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Is keeping your car really worth the money?

The rapidly rising cost of living in 2022 is affecting almost every area of our lives. And, if you have a car, you will notice a big difference in how much it is costing you.

For some people, these rising costs have made them decide to give up their car. A recent survey by Kwik Fit revealed that 4% of drivers have already sold their car this year and not replaced it. This particularly applies to younger drivers under 35. And 35% of motorists are consciously trying to use their cars less, by cutting down on non-essential journeys to save money. 

What about you? If you own a car, have you considered getting rid of it? Or is it absolutely necessary to your everyday life that you would find hard to manage without?

In this article we look at:

  • The main costs of running a car and how to reduce them.
  • Alternative options if you decide to get rid of your car.

The main costs of running a car and how to reduce them

When you have a car, you take it for granted, and perhaps don’t realise how much all the costs of running a car really do mount up. So here is a quick summary of what you could expect to spend on a car in a typical year.

  • Car loan

Unless you owe your car outright, you are likely to be paying some kind of loan for your car. Whether that is a short term loan or a personal contract plan, there will be monthly payments to make, with interest added on top. Even though the payments are going towards the car, so each month you owe less money, the value of the car will also depreciate month by month. This means that you are unlikely to get back the full value that you paid for the car when you resell it.

If your financial circumstances change, and you are able to pay off your car finance early, this can be a good idea as long as you won’t be charged any financial penalty for doing so. Once you have paid off your car loan, the vehicle is then yours to do with as you wish – including selling it and changing to a smaller car if this works for your circumstances.

  • Fuel

This is the hot topic of the moment! Fuel prices have shot up in 2022 and this is likely to continue. Reducing car journeys and driving more carefully and smoothly can both help to reduce the amount of money you spend on fuel. But when you do need to fill up, you will always notice the difference from the last time you did it. 

Be careful to shop around for the cheapest fuel, as prices can vary enormously. And check at the pump that you are not paying for premium fuel by accident. Standard petrol in the UK is E10, and premium petrol is E5.

Fuel prices are causing many people to look into electric cars. The longer term plan in the UK is that the sale of new petrol and diesel cars will be banned by 2030 and new hybrid cars by 2035. So if you are planning to change your car anyway, it would be worth looking into electric or hybrid cars as an option. The car itself may be more expensive, but there will be no fuel costs to pay.

  • Insurance

Car insurance can be really expensive, but there is a wide range of options to choose from so it is always worth shopping around. Comparison websites such as Compare the Market and Money Supermarket can help you find the best deal for you. Always be careful to read the small print to check that the policy does what you need it to, whether there is an excess to pay in the event of a claim, and also that you are not paying for more features than you really need. 

If you are a new driver it can reduce the cost if you add a second, more experienced, driver to your policy.

Most insurers enable you to pay your premiums in monthly instalments. This may work out a little more expensive overall, as they will probably add interest on, but it does mean that you can spread the cost over a year.

  • Vehicle tax

It is a legal requirement to pay vehicle tax on your car unless the car is off the road. If it is off the road you need to register a “SORN” (Statutory Off Road Notification) with the DVLA. 

The amount of vehicle tax you pay depends on the type and age of the car you have. For example for cars registered between 1 March 2001 and 31 March 2017, the annual rate of vehicle tax is based on fuel type and CO2 emissions and can range from £0-£630. 

For cars registered on or after 1 April 2017, there is a variable initial 12 months payment depending on the type of car, then a fixed annual payment, currently £165 for petrol and diesel cars and £155 for alternative cars, including hybrid, bioethanol and liquid petroleum gas.

If you own a fully electric car there is no vehicle tax to pay. 

As with insurance, you can choose to pay vehicle tax in monthly instalments rather than all up front.

  • MOT

If your car is over 3 years old it is a legal requirement for it to have a valid MOT certificate. If you do not have one you could be fined up to £1,000, or even prosecuted. 

But the price you pay for your MOT will vary between testing stations. You may not be aware that many Councils have MOT testing centres that can be cheaper than some garages, so check with your local Council to see whether this is the case in your area. Also check out motoring chains such Kwikfit and Halfords.

You can give your car the best chance of passing its MOT by keeping it well-maintained and serviced. Though this will require yet more expenditure.

  • Servicing and Repairs

Try to get into the habit of regularly checking your car for any damage or other issues. For example, check tyres for damage and wear and tear, windscreens for cracks and wipers, lamps and indicators for faulty bulbs, and fluids such as engine oil, screen wash etc. Remember that minor repairs and replacements can turn into more major and expensive problems if not sorted out straight away.

Many car owners aim to have an annual service, but this can cost a lot of money. If you keep on top of minor repairs, and are not using your car quite as much as you were before, you may be able to have it serviced less often. Also, when you do get it serviced, ask around for recommendations for small local garages rather than automatically going to the dealer. You could get just as good a service but at a much cheaper cost.

  • Cleaning 

Paying to have your car cleaned is another car-related expense that can start to mount up. So, even though it’s not most peoples’ favourite job, if you can get into the groove of cleaning your car yourself, this can work out a lot cheaper than either going through a car wash or having it valeted. 

Cleaning your car yourself – both inside and out – can also help with the ongoing maintenance of your car, as you will be able to spot any bits of damage to bodywork, glass or tyres.

  • Parking, tolls and fines

When counting the cost of using your car, don’t forget to consider charges for parking and tolls. These charges can really add up if they are part of a regular journey. 

It’s worth looking for cheaper parking before you make a journey. Find out the location and prices of car parks. Also see if there are streets a walkable distance from your destination with free street parking. Or another option is to see if you can find a private parking arrangement via a website such as Park on My Drive.

If there don’t seem to be any cheaper parking solutions, you may want to investigate other options such as Park & Ride, public transport or a local car sharing scheme. 

Wherever possible, also plan your journey to avoid additional costs such as congestion charges (such as central London) or toll roads. And when driving in unfamiliar places, be watchful for situations where you could do something wrong without realising it, and be fined as a result. For example, driving in a bus lane or parking in a restricted zone. Let’s face it, an unexpected penalty notice is the last thing you need right now!

Alternative options if you decide to get rid of your car

You may be considering getting rid of your car to save money. It all very much depends on how essential a car is to your daily life. If you and your family have regular journeys that you would need to find another way of doing, it may be false economy to get rid of your car as you would still need to pay for your travel anyway.

But if you are more of an occasional traveller, and don’t need your car every day, it may be worth looking at alternative means of transport such as:

  • Walking
  • Cycling
  • Public transport
  • Taxi or Uber
  • Hiring a car

Car hire is becoming cheaper and more readily accessible through peer to peer car hiring/sharing schemes, such as Zipcar, Hiyacar, and Karshare. Many schemes work on both an occasional or ongoing basis, so if you still sometimes need a car for a few days or weeks, it may now be easier and cheaper to do than previously. 

And if you didn’t have a car, you wouldn’t have the year round costs of:

  • Car loan
  • Fuel
  • Insurance
  • Vehicle tax
  • MOT
  • Servicing and repairs
  • Cleaning
  • Parking fees and tolls

Certainly food for thought!

We hope that the above information helps you to weigh up the costs of running a car so that you can make the best decision about whether or not to buy or keep a car.

Check back here soon for more lifestyle and financial tips from Loans 2 Go.