If you are currently driving an old car that you are thinking of replacing, it may actually cost the same, once all the various costs are calculated, to buy a a new, nearly new or pre-registered car as it would to buy another older car.

If you lack the money to purchase a new car outright, then the cost of the finance required may put you off and make you think that the finance needed for a new car can't be afforded. There are many areas in which the costs of a new car can be substantially lower than those of an old car. These savings may be enough to cover the increased finance costs.

Areas In Which Money Can Be Saved

Here are various motoring costs that can be reduced by purchasing a newer car.

Road Tax

Road tax needs to be paid to operate a vehicle on the public roads in the UK unless the car is exempt from road tax, such as electric vehicles or those used by a disabled person in receipt of the higher rate of the mobility component of the Disability Living Allowance or the War Pensioners Mobility Supplement, and even then a tax disc will need to be displayed.[1]

Cars registered on or after 1st March 2001 are taxed based on their CO2 emissions, those registered before that date are taxed based on their engine size. There are many different bands of road tax based on CO2 emissions, with the best cars never having to pay road tax (on current figures), and others free for the first year with a nominal amount to pay for subsequent years for certain vehicles (up to £30) and currently £100 for one borderline emissions category. After that, road tax rapidly increases.

Buying a car registered after 1st March 2001 which has a low CO2 output compared to one registered prior to that date can easily save £200 per year.[2]

MOTCredit: http://en.wikipedia.org/wiki/File:MOT_Approved_Test_station_symbol.pngMOT

MOTs, named after an old UK government department, the Ministry of Transport, are required for all cars over three years old. Cars do not need MOTs for the first three years after registration. This is a yearly test and is required in order to operate a vehicle on public roads in the UK (with certain exceptions relating to MOTs themselves), although having a valid MOT certificate does not, at any time, mean that the car is either roadworthy or that it will pass an MOT.[3]

The MOT is one of the most likely times that faults will be discovered with a car, the other being during a service, although services cover less of the car than an MOT and are usually not actively looking for faults. MOTs tend to therefore be the most expensive time for a car. Having a car that is new enough not to require them can be a great yearly saving.

Petrol(120584)Credit: MorgueFileFuel

Fuel for a car, whether petrol or diesel, is often its single highest running cost, especially given the current prices of both. Diesel cars are only really worth getting for those who do a substantial amount of travel, as the higher expense of a diesel engine requires a lot of mileage for the better fuel consumption to pay off.

About half of the cost of petrol is in tax, and this part is unlikely to drop. Much of the rest of the cost is in processing. Although changes in the price of crude oil do affect prices at the pump, and there are often complaints about drops in the price not being passed on to customers, in actuality these rarely would make more than a few pence difference.

A newer car is often more fuel efficient, with newer engines doing many more miles per gallon. Smaller engined cars will also do better mileage. Doubling the number of miles per gallon (or per litre) will halve fuel costs. This can easily save hundreds of pounds per year.

Welding(120599)Credit: SXC.HUMaintenance

Other than during an MOT, an older vehicle is more likely to have parts break during the year. As a car gets older, the likelihood of it needing more expensive repairs, for example welding to the bodywork, increases as does the chance the something major will break that simply costs too much to repair.

With a new car, many parts are covered by a warranty. The standard length of time for a warranty is three years, but this can be longer with some manufacturers such as Hyundai give five year warranties or even seven year warranties in the case of Kia. Regular wear and tear repairs will still be required on a new car, such as new tyres for example, but those parts not covered by the warranty are less likely to wear out because they are newer.


If a car is in a lower vehicle road tax bracket this will probably mean that the car and engine are smaller, unless it's a diesel, and smaller cars are cheaper to insure. This could be another saving of several hundred pounds a year.

Other Benefits

New and pre-registered cars may come with other benefits which will save money, such as free breakdown cover and free insurance.

Is a Newer Car Right for You?

There aren't a huge selection of cheap cars, even many "small" cars are surprisingly expensive, and small cars are often limited in internal space or the number of seats. This means they may not be suitable for large families.

Fifty Pound NoteCredit: SXC.HUCalculating the Savings

To see what you would save, you need to total up all the costs of your current car which wouldn't be applicable to a new car. Some won't be possible to calculate unless you actually have a new car selected to compare them against, such as insurance and fuel consumption, but maintenance costs can be and road tax can be estimated with a reasonable amount of accuracy, if a low emissions car is going to be bought.

An Example

Maintenance costs, excluding wear and tear and servicing (averaged over three years if possible):

No costs, saving £600 per year.

Road tax:

Nothing to pay for the first year, £30 per year afterwards (averaged over three years). Saving on the current cars tax, £222 per year.


Substantially reduced, saving £290 per year.

Fuel consumption:

The new car does substantially more miles per gallon, reducing the fuel costs by £700 per year.

Other benefits (breakdown cover):

10 months free AA membership, saving £57 per year (averaged over three years).

Total yearly saving: £1,869

Pre-Registered Car(120587)Credit: eGDC LtdThis will give an idea as to how much money could be paid out on a vehicle loan without actually spending more than the previous car cost to run. The amount borrowed can be reduced by paying a deposit, whether that's the old car traded in, a cash deposit, or both. The savings may cover the cost of the finance on a new car.

It may still be that the end cost of the new car is still slightly higher than that of the old car, but an older car is rarely going to cost less in maintenance on a yearly basis. It is actually likely to increase as the car gets older and other costs such as petrol and road tax are also unlikely to go down for the older car, resulting in increased, but uncalculated savings for the new car.

The old car is also more likely to start getting really expensive costs such as major parts or bodywork failure, the latter requiring welding, and even if the costs are very similar, the increased peace of mind from knowing that a new car isn't going to break down requiring a further investment is a definite plus.

Although the cost of buying a car could be reduced by getting one that is a couple of years old, this saving can easily be lost as the car could be reaching the end of its' warranty period and the likelihood of an expensive repair increases. Even those cars with longer manufacturer’s warranties will still need an MOT after three years.