Buying a Car? Time to Consider all the Costs

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…

Car tax figures updated for 2026/27.

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

To drive your new car, you need to be insured. The most important thing when researching insurance 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 who has been driving for a long time) or look into a black box policy. Also, try speaking to someone on the phone about your quote, as you can often negotiate a better price.

Step 3 - Tax

For cars first registered from April 2017, the standard rate of car tax (Vehicle Excise Duty) is £200 a year from the second year onwards (2026/27). The first-year rate depends on your car’s CO2 emissions and ranges from about £10 to £5,690. Electric cars now pay car tax too. Cars with a list price over £40,000 (£50,000 for electric cars licensed from April 2026) also pay an expensive car supplement for five years. You can pay monthly or yearly, but paying monthly by Direct Debit costs a little more. If you pay yearly, think about creating a sinking fund to put the money aside each month.

Step 4 - Car maintenance

Services, MOTs and trips to the car wash all add to your monthly costs. Even though you may only need a service once a year (or every 12,000 miles, depending on your vehicle), the price can add up quickly. The low cost of an MOT can also be deceiving: if your car doesn’t pass, you’ll need to be prepared for extra repair costs. Again, a sinking fund can help you be ready for the unexpected.

Step 5 - Fuel

Fuel is one of the biggest running costs, so think about how fuel-efficient the car is. How much does it cost to fill the tank, and how often will you need to? Pump prices change often, so check current prices (UK pump prices over time) when you budget. For an electric car, look at home and public charging costs instead.

Here's a rough example from when this article was first written to help you see the costs together - don't be intimidated, just be prepared!