average and how often will you need to fill it up? Petrol has risen by around 12% since January (UK pump prices over time), so it’s definitely another thing to keep in mind.
Here's a rough example to help you see the costs altogether - don't be intimidated, just always be prepared!
Cost per Month