Lack of knowledge could lead motorists down one way road to debt

Article date: 17 September 2007

With the new ‘57' vehicle licence plates fresh on the dealer forecourts, RAC Loans are advising people to do their homework and take into account day to day running costs* as well as the initial cost of buying a car, especially when they are borrowing large sums of money.

Over a third (34%) of RAC Loans are taken out for the purpose of buying a car, with the average amount of the loan being just under £10,000.  Loans are a popular choice to raise money in order to buy a vehicle, with the bargaining power of cash as the car dealer will still be paid in full up front, rather than taking on a finance package with a dealership.

The average family car now costs £5,627 a year to keep on the road. The average cost of fuel, maintenance, insurance and tax alone is costing motorists £1,977 per year. Findings from the latest RAC Cost of Motoring Index findings show that depreciation is the largest cost factor, with the average car now reducing in value by £2,357 a year, equivalent to £45.33 a week. Those thinking of buying or selling need to be mindful of depreciation, as increased depreciation and higher motor finance costs are pushing up the total cost of motoring. 

The Cost of Motoring Index is an in-depth piece of research that tracks the costs per annum associated with owning and running 17 popular models of car. 


Q2 2007 cost per annum £





Cost of Finance








RAC membership


Total cost (per year)


Total cost (per week)


Brian Spinks, head of lending at RAC, said: "When taking out a loan to pay for a car, it is important to ensure that you can not only afford the monthly repayments on that vehicle but also have checked that you are able to cover the growing costs associated with running your vehicle overtime.

"Make sure you take into account things like insurance, road tax, MOT, servicing, fuel, repairs and wear and tear on things like tyres and brake pads. All of these add up and can be a nasty surprise if you've only borrowed enough to buy the vehicle. So taking a little extra finance initially up-front may actually save you money and time in the longer term, especially as the financing of small loans via say an overdraft or even a credit card can turn out to be a relatively expensive option.

"You've also got to make sure you know exactly what you're buying. Check whether the car is mechanically sound, hasn't got existing finance, been written off or even stolen. That's why all RAC Car Loans come with a free vehicle inspection and car data check."

The RAC Essentials Vehicle Examination can help avoid the pitfalls of buying a used car as a quarter of car buyers have experienced mechanical problems within just one month of the purchase. The check assesses whether a car has been stolen, written-off, clocked, has outstanding finance or plate changes, is at risk of being sold illegally, and that its number plate and chassis number correspond. It will also check whether the car's documents are genuine and give a current market valuation. 

RAC loans** are now available for terms up to 84 months with a competitive typical APR of 6.9% (for loan amounts between £7,000 - £25,000).

Customers can visit or call 0800 707 6179 for more information (calls may be monitored).


RAC Press office contacts:
Adam Cracknell on 01603 684916 / 07800 699 517

Notes to editors

* ‘Daily running costs' comprise day-to-day expenses when running a vehicle, such as fuel and maintenance

The RAC Cost of Motoring Index August 2007 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 initial purchase to depreciation, the cost of insurance, fuel, servicing, VAT and breakdown cover.

** RAC Vehicle Examinations commissioned ICM research to interview a random sample of 1,000 adults aged 18+, by telephone in August 2006.  Interviews were conducted across the country and the results have been weighted to the profile of all adults.  ICM is a member of the British Polling Council and abides by its rules.  Further information at

*** RAC Loans are provided by The Co-operative Bank plc on behalf of RAC Financial Services Limited (Registered No. 5171817). Registered Office: 8 Surrey Street, Norwich NR1 3NG which is authorised and regulated by the Financial Services Authority. Applicants must be UK residents, aged between 23 and 69, have a minimum annual income of £10,000 and be either a homeowner or hold a debit, cheque guarantee, store or credit card. Terms and conditions apply. Credit facilities are provided by

The Co-operative Bank p.l.c. (Registered No. 990937), of P.O. Box 101, 1 Balloon Street, Manchester, M60 4EP and are subject to status. The Co-operative Bank reserves the right to decline any application or offer a loan at a rate that differs from those advertised. Interest rates are correct at time of going to press. Calls may be monitored and/or recorded for security and/or training purposes.

The Co-operative Bank is authorised and regulated by the Financial Services Authority (No. 121885), subscribes to the Banking Code, is a member of the Financial Ombudsman Service and is licensed by the Office of Fair Trading (No. 006110).

About RAC

  • With around seven million members, RAC is one of the UK's most progressive motoring organisations, 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 per cent.  
  • RAC's news releases and a selection of images are available from the internet press centre at

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