Despite recent reductions in fuel prices, new figures reveal the cost of running a vehicle is growing steadily.
Despite recent reductions in fuel prices, new figures reveal the cost of running a vehicle is growing steadily. According to RAC’s latest "Cost of Motoring" index, the average car now costs more than Ł5,500 a year to run, equivalent to Ł15 a day.
Following increases in congestion charging and with road pricing on the horizon, car owners are having to budget ever more carefully. The cost of car ownership has risen by as much as the cost of a package holiday - Ł539 - in 12 months.
RAC’s "Cost of Motoring" index is an in-depth piece of research produced every six months, which tracks all costs associated with owning and running 17 different models of car.
As in previous indexes, depreciation is the largest cost factor in all new cars, increasing Ł432 or 22% in 12 months. The average person now loses Ł2,420 a year, equivalent to Ł46.50 a week. The growing depreciation of vehicles is driven by a significant reduction in the projected residual value of the cars in the index after three years, from 52% to 45% of the recommended retail price.
Other significant developments in the last 12 months, highlighted by RAC’s "Cost of Motoring" index include:
- Fuel price fluctuation means costs are down from Ł1,155 to Ł1,112 - a 3.7% drop
- The cost of finance has grown from Ł948 to Ł1,040 - up 10%
- Insurance premiums have increased from Ł389 to Ł412 - an average annual growth of 6% across the market
- Maintenance costs rose from Ł271 to Ł300 - 10% more than 2005
- Tax is up from Ł124 to Ł129 - a 4% rise.
According to the figures, the bill for running a car is as follows:
| Variable | Q3 2006 | Q3 2005 |
|---|---|---|
| Depreciation | Ł2,420 | Ł1,987 |
| Fuel | Ł1,112 | Ł1,155 |
| Cost of finance | Ł1,040 | Ł948 |
| Insurance | Ł412 | Ł389 |
| Maintenance | Ł300 | Ł271 |
| Tax | Ł129 | Ł124 |
| RAC membership | Ł126 | Ł126 |
| Total cost (per year) | Ł5,539 | Ł5,000 |
| Total cost (per week) | Ł106.51 | Ł96.15 |
| Total cost (per mile) | Ł0.46 | Ł0.42 |
Commenting on the index, RAC spokesperson and index author Sean Morris, said: “The second biggest investment we make after home ownership – car buying - is getting bigger. For such an important decision, too few of us understand the spread of costs associated with owning and running a car. The index results will be unwelcome news for many, but motorists must better understand the true cost of their vehicles.”
There are a number of factors identified by the index that help explain these changes.
Fuel prices have fluctuated as the price per litre at the pump has reduced by 3.5% for petrol and 2.3% for diesel. The average annual cost for vehicles covered by the index reduced by slightly more than the reduction in the price per litre, reflecting a trend towards more fuel efficient vehicles.
The annual cost of finance has risen by Ł92 from Ł948 to Ł1,040, an increase of almost 10%. Just over half of this is accounted for by the increased cost of borrowing, reflecting a jump in the Bank of England Base rate in August 2006. The balance of the increase arises from a 4% growth in the average target price for the vehicles in the index over the year.
The average annual cost of insurance for vehicles in the index grew 6%, from Ł389 to Ł412. Most of the increase reflects premium rate movements seen in the vehicle groupings. There is also some increase as a result of the weighted average of vehicles in the index moving towards cars with higher insurance groups.
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RAC Press office contact:
Sonia Clarke or Chris Lauwerys at Lexis PR on 0207 908 6570 or 0207 908 6465
Adam Cracknell at RAC Press Office on 01603 684916
Notes to editors:
The RAC Cost of Motoring Index is based on data provided by Deloitte - Actuarial and Insurance Solutions. It tracks all the costs associated with owning and running 17 different models of car, from the initial purchase to depreciation, the cost of insurance, fuel, servicing, VAT and breakdown cover.
About RAC
With around seven million members, RAC is one of the UK's most progressive motoring organizations, providing services for both private and business motorists. Whether it's roadside assistance, windscreen repair and replacement, learning to drive, vehicle inspections and checks, legal and financial services or up-to-the-minute traffic and travel information - RAC is able to meet motorists’ needs. RAC incorporates BSM, RAC Auto Windscreens, RAC Direct Insurance and HPI.
Aviva bought RAC in May 2005. The acquisition brings together RAC's powerful brand and customer base with the expertise and leading position in motor insurance of Norwich Union Insurance (part of Aviva). Norwich Union is the UK's largest insurer, insuring one in seven motor vehicles and with a market share of around 14%.
RAC’s news releases and a selection of images are available from the internet press centre at www.racnews.co.uk.