Money Advice Service

Buying a car is one of the biggest purchases you’ll make. However, once you have bought your car, you have to keep it on the road. It’s important to think about how much this is going to cost in the long run.

Work out your budget for buying a car

Your budget will determine whether you can buy new or used and how much you can afford in running costs.

It’s crucial you’re realistic about your budget. Over-extending yourself can lead to problems later on – particularly if you have little or no savings and your income drops unexpectedly.

Use our simple Budget planner to work out how much you can afford to spend buying a car. It takes just a few minutes.

Use our Quick cash finder to discover how much you could start saving towards your new car. It only takes five minutes.

Work out the running costs

For help working out a car’s running costs, try our Car costs calculator tool.

Once you’ve worked out how much you can afford to spend buying your car, make sure you can also afford to run it.

It’s worth bearing in mind UK motorists spend an average of £1,679.60 a year on running costs. (Source: Office for National Statistics, 2017) However, this figure does not include the cost of depreciation, which is the amount of resale value a car loses each year.

As a basic comparison, here is an example of running costs for a new car worth around £14,000 and a comparable used car that’s five years older in the first year after purchase.

Expense New car Used car
Fuel £850 £900
Insurance £500 £500
Servicing and maintenance £300 £600
Vehicle tax £10 £20
Estimated annual depreciation £7,600 £2,450
Running cost £1,660 £2,020
Total cost, including depreciation £9,260 £4,470

These figures are only to give you an idea of the difference in running costs between a new car and one around five years older.

So, although the used car costs more to run, the new car will lose more of its value during the year, affecting the amount of money you’ll be able to get when you come to sell it.

Also, keep in mind that, typically, cars with larger engines cost more to run, and also lose more of their value to depreciation.

Depreciation affects new cars more than older cars, so the older the car, the smaller the drop in its value. That means if you know you’re likely to sell the car soon, an older car will let you get back more of the money you bought it for when you sell it.

Find out more about how car depreciation works.

If you know the different types of running costs to allow for and just need help calculating them, try using the calculator on the This is Money website.

How to find the right car

Top tip

Don’t let your heart rule your head. If you can’t afford your dream new car, consider a nearly new or used car.

Find out more about nearly new cars on the Which? Car website.

Unless you already have a car in mind, you should start by looking:

  • in car magazines
  • at cars on the road
  • on motoring websites
  • at your local car dealers.

You could also ask friends, family and work colleagues for recommendations.

Top 10 questions to ask yourself

Now you’ve made sure you can afford a car, it’s time to find out what you can buy within your budget.

But first, ask yourself the following questions, all of which are essential when choosing your next car:

  • What length of warranty am I looking for?
  • Do I want one of the safest cars on the road?
  • Do I want a car which will hold its value well?
  • Does my car need to be able to tow a caravan?
  • Would I like to buy one of the most reliable cars?
  • Do I need to be sure the car will fit in my garage?
  • Will I normally be driving short distances or longer journeys?
  • Do I want my car to be environmentally-friendly and economical?
  • How much space do I need for passengers, including perhaps a dog?
  • Do I need to keep running costs such as tax, insurance and fuel to a minimum?

Comparing cars

To help you decide which car would be right for you, the following websites publish regular reviews of:

Your next step

This article is provided by the Money Advice Service.