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Simple guide to budgeting to run a car

Simple guide to budgeting to run a car

Getting your first car is a first milestone every young adult looks forward to, how to pay for it something every parent dreads.

Getting a license is the first step, see our Simple step guide to getting a UK driving license but now you have your license and want to buy a car what should you do and how much is it going to cost?


Motor insurance is the largest monthly outlay when it comes to running a car and the newer, faster and more expensive the car is, the higher the premiums. Avoid getting into trouble/debt by keeping your first car purchase under 1300cc engine capacity.

In the first year after passing your test your premiums will be astronomical. Some companies like Direct Line allow you to build a no claims discount by being a named driver on an older more experienced drivers policy before you try and take out a policy of your own. Planning ahead and piggy backing on someone elses policy the minute you turn seventeen, so you start to build a good record with the insurer can save you alot of money down the road. You can also keep insurance costs down by adding a more experienced driver to your policy as a named driver but if you are the main driver you must state this. Using an insurance company that caters specifically to young drivers can also reduce your premiums.

There is a list of these companies on

Road tax

Every car on the road must display a valid tax disc on the windscreen to be legal. This fee is paid every 6 or 12 months. 12 months road tax for a vehicle under 1549cc costs £135 per year. You pay a slight premium (£13.50) to buy 6 months road tax at a time, £74.25.


As your first car is likely to be a few years old it must have a valid MOT certificate. This is a certificate of road worthiness and is valid for one year. The cost of an MOT test varies but we found several companies offering a test with a free retest within 14 days (if your car fails you get an opportunity to fix the things it failed on and have it retested at no extra charge) for £25.00 at

Car parts and labour are very expensive and can add up quickly so a valid 12 month MOT is worth a great deal when purchasing a car.


How economical your car is depends on a number of factors but the main one is the size of the engine. The larger the engine capacity the more fuel it will need to run, another reason for not getting carried away when buying your first car. A 1.4 (1360cc) Peugeot 206 will get about 30 mpg (miles per gallon) about 6.5 miles per litre.

If £50 per month is your fuel budget, on a car like this you will only get to drive about 240 miles which isn’t very far when you break it down daily, about 8 miles per day.


Cars breakdown even if you buy one brand new and parts and the professional labour to fit them are extremely expensive for anyone living on a budget so unless you are mechanically minded or have someone who can fix your car should something go wrong you need to be able to save at least £10 per month for repairs. This should cover the costs of a minor thing going wrong or any maintenance your vehicle needs like new tyres, a new exhaust, brake pads/disks however it will not be enough to pay for something major going wrong like your clutch or cylinder head gasket. When running a car on a tight budget it is always smart to buy the oldest, cheapest car you can with low mileage under 70,000 if possible, with 12 months MOT and tax. Then you get to drive it for a year hopefully maintenance free but in the event something really expensive to repair goes you have minimised your risk with a low initial investment that in this eventuality can be partially recouped should your car have to be scraped. (i.e. the cost of repair is more than the car is worth.)

I paid £450 for a Renault Clio. I drove it for two years and when something expensive to repair went I scraped it for £140.

Good driving record

The reason insurance is so high for young inexperienced drivers is because with that inexperience come accidents which cost the insurance company.

Taking the Pass Plus driving test costs about £100 but shows commitment to insurance companies if you pass and could reduce insurance premiums by up to 35%, on a £100 per month premium that’s 35 quid a month. Every year you drive accident free your premiums will reduce as you earn your “no claims bonus” i.e. the number of years you have driven while insured and not had an accident or made a claim. If you involved in a accident but it was not your fault, your no claims bonus is unaffected.

Minimum necessary annual budget to run a car under 25 years old

Cost of vehicle to purchase £600.00
Insurance premium monthly (£100) £1200.00
Fuel (driving 20 miles per day) (£100) £1200.00
Savings For Repairs/Maintenance (£10) £120.00
MOT £25.00
Total £3145.00

Top budget tips when it comes to driving

Share your vehicle with a family member, neighbour or friend who lives nearby and share the costs. This takes organisation, flexibility and an adult approach, (your parents won’t be happy to hear siblings arguing about a shared car they have helped pay for) but if you are mature enough it is a great way to have the luxury of a car when you need it but not all the expense. Do a week on week off or work out a schedule between the two of you, swap mid week and take alternate weekends.

If you make a regular journey to work or university put up a notice offering your services as a carpool driver and have your passengers chip in for the petrol. It’s much cheaper to drive a car with four passengers than none.

Before investing in a car save the £3145 you need for your first years motoring. The benefit of doing it this way and planning ahead is no stress in the future. You will also appreciate and understand the value of your car so much more when you’ve actually earned the money yourself to pay for it. If you are a student having the money up front is the only way possible to have a car on campus. If you are working and do have a monthly salary, saving up ahead of time will mean you are not spending all your salary/wage on your car.

We are told by marketing/advertising companies to believe our car says a little something about us and many of us aspire to drive a luxury brand because other people will be impressed. Having a car makes life much more convenient and allows you to get more accomplished so don’t be fooled into thinking too much about what others may think about your wheels. Be confident knowing they are bought, paid for and most importantly budgeted for, for at least 12 months in advance then the only thing anyone can think about you is how smart you are.

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