When most people buy a car, they see the monthly finance and insurance payments for their vehicle as the cost of ownership.
But there are other factors which might not be as obvious which have pushed the average cost to £900 a month, with the average cost of vehicle ownership almost doubling in the past 10 years.
Cost of living
As reported in Motor Trade News, research by GAP insurance provider ALA Insurance found that in 2016, the annual cost of owning and running a vehicle was £6,500.
As well as finance and insurance, this also includes vehicle excise duty, fuel, servicing and maintenance, and depreciation, which has been especially noticeable with EVs.
The way people finance their cars can also push up the price, with some leasing or hire-purchase contracts insisting on a particular service and maintenance plan.
Other costs which motorists might not immediately appreciate include breakdown cover and connectivity subscriptions for various features included in modern vehicles.
Adding up
Today, with ALA calculating a 70% rise in car insurance, an almost 90% increase in the price of new vehicles and finance costs also doubling, the annual cost is now £11,500 — £5,000 more than a decade ago.
Motor Trade News reports: “The difference – roughly £415 more every month – is accumulated across fuel, insurance, finance and purchase prices.
“The £11,500 figure represents the total annual cost of car ownership including depreciation, fuel, insurance, road tax, servicing and finance repayments for those purchasing on credit.”
Those figures would make many people think vehicle ownership is out. While monthly payment schemes make it manageable, experts believe many people are unaware of the true cost of owning a vehicle.
Hidden cost
ALA’s research used figures from the ABI, RAC, the Bank of England and the ONS, as well as cross-referenced with price comparison platforms to show that the average new car today costs “the equivalent of 33 weeks’ gross pay for a typical UK worker, in comparison to nearly a full year’s salary before tax in 2026”.
Simon England, founder of ALA Insurance, said: “The shift to monthly payments has effectively buried the real cost of owning a car.
“Most people buying a new car are handed a monthly payment and told that is the cost, but it isn’t that simple.
“Once you account for depreciation, fuel, insurance and tax, the average new car driver is spending well over £900 a month to keep it on the road.
“General inflation has run at around 35 to 40% over the past decade.
“Car insurance has risen 70%, new car prices by nearly 90%, and finance costs have doubled.
“Millions of drivers are now committed to a level of spending that would have been unthinkable in 2016, often without fully understanding how it got this expensive.”
The true cost of vehicle ownership is no doubt lost on a lot of people. Many go into a monthly finance agreement knowing they can afford the figure in front of them, and probably with a plan to replace the vehicle within three years and without making large balloon payments.
The advances in vehicle technology have been huge over the past 10 years with cars features for safety, comfort and convenience. But this is reflected in the price, with inflation and depreciation eating into the value of what is the second biggest financial investment most people make.
