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Find out how much it really costs to own a car in the UK, from fuel and tax to insurance and depreciation.
Buying a car isn’t the end of your spending. While the purchase price or monthly lease deal might be the headline figure, the true cost of car ownership includes fuel, insurance, maintenance, and depreciation. For most people, owning a car ends up costing several thousand pounds a year once everything’s included.
You can buy a car outright, finance it in a range of ways, or lease it. Paying up front in cash avoids interest, but requires a lot of capital expenditure, so most UK drivers tend to spread the costs over monthly payments. A small hatchback might cost around £250 to £300 a month on finance, while a mid-size SUV is likely to be closer to £400 or £500 a month. Leasing can often offer lower monthly payments and includes Vehicle Excise Duty (road tax), which makes it an increasingly popular option.
Getting your car to actually move is one of the more visible costs of ownership. The actual costs will vary depending on how far you drive, what kind of journeys you make, and what kind of car you have. So take these figures as more of an indicator.
The average UK driver covers between 7000 and 10,000 miles per year. With a petrol car, costing broadly between 15p and 17p per mile, that’s £1200 to £1700 each year.
A diesel car can be slightly more efficient – often 13p to 15p per mile – at a cost of between £1000 and £1500 annually. Keep in mind, though, that pump prices have fluctuated during 2025 and could continue to do so.
Electric cars charged at home can cost as little as 6p to 8p per mile, meaning annual costs of between £500 and £800 (although public rapid charging can push this higher).
Vehicle Excise Duty, often known as road tax, depends on the age of your car. If your car is new, you’ll pay a first-year emissions-based showroom rate that’s included in the on-the-road buying price. After that, and if you have a car registered on or after 1 April 2017, you’ll pay a flat annual rate, which is currently £195. If your car costs more than £40,000 (including options), there’ll be an Expensive Car Supplement on top of that between years two and six of taxation, which is currently £425 a year.
Cars registered before April 2017 work on a different emissions-based system. Your annual tax will depend on how much CO2 it emits from its exhaust – cars are put into bands from A to M with a corresponding annual cost. Owners of cars with the lowest emissions – Band A – will pay just £20 a year, while the most polluting cars (Band M) bring annual charges of £760.
If you’re leasing a car, the VED is included in your monthly lease rate.
Keeping a car roadworthy will require regular servicing, the frequency of which will depend on the mileage you do and the manufacturer's recommendations for your particular car.
The cost of a straightforward annual service will again depend on the car, but generally ranges from £150 to £500. Keep in mind that the cost of wear-and-tear items, such as tyres, brake pads, and 12-volt batteries can quickly add up if neglected, so it’s important to service your car as directed by the manufacturer.
Three years after registration you’ll also need to put your car through an annual MOT test, which costs up to £54.85.
One of the most variable ownership costs is car insurance. It can be particularly pricey if you’re young – drivers under 25 could face annual premiums of more than £1500. According to the ABI (Association of British Insurers), the UK average premium in the second quarter of 2025 was £562.
Premiums depend on a range of factors, including your postcode, your personal driving history, and the type of car you drive. Electric cars and high-performance models can cost more to insure because of pricier repairs, although that gap has been narrowing.
Many car owners forget about depreciation, but it’s often the biggest hidden cost. A new car will typically lose more than half of its value within five years. As an example, a £30,000 car will often be worth just £20,000 after only three years, which is £10k just… gone. For that reason, it could be worth buying nearly new, as the depreciation rate of a one-to-two-year-old car will likely be far slower.
We’ve compiled this table to give you a rough idea of ownership costs for two of the most common types of car in the UK. These are illustrative averages and by no means definitive, but they give a summary of the kind of costs you should take into account and how they add up.
We’ve used cost estimates based on Department for Transport mileage data, fuel costs from the RAC and insurance averages from the ABI, as well as typical finance and leasing deals.
| Cost | Small Hatchback | Family SUV |
| Finance/Lease | £3000 (£250/month) | £5000 (£420/month) |
| Fuel | £1200 (petrol) | £1500 (diesel) |
| VED (Road Tax) | £195 | £195 |
| Maintenance and servicing | £300 | £500 |
| Insurance | £600 | £800 |
| Depreciation | £2500 | £4000 |
| Total per year | £7795 | £11,995 |
The costs of motoring rarely stay constant. For example, fuel prices rose sharply in 2022 and, according to the RAC Fuel Watch, are still higher than they were before the COVID-19 pandemic.
Insurance premiums climbed through 2023 and 2024, although ABI figures show that they dropped during 2025 as repair backlogs eased.
Industry sales data showed a peak in used car values during the pandemic, but these are now stabilising. Autotrader reported in August 2025 that average used car prices had stayed flat year-on-year after 19 months of falls, and Parkers found that prices are flattening out as supply improves and sales return to pre-pandemic levels.
Electric cars remain cheaper to run per mile, although since April 2025 they’re no longer exempt from VED and are subject to the same tax bands as petrol and diesel cars. And speaking of electric cars…
Owning or running an electric car is likely to save you money on fuel and routine maintenance, especially if you’re a high-mileage driver.
Maintenance costs tend to be lower because electric cars have fewer moving parts than a petrol or diesel car, and fuelling costs less because electricity tends to be cheaper – especially if you have a home charger and an EV-specific tariff.
You’ll also pay VED of just £10 in the first year for an EV, which contributes to a lower on-the-road purchase price. And the government’s new Electric Car Grant offers discounts on EVs of up to £3,750, depending on the model.
However, EVs still tend to cost more to buy or lease than an equivalent petrol or diesel model. Insurance costs can be higher, and the charging costs are very dependent on infrastructure – if you don’t have a home charger, public charging can be pricey and, depending on where you are, hard to find.
For higher-mileage drivers, EVs often work out cheaper overall, but if you’re covering less than 10,000 miles a year it’s worth doing some maths, as petrol or hybrid cars could be more cost-effective, especially without home charging.
Despite the myriad variables in the costs of car ownership, there are various ways that you can lessen the financial impact.
Shopping around for insurance can be a major factor – the ABI suggests that comparing quotes can save you hundreds of pounds. Don’t just accept the first quote you get or the standard renewal offer from your existing supplier.
Tempting as it can be to skip a service on your car, it’s a false economy – regular servicing can prevent larger bills in the future, and a solid service history will also lessen the depreciation on your car when you come to sell it.
Consider leasing a car instead of buying it. You’ll get predictable monthly costs that can fit with your budget, and no depreciation worries. You could also look at buying nearly-new rather than new, because the biggest depreciation hit comes in the first two years of a car’s life.
It’s also worth tracking your fuel or charging costs. There are various apps available to help you find cheaper fuel stations or EV chargers, such as PetrolPrices and ZapMap.
Despite the myriad variables in the costs of car ownership, there are various ways that you can lessen the financial impact:
Shopping around for insurance can be a major factor – the ABI suggests that comparing quotes can save you hundreds of pounds. Don’t just accept the first quote you get or the standard renewal offer from your existing supplier.
Tempting as it can be to skip a service on your car, it’s a false economy – regular servicing can prevent larger bills in the future, and a solid service history will also lessen the depreciation on your car when you come to sell it.
Consider leasing a car instead of buying it. You’ll get predictable monthly costs that can fit with your budget, and no depreciation worries. You could also look at buying nearly-new rather than new, because the biggest depreciation hit comes in the first two years of a car’s life.
It’s also worth tracking your fuel or charging costs. There are various apps available to help you find cheaper fuel stations or EV chargers, such as PetrolPrices and ZapMap.
Owning a car is about more than just paying for the keys. When you add fuel, tax, insurance, and depreciation, the overall annual costs can surprise many drivers. It’s vital to consider all aspects of car ownership when choosing a new car or planning your spending. Buying nearly-new can lead to big savings, while leasing can mean fewer headaches over unexpected costs.
If you’re exploring your options for your next car – whether petrol, diesel, hybrid or fully electric – check out the latest Select Car Leasing special offers.
Data from the Office of National Statistics and the Department for Transport shows that most UK drivers spend between £3500 and £5000 per year on car running costs, according to analysis by personal finance website NimbleFins. However, larger cars can cost much more once depreciation and finance are added.
It can be, yes, especially if you do higher mileage and have access to a home charger, because electricity costs less than petrol or diesel. However, insurance and up-front costs can be higher.
As with so many car-related costs, it depends on the car and how much you drive it. But based on ABI insurance averages, RAC fuel data, and leasing market figures, budgeting £300 to £600 per month for finance or lease costs, fuel or charging, and insurance would be a sensible guide. Bigger cars, luxury cars and performance cars will cost more.
Yes, it can. Leasing often means you can avoid large upfront payments, and can protect you from depreciation. VED (road tax) is also included in your monthly payments.
Want to know more about car leasing? Get in touch now with our dedicated leasing consultants on 0118 920 5130 or email us at enquiries@selectcarleasing.co.uk
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