Creeping costs spell more misery for motorists

Article date: 20 October 2006

Despite recent reductions in fuel prices, newfigures reveal the cost of running a vehicle is growing steadily.According to RAC’s latest "Cost of Motoring" index, theaverage car now costs more than £5,500 a year to run, equivalent to£15 a day.

Following increases in congestion charging and with road pricing onthe horizon, car owners are having to budget ever more carefully.The cost of car ownership has risen by as much as the cost of apackage holiday - £539 - in 12 months.

RAC’s "Cost of Motoring" index is an in-depth piece ofresearch produced every six months, which tracks all costsassociated with owning and running 17 different models ofcar.

As in previous indexes, depreciation is the largest cost factor inall new cars, increasing £432 or 22% in 12 months. The averageperson now loses £2,420 a year, equivalent to £46.50 a week. Thegrowing depreciation of vehicles is driven by a significantreduction in the projected residual value of the cars in the indexafter three years, from 52% to 45% of the recommended retailprice.

Other significant developments in the last 12 months, highlightedby RAC’s "Cost of Motoring" index include:

  • Fuel price fluctuation means costs are down from £1,155 to£1,112 - a 3.7% drop 
  • The cost of finance has grown from £948 to £1,040 - up 10% 
  • Insurance premiums have increased from £389 to £412 - an averageannual growth of 6% across the market
  • Maintenance costs rose from £271 to £300 - 10% more than 2005
  • Tax is up from £124 to £129 - a 4% rise.

According to the figures, the bill for running a car is asfollows:

VariableQ3 2006Q3 2005
Cost offinance£1,040£948
Totalcost (per year)£5,539£5,000
Totalcost (per week)£106.51£96.15
Totalcost (per mile)£0.46£0.42

Commenting on the index, RAC spokesperson andindex author Sean Morris, said: “The second biggestinvestment we make after home ownership – car buying - isgetting bigger. For such an important decision, too few of usunderstand the spread of costs associated with owning and running acar. The index results will be unwelcome news for many, butmotorists must better understand the true cost of theirvehicles.”

There are a number of factors identified by the index that helpexplain these changes.

Fuel prices have fluctuated as the price per litre at the pump hasreduced by 3.5% for petrol and 2.3% for diesel. The average annualcost for vehicles covered by the index reduced by slightly morethan the reduction in the price per litre, reflecting a trendtowards more fuel efficient vehicles.

The annual cost of finance has risen by £92 from £948 to £1,040, anincrease of almost 10%. Just over half of this is accounted for bythe increased cost of borrowing, reflecting a jump in the Bank ofEngland Base rate in August 2006. The balance of the increasearises from a 4% growth in the average target price for thevehicles in the index over the year.

The average annual cost of insurance for vehicles in the index grew6%, from £389 to £412. Most of the increase reflects premium ratemovements seen in the vehicle groupings. There is also someincrease as a result of the weighted average of vehicles in theindex moving towards cars with higher insurance groups.


RAC Press office contact:
Sonia Clarke or ChrisLauwerys 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 MotoringIndex is based on data provided by Deloitte - Actuarial andInsurance Solutions. It tracks all the costs associated with owningand running 17 different models of car, from the initial purchaseto depreciation, the cost of insurance, fuel, servicing, VAT andbreakdown cover.

About RAC
With around seven million members, RAC is oneof the UK's most progressive motoring organizations, providingservices for both private and business motorists. Whether it'sroadside assistance, windscreen repair and replacement, learning todrive, vehicle inspections and checks, legal and financial servicesor up-to-the-minute traffic and travel information - RAC is able tomeet motorists’ needs. RAC incorporates BSM, RAC AutoWindscreens, RAC Direct Insurance and HPI.

Aviva bought RAC in May 2005. The acquisition brings together RAC'spowerful brand and customer base with the expertise and leadingposition in motor insurance of Norwich Union Insurance (part ofAviva). Norwich Union is the UK's largest insurer, insuring one inseven motor vehicles and with a market share of around 14%.

RAC’s news releases and a selection of images are availablefrom the internet press centre at

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