Owning and running a car can be a costly business. But for many people, it is an expense they cannot avoid. Indeed, over three quarters (78%) of motorists claim that their car is essential to sustain their current lifestyle – according to a survey of 1,460 UK car owners commissioned by KnowYourMoney.co.uk.
Despite the importance of cars to consumers’ day-to-day lives, there remains a surprisingly large knowledge gap surrounding the actual cost of running and maintaining them. In fact, while the majority (64%) of drivers realise that their car is their most expensive monthly outgoing, after rent or mortgage payments, almost the same number (65%) admit to not knowing how much they spend on their car each year.
So, the big question is: what is the true cost of car ownership?
The full costs revealed
The total cost of owning a car may come as a surprise to many consumers; on average, a UK car owner spends £284 on their vehicle every single month. For those who bought their car on finance, this figure increases to £479 when the monthly repayments are included.
Delving further into the KnowYourMoney.co.uk research, we discovered that car finance payments are the priciest monthly expense, with repayments averaging £195 per month. This is followed by fuel (£75), car insurance (£53) and maintenance, such as cleaning, replacing parts and general upkeep (£45).
So, why is it important to note all of these costs? Put simply, keeping on top of monthly outgoings will ensure that consumers do not find themselves burdened with hidden costs – and given the current economic climate, savvy management of one’s finances has never been more important.
Avoiding financial burdens
While it might seem like an obvious point, tracking car expenses will help consumers to avoid any nasty financial surprises later down the line.
Interestingly, many car owners are actually taking on additional financial burdens beyond the regular outgoings. For example, in the case of an accident, 44% of car owners said they would prefer to pay for the repairs themselves, so that their car insurance quote is not negatively affected.
What’s more, almost a fifth (19%) of UK car owners admitted to taking on debt within the past 12 months to pay for a service, repair or MOT. These figures highlight that failure to understand their car expenses and put aside an emergency fund is resulting in consumers driving themselves into an unsettling financial situation.
Following the devastating economic impact of COVID-19, many households’ finances are tighter than ever. So, it is vital consumers get to grips with their car expenditures and manage their bills more effectively. Positively, it is much easier to do this than some would assume.
Empowering savvy consumers
It’s curious that, despite the majority (61%) of car owners believing that the price of car ownership has increased significantly over the past five years, over a fifth (22%) fail to shop around to lower the price of one of the largest expenses: insurance.
It is of the utmost importance that consumers feel empowered to do so and investigate all options available to find the best deal. Consumers should make a habit of researching the market for various financial products, whether that is a car finance plan, insurance or breakdown cover – this includes when they first purchase the vehicle and also when these policies come up for renewal. Doing so can save car owners hundreds of pounds each year.
Many consumers – not just car owners – fail to shop around for better deals from providers due to the perceived time and effort involved. But this need not be the case.
The best place to start is often a comparison website. Indeed, they take into consideration all requirements of the car owner and search the internet to find the most suitable options. They then present all options in a clear way, enabling consumers to choose the best option to suit their needs.
In these challenging times, it has never been more important to keep track of monthly outgoings in order to balance budgets; and car maintenance should be high on the list of expenses to review. Not only will it help consumers to avoid any nasty surprises, but it will also enable them to identify where potential savings could be made.
About the Author
John Ellmore is Director for KnowYourMoney.co.uk. Know Your Money is an independent financial comparison website, launched in 2004. Run by a dedicated team, Know Your Money’s goal is to provide clear, accurate and transparent comparisons for a wide range of financial products, such as business loans, mortgages and car insurance.