140 years after the automobile was invented by Carl Benz in 1886, the car is more ubiquitous than he could have ever imagined. Cars are everywhere. In many countries, it’s unusual not to own a car.
However, as we shall investigate in this blog, the motorcar is insanely expensive to run – while it may be one of the world’s greatest inventions, it’s also a silent wealth killer that has quietly eroded the long-term wealth of millions of middle class people. In this blog, I’ll show you that the true cost of car ownership is far more than you realise, and why you’re probably better off cycling.
Let’s consider a £20,000 new car in the UK. What makes it so expensive to run? Well, the first point is that the car probably didn’t cost you £20,000. It cost you £23,761.44 because you bought it with…
Finance
This is the silent wealth killer of the middle class. In 2022, 84% of new cars, and 22% of used cars were bought on finance in the UK. How did you get to £23,761.44? I hear you ask.
Well, at 7% annual interest (competitive on the current market), and for a loan term of 5 years, you’d pay back £396 per month, with interest payments totalling £3,761 – you can check for yourself here.
Depreciation
Depreciation varies strongly between make and model of car, as well as market appetite. It can be anywhere between 10-20% per year – let’s say 12% on average over the long-term. (Depreciation is not a flat rate forever, it is greatest in the first five years, and then slows.) Oh, and as soon as you drive your shiny new £20k car off the showroom floor, there’s an immediate 10-20% loss as your car goes from “new” to “used”. Depreciation is one of – if not the – biggest contributor to the overall cost of owning a car.
At 12% depreciation per year, your car is worth £10,555 by the time you’ve paid off the 5-year finance, and just £5,570 after 10 years. So, for a 10-year car ownership period, you’ve lost an average of £1,819.10 per year ((£23,761-£5,570)/10). This is the loss through depreciation and interest. Although, of course, the depreciation curve is exponential, so most of these losses occur in the first few years:
Insurance
The average price of car insurance in the UK is £726 per year, as of Q4 2025. It’s difficult to get specifics for your £20k car, as this will strongly depend on your age, where you live, your profession etc.
Road tax
We’ll take the current UK flat rate of £195 for road tax (for cars more than 1 year old and registered after 1st April 2017).
General maintenance and servicing
MOT cost ~£55 annually once the car reaches 3 years old.
Tyres cost ~£400 for a set, but should last ~30,000 miles, so 3 years of use. That’s £133.33 per year.
Servicing, general maintenance and unexpected repairs: ~£700 per year.
Fuel
If you’re driving 10,000 miles a year, you can expect to pay around £1,200 in fuel (of course, this will vary significantly depending on fuel prices and fuel efficiency of your car).
Parking Costs
In 2018, the average cost of parking permits and tickets for a UK motorist was £6.89 per month. That’s £9.06 in Dec 2025 pounds, or £108.72 per year.
Cost to health
A difficult concept to measure, but we all know that sitting in a chair is not good for your health. Sitting causes a range of health problems, and getting up from your desk job only to sit back down to drive home in your car is bad. Driving replaces movement, which has long-term health consequences. Alternatively, you could be pumping blood and getting high on dopamine by cycling more often.
Opportunity cost
If you could orient your life around not needing a car for work, then you’d be able to free up a lot of time that you’d otherwise spend driving. How much is your time worth to you? Even a modest daily commute of 30 minutes adds up to 250 hours per year – time that could be spent exercising, building a side hustle, learning a new skill, or with your family.
Other things to consider…
Car ownership can shape where you live – driveways, garages and proximity to roads all come at a premium that you will have to pay for. Without a car, you might be happy with a small flat or house, but no necessity for a driveway or easy access to your car. Buying a car contributes to lifestyle inflation. Suddenly you’ll want a new, bigger house to have your shiny new car parked in front of.
What is the cheapest mode of transport?
The answer to this is walking. It costs as much as the food you eat and the soles on your feet. But it’s not very efficient and you can’t walk everywhere. Cycling is the holy grail for cheap, efficient transportation, and is great for journeys of 10 miles or less.
Personally, I’ll cycle into town and to the gym (~7 mile round trip) when the weather is nice, but in the cold and drizzle of an English winter, I’m not particularly keen. So I tend to drive in the winter. One thing I do struggle with is shopping. I don’t have a trailer for my bike so I have to drive to get the weekly groceries. The supermarket is only 2 miles away – perhaps it’s time for me to get a bike trailer!
The true cost of car ownership
Have you managed to keep up with this? I hope so. I’ve shown here that cars are far more expensive than you might realise – often in sneaky, underhand ways that affect where you live and the quality of your health. For many people, reducing car dependence – even slightly – can unlock huge savings.
For a £20,000 car with an ownership period of 10 years, you have an average ownership cost of £5,203.82 per year (interest on finance + depreciation + insurance + road tax + general maintenance/servicing + fuel + parking) before any of the hard-to-measure lifestyle costs are taken into account. This is the tangible cost of car ownership.
However, car ownership can affect your finances in more serious ways – from where you choose to live to the opportunity cost of driving and the detrimental impact to your long-term health. Together, these could cost many additional thousands of pounds over time.
I hope you found this article informative and interesting. Here are some other articles you may enjoy:
Cycle more to save money and get fit
State of the UK’s electric charging network in 2025
The best index funds to own in 2026 (UK)
A no-nonsense guide on how to live a healthy life
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