How much does your car really cost to run

Posted by Elizabeth Harrison in Personal Finance on 30 July 2014 - Elizabeth is a Senior Credit Analyst at checkmyfile.

As the proud owner of a 1978 MGB I’m going against my instincts this time and wondering whether an older car is such a good idea after all. Sure, there are definite positives. If your car is classed as a historic vehicle i.e. made before 1 January 1974 then you’re exempt from paying tax. You may find that insurance costs are lower thanks to classic car drivers having a good reputation for looking after their vehicles and driving with care. Compared with the computerised boxes that pass for cars today, which sense your keys from across the car park, decide when the windscreen wipers are needed and help you park, older cars are actually quite straightforward to repair. For one thing, when you open the bonnet you’re faced with the car’s inner workings, not just another box and the problems can be fixed using a bit of knowledge and actual tools rather than another computer. Plus, driving these cars is actually fun and you won’t want to go back to your boring modern cars once you’ve driven one.

On the negative side, although you can pick up a second-hand car for a good deal less than a new car boasting all the latest technology, unless you do your research on the associated costs such as insurance and fuel-consumption and calculate whether or not the car is actually an affordable prospect long-term then you may be surprised by the actual cost of running and maintaining the car. Major repairs aside, your car’s likely to require regular maintenance to keep it running smoothly, petrol consumption will be high in comparison with the more fuel-efficient modern vehicles and insurers may limit the number of miles you’re able to drive each year in order to qualify for certain insurance policies.

But it’s not just drivers of older cars who don’t always realise the true cost of running a car. The Money Advice Service has found that large numbers of us underestimate just how expensive being a car owner can be. Choosing a car based purely on the affordability of the initial price may seem enough at the time but going on initial cost alone is a false economy when a car isn’t a throwaway purchase.

Underestimate the costs to run, insure and repair your car and you may be setting yourself up for financial issues. If the overall annual expense of running the car is far higher than expected, you’re going to have to make this up elsewhere. Many find they have to cut back on spending in other areas and some may even get into considerable financial difficulty as a result of not considering the bigger picture when making the purchase.

And it’s not as if you can just sell the car and make do without. A car often plays an essential part in giving people the ability to earn a wage in the first place and alternatives such as public transport are not always economically viable, as ticket prices continue to increase for an often less-than-reliable service. So if the car’s a necessary expense, it definitely merits careful thought.

The Money Advice Service now offers an online ‘car costs calculator’ to assist here and allows prospective buyers to search particular cars to get an idea of how expensive the cars would be to tax, insure and fuel, as well as taking depreciation into consideration. It’s not much use if you’re looking at an older model - apparently my car’s number plate doesn’t exist - but it’s a good way to check and compare potential cars before parting with your hard-earned money.

So don’t get swayed by futuristic looks and shiny trim. Putting in the time early on and researching realistic running costs should ensure you’re not scuppering yourself at a later date. (And just so you know, I don’t regret buying my car one bit)

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