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Is it worth buying a car?

Updated 14 December 2022

7min read

Nick Green
Financial Journalist

Until you buy your own home, a car will probably be your single biggest financial commitment. If you’re considering getting some wheels of your own, just how much could it cost you overall – and are there any better-value alternatives? Article by Nick Green.

You can buy a car for as little as £500 – though you get what you pay for. Still, there are plenty of good-quality used cars on the market, and around £1,000 should be enough to purchase a decent enough first car. Where owning a car can get very expensive is in all the additional expenses, such as insurance, vehicle tax, fuel and servicing. Once you’ve totted up all these costs, you may find yourself wondering: is it worth it?

The answer will depend on your personal circumstances, so here’s a guide to working out whether car ownership makes sense for you – or whether you have a better-value alternative available.

What are the costs of owning a car?

First of all, let’s work out what a car might cost you overall.

First question: can you drive yet?

If you still need to learn to drive, you’ll face considerable expense even before you get your own vehicle. An hour’s driving lesson is £24 on average, so to get the recommended 47 hours of tuition you’re looking at £1,128. You might reduce this if you learn from a family member – but this can be stressful, as well as more risky.

Your provisional licence will set you back a further £62.50. There’s no charge to upgrade it to a full licence once you’ve passed your test.

On top of that, there are the fees for the driving theory test (£23) and the practical test (£62).

The car itself

Assuming you want a small used car in reasonably good condition, we’ll set a budget of £1,000 for this. Any cheaper and your servicing costs may outweigh any savings. Equally, you could pay more for a car in better condition in the hope of keeping servicing costs down.

Car insurance

For many young and new drivers, this is the biggest deterrent to car ownership. The average annual premium for new drivers aged 17 to 24 is around £1,100 a year or more (i.e. probably more than you paid for your car, repeated every year).

There are a few ways you can try to lower this figure, including:

  • Add an older named driver to the policy
  • Install an insurer’s black box or app to monitor your driving (if you are a safe driver!)
  • Take a Pass Plus additional driving course (though this usually costs around £180)
  • Keep your car on a driveway or in a locked garage
  • Opt for a higher excess (i.e. the amount that you have to pay if you make a claim)

If you're buying a new car, then you may also want GAP insurance. This type of insurance is to cover you against the gap between the purchase price of your new car and the payout of your ordinary insurance. Usually there will be a gap, since new cars lose value very quickly. You can find out more about GAP insurance in this article by specialists Best4Gap.

Vehicle tax

Vehicle excise duty is an annual tax you have to pay on your car – it’s popularly known as vehicle tax and some people still call it ‘road tax’, though this was never an official name for it. The price varies from vehicle to vehicle, but for your type of car you’ll probably have to pay £140 annually.

MOT and servicing

Cars aged three years and older need an annual mechanical check to ensure they are still roadworthy. You can expect to pay around £50 for this, though some garages will do it for less.

You should also have your car serviced regularly, at least once a year or at every 12,000 miles, whichever comes first. A full service costs around £150, but can be very much more expensive if new parts or special repairs are needed (such as a cam belt replacement – around £400).


Assuming your car does 40 miles to the gallon and you drive 12,000 miles per year, then if petrol is £1.10 a litre you’ll pay just over £1,460 per year for fuel. Lower mileage or better fuel efficiency can of course bring these costs down significantly.


Did you forget about parking costs? Many journeys end up in a paying car park, whether you’re driving to the train station, a hospital or just to a tourist attraction. You might also live in an area where you need a resident’s parking permit. It’s hard to say exactly how much parking will cost you personally, but most of us can expect to pay at least £200 a year. If you have to park every day in a commuter car park, that figure might be closer to £1,000 or even more.

Car depreciation

This is another thing many people don’t consider. By how much will your car have dropped in value by the time you come to sell it? The average car loses about 15 per cent of its value per year, so in five years your £1,000 car may be worth more like £430 (if you can sell it at all). You can therefore use this figure as the annual cost of the car: approximately £114 per year.

Adding it all up

Bearing in mind that this is a very rough estimate – everyone’s driving circumstance are different – let’s see what all those costs might add up to. We’ll assume you buy your car for £1,000 and keep it for five years.

What are you paying for?

Cost per year

  Car depreciation


  Insurance (new driver, aged 17-24)


  Vehicle tax


  MOT & servicing

  £200 (at least!)

  Fuel (driving 12,000 miles)



  £200 (at least!)

Running total:  


  If you don’t yet have a licence


  Lessons, tests and licence

  £255  (cost spread over 5 years)

Grand total:  



All those costs add up to an annual spend of £3,214 if you already have a full licence, and £3,469 if you still have to go through the process of learning to drive. It’s a lot of money to part with every year – especially if you’re just starting your career.

In this example (driving 12,000 miles) you end up paying 29 pence for every mile you travel. So is there a better value alternative for getting from A to B?

Alternatives to owning a car

The alternative transport available to you depends a great deal on where you live. If you’re in a city, you may be spoiled for choice. If you’re in a little village, you might be lucky to have a single bus.

Your transport requirements may also vary a great deal. Can you get to work with a simple walk and train journey, or is the station a 15 minute drive away? How reliable are the transport links you might use? How frequent? Convenience will be a big factor in weighing up your alternatives – and you’ll have to decide how much it’s worth to you in monetary terms.

The two closest alternatives to owning your own car are probably:

  • Hiring a car
  • Using taxis or mini-cabs

Is it cheaper to hire a car than own one?

As well as standard car rental outlets, you can rent a car via a car club, paying a regular subscription plus the individual hire fees. This may be cheaper if you plan to rent regularly.

A car club works out at about £1 per mile (ordinary car rental is generally more expensive). However, both these options depend on you already having a licence, so factor in this cost.

How does it compare?

If you drive less than 1,700 miles in a year, a car club may work out cheaper than owning a car, based on the example above.

Is it cheaper to use taxis than to own a car?

Several different kinds of private hire vehicles are now available, including black cabs, mini-cabs and ridesharing companies such as Uber. The approximate cost per mile for these is as follows:

Type of vehicle

Cost per mile (approx.)

  Black cab




  Ridesharing companies (e.g. Uber)



How does it compare?

If you travel less than 530 miles in a year, a mini-cab may work out cheaper than owning a car, based on the example above. Travelling by Uber might take you 1,038 miles before a car became better value, but a black cab would only take you 340 miles (and you might have to make conversation).

If these options are too pricey for you, your remaining alternatives are:

  • Using public transport
  • Cycling

Using public transport

Commuter trains and buses average around 30-40p per mile across the UK, though the London Underground is much dearer at £1.17 per mile.

As you can see, buses and trains are very close in terms of cost-per-mile to owning a cheap car, if you are new driver. The crucial point here however is convenience. Only you know whether your local transport system is adequate for your needs.


Cycling is by far the cheapest option of all, though of course it has its drawbacks. A decent bike can be yours for under £400 (Lycra may be extra), which over five years is less than £80 a year. With a 12-mile commute by bike, you might comfortably clock up 6,000 miles or more a year, which would work out as a dirt cheap 1.3 pence per mile.

The downside of a bicycle is that you can’t take passengers, can carry only minimal luggage, and are more vulnerable on the road. You also need resilience to battle through all weathers, and the confidence to ride in traffic. That said, you will keep fit (so no need to join an expensive gym).

So is it worth buying a car?

As you can see, owning and running your first car certainly isn’t cheap – but then, neither are many of the alternatives. The best option for you will depend on many factors, such as how many miles you travel, where those journeys take place, how suitable the alternative transport options may be, and who or what you need to take with you.

This guide should give you a better idea of when buying a car becomes the better value option, and when it’s more economical to get about by other means. Fortunately, if you keep a clean licence, car insurance will get cheaper as you grow older and more experienced.

For more help with tricky choices, check out our Life’s Biggest Decisions pages or talk to a financial adviser.

Nick Green is communications manager at Unbiased, the UK's favourite place to find advice you can trust. He has been writing professionally on finance, business and many other topics for over 15 years.

If you found this article helpful, you might also find our article on how much money could you save with an electric car informative, too.

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About the author
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.