How to budget for a car in the UK
Understanding what this look like upfront, can help you make a more informed decision and avoid any surprises further down the line.
So, you’re looking to buy a new car – exciting! Exciting, but something that also has the potential to be an expensive financial commitment if you don’t budget wisely. It’s easy to focus on the upfront cost or your finance payments, but the reality is that owning a car comes with a range of ongoing expenses.
Understanding what these costs look like upfront, can help you make a more informed decision and avoid any surprises further down the line.
So, what do you actually need to budget for?
Start with your regular car finance payments
If you’re buying your car on finance, this will likely be your largest, consistent cost.
Your monthly payments will depend on:
- The amount you borrow
- Your deposit (if you’re putting one down)
- The length of your agreement
- Your APR
Before you commit to a finance agreement, it’s also important to ask yourself:
“Can I comfortably afford this payment every month?”
A good rule of thumb is to make sure your car payments easily fit into your budget, instead of stretching it too thin.
Car insurance
In the UK, car insurance is a legal requirement, and can sometimes come at a significant cost, especially if you’re a newer or younger driver, or you’re looking to insure certain makes of car.
The price you pay can also depend on things like where you live, where your car is being left overnight (do you have a driveway or is it on the street, for example), and your overall driving history.
Costs can vary widely, with estimates suggesting the so it’s worth getting quotes before choosing a car, as some models are much more expensive to insure than others. There are even some models that specialist lenders won’t finance, because of their associated insurance costs.
Fuel costs
Fuel is one of the most consistent ongoing expenses, and can also vary depending on .
How much you’ll spend depends on:
- How often you drive
- The type of journeys you make
- Your car’s fuel efficiency
For example:
- A smaller, fuel-efficient car will generally cost less to run.
- Larger or less efficient vehicles will increase your monthly spend.
Also factor in whether the car you’re looking at is a petrol, diesel or hybrid engine, as this will also be a factor in how much you spend each month.
If you’re trying to calculate your budget, a good first place to start is by estimating your weekly mileage and working from there.
Road tax (otherwise known as Vehicle Excise Duty - VED)
Most cars in the UK require you to pay road tax. The amount you pay depends on the car’s emissions, the type of fuel it uses and when it was first registered. This is typically paid monthly or annually, and is something you’ll need to factor into your overall costs.
MOTs and servicing
Once your car is over three years old, which will be the case for the majority of , it will need an annual MOT test to ensure to meets road safety and environmental standards.
You’ll also need to budget for regular servicing such as oil changes, brake checks and general maintenance.
While an (£54.85 for cars), any repairs needed to pass the test can quickly mount up to add to your expenses.
Unexpected repairs and maintenance
This is often where people can get caught out when running their cars. Even the most reliable motors can go ‘pop’ unexpectedly, with things like tyre replacements, battery faults or other mechanical faults cropping up with no warning. These aren’t always predictable, which is why it’s always a good idea to set aside a small buffer or emergency fund (wherever possible) for car-related expenses. Just a couple of pounds a week could come in handy when you least expect it.
Parking and other everyday costs
Depending on where you live, you may also need to factor in money for parking permits, pay-and-display parking, parking season tickets or congestion/clear air zone charges. These smaller, day-to-day costs can add up over time, especially in cities. If you live near a place with tolled roads or services too (i.e. the , (Runcorn Bridge) or ), it’s worth calculating any ongoing charges associated with using these into your budget.
A simple monthly budget example
To bring it all together, your monthly car budget might include:
- Your finance payment
- Insurance
- Fuel
- Road tax
- Maintenance fund contribution
Looking at everything as a whole, can give you a clearer picture of what owning a car will actually cost you each month, instead of looking at just one thing on its own.
How to keep your car ownership costs as manageable as possible
If it’s extra important that you stay in budget, there are a few ways to keep costs under control:
- Choose a car that’s affordable to insure and run
- Consider fuel efficiency when selecting a vehicle
- Set aside a small amount each month for maintenance
- Avoid stretching your budget on monthly payments
It’s not necessarily all about choosing the cheapest option – it’s about choosing something that works for your lifestyle and finances.
Is it better to budget monthly or annually
It can be helpful to look at it both ways.
Monthly budgeting makes it easier to manage your every day to finances, while annual budgeting helps you prepare for insurance renewals, MOTs and servicing.
A combination of both will help to give you the most complete view.
At the end of the day, it’s important to plan for the full picture
When budgeting for a car, it’s important to look beyond just the purchase price or the monthly finance payments.
The true cost of owning a car includes everything from fuel and insurance to maintenance and unexpected repairs. By planning ahead, you’re able to understand these costs and make decisions that are realistic, affordable and sustainable.
If you’re considering car finance, taking the time to understand your full budget can help ensure you choose an option that fits your lifestyle comfortably, instead of putting pressure on it. Why not use our to get an idea of what your monthly car finance payments could be?
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