What's the Real Monthly Cost of Owning a Car in the UK?

There is a saying that when buying a car, the purchase price is the cheapest part. When considering what it costs to own and run a car in the UK, there are a number of considerations to factor in aside from the cost of the car itself.

Car ownership can be a costly business, and it's important to work out the monthly cost of owning a car to ensure you save money where possible and ensure car running costs stay affordable.

The average annual cost of car ownership can vary greatly depending on the car you buy, insurance history, and much more. In this post we break down the main monthly costs of owning a car in the UK and what car owners should consider when it comes to monthly costs.

Monthly Fuel Costs

One of the key factors to consider when working our running costs is your monthly average spend on fuel.

Think about how many miles you intend to drive each month. Fuel prices fluctuate constantly, but taking an average current cost of petrol and diesel per mile over the number of miles you expect to drive in a month will give you an idea of what you might expect to pay for your monthly fuel.

This can help determine critical factors such as:

What should your mileage limit for your car finance agreement be?

Consider the miles driven on your regular commute, and add in leisure and other forms of driving such as regular visits to friends and family, your weekly shopping trip, and any other regular trips you are likely to do. Once you have worked out your average monthly mileage you can multiply this by 12 to get your expected annual mileage.

Should you buy a petrol or diesel car?

There is a disparity in the cost of petrol and diesel fuel, with diesel being a more expensive, but more economical option. As a rule of thumb, most car owners only see a benefit in buying a diesel car of their annual mileage exceeds 20,000 miles per year.

What average mileage will you put down for your car insurance policy?

The average mileage you expect to do is not only useful for your car finance agreement, but for determining the cost of your car insurance too.

According to NimbleFins, the average petrol car cost £106 per month (£1,272 per year) to fuel in 2019, and diesel cars cost an average of £140 per month (£1,683 per year). Fuel costs have increased significantly since then, reaching record highs in 2022, making fuel one of your most important monthly running costs to consider.

Monthly Car Insurance Costs

Now you have your annual mileage you can start to look at insurance premiums for the car you would like to buy, another vital factor in determining your car running costs. Fully comprehensive premiums are more expensive than third party insurance options, however fully comprehensive is always recommended for maximum cover. You may find some finance agreements will expect or require a fully comp policy in order to complete the agreement.

Your monthly car insurance costs will vary depending on the value of the car, the engine size, engine type, your driving history, where you live, where the car is parked overnight, whether the policy is fully comprehensive or third-party insurance, and a number of other factors.

According to Motor1, car drivers and now paying in excess of £58 per month (£700 per year) for their car insurance, in part thanks to the increased value of the used car market thanks to the decrease in availability for those trying to buy a brand new car.

Monthly Car Tax Costs

Vehicle tax, road tax, or vehicle excise duty (VED) is another monthly cost which can vary greatly depending on the car you buy. If you are considering buying a new car, or nearly new, you may find you need pay no vehicle tax at all. A number of cars on the road now pay no road tax thanks to their green credentials, including certain models of the Nissan Qashqai, Vauxhall Astra, and Ford Fiesta.

At the other end of the scale, larger and commercial vehicles can cost in excess of £600 in the first year in road tax. 

The flat tax rate for petrol cars after year one in the UK is currently set at £165 for petrol and diesel cars. 

This handy guide from the AA breaks down how car tax bands work and what you can expect to pay.

Monthly Car Finance Costs

Another cost to consider is the monthly repayments on your car finance agreement. Using a car costs calculator for finance can give you a rough idea of what you might expect to pay, but speaking to a car finance manager is the best way to get an accurate figure. 

If you are looking for a cost-effective way to own a car and reduce monthly running costs read our guide to the cheapest ways to own a car in the UK to discover why car finance could be a good option for you or contact our team today to discuss your car finance requirements.

Monthly Car Maintenance and Repair Costs

Whichever car you buy, an essential element of your car's running costs is the service and maintenance costs. Without regular maintenance, your car may cease to run at all. Ensure you factor in an annual MOT (for cars at three years old and over), and annual servicing costs. Ensure you factor in extra budget for tyres and other parts with a limited life span such as the clutch and cambelt.

Your annual MOT test will cost a maximum of £54.50 on a car in the UK, and some garages will carry out retests and minor repairs for free. 

Service costs will vary depending on the type of service required, and the hourly rate of the garage you take it to. The frequency of servicing required will depend on how many miles you do, but on average, if you own a car in the UK you'll need a car service in 12-24 month intervals, or 10,000-20,000 miles, depending on which comes first.

You can find out more about car servicing in the AA complete car servicing guide, or speak to your local garage to get a quote for the car you have in mind.

Breakdown Cover

If you are looking at adding breakdown cover to your car purchase you can expect to spend between £20 per year and £160 depending on the car, and the level of cover provided. In some instances, you may be offered free or reduced costs breakdown cover as part of other services such as your bank account or car insurance policy.

Every car bought from DCC comes with 12 months AA breakdown cover as standard.

Monthly Parking Fees

Parking fees are an often overlooked monthly car running cost. Whether you need to use a car park for work, shopping, or something else, if you visit regularly these parking costs can add up and should be factored into your car cost planning.

Vehicle Depreciation

Inevitably every month, every car in the UK your car will lose a little of its value. How much this will be varies greatly, based largely on the vehicle's age, mileage, condition and demand for that car. There are online calculators and advice available, but these are a rule of thumb only based on the market at the time. When buying a car it's a good idea to get an idea of the expected depreciation, as some hold their value better than others.

If you want to guarantee the future value of your car, speak to a car finance manager about hire purchase and personal contract purchase car finance options, where a guaranteed minimum future value of the car is set at the start of the agreement. You can find out more about HP and PCP agreements in our blog.

Buy a car to suit your monthly budget with DCC

At DCC we have a huge range of used cars to suit every monthly budget, and competitive finance agreements to help you budget and know what your car will be worth at the end of the term.

View our current stocklist or speak to a member of the team today to discuss your requirements.