How to cut the cost of motoring for under-25s
- Average annual cost of motoring for under-25s now standing at a hefty £3,435
- Premiums are up 11% year-on-year, with younger drivers facing the biggest hikes
Keeping a car on the road as a young driver is no mean feat, with the average annual cost of motoring for under-25s now standing at a hefty £3,435. Indeed, some 20 per cent of under-35s now spend as much on their car’s monthly payments as on renting a home.
While a recent fall in fuel prices has offered young drivers a little respite, other costs – such as eye-watering increases in insurance premiums – remain a major financial burden.
New figures from the Association of British Insurers reveal that motorists currently face the biggest hike in insurance premiums since records began. Premiums are up 11 per cent year-on-year, with younger drivers facing the biggest hikes. Many young drivers are now paying £1,000 or more for their car insurance.
Here we look at some of the ways young drivers can drive down the high cost of motoring.
Expensive: Many young drivers are now paying £1,000 or more for their car insurance
CHOOSE AN INSURANCE FRIENDLY MOTOR
If you are buying a car, choose a model with low fuel consumption, reduced vehicle emissions and one that is in the three lowest categories for insurance pricing purposes.
Matt Oliver, of comparison website Gocompare, says: ‘Young drivers’ insurance premiums are more affordable if they drive a standard car with a small engine – under a litre – and which is in a low insurance group.’
Insurer Admiral recently carried out a study of the cheapest cars to insure for drivers under 25. It found the top five models to be the Volkswagen Fox, Nissan Qashqai, Fiat 500, Citroen C1 and Fiat Panda. You also need to think about safety issues. Recent research found that only a third of young drivers consider this when choosing a first car – with their main priorities being the price of the motor, the cost of insurance and whether it is cheap to run.
James Hillon, from Co-op Insurance, says: ‘Given that almost a third of young motorists are involved in a traffic accident in the first six months of driving, they should not compromise on safety.’
The insurer has compiled a list of the safest used cars for young drivers, priced at under £5,000. It puts the Skoda Citigo top of the list, followed by the VW Up!, the Seat Mii, Toyota Yaris and Kia Rio.
‘My car costs me £6,000 a year – but it’s a necessity’
Marketing assistant Becky Read drives from Bristol to Swindon every day for work – and finds that the commute eats into a big chunk of her monthly income.
Becky, 24, bought a new Vauxhall Corsa last November. After putting down a deposit of £1,100, she pays £159 a month on her car finance deal.
She says: ‘When my old car – a Vauxhall Agila – broke down, I decided it made sense to buy a new, reliable car for commuting.
‘For me, a car is a necessity, not a luxury.’
Costly: Becky Read uses her Corsa to commute to work in Swindon
As well as using her car throughout the week for work, Becky also uses it a lot at the weekend. She adds: ‘I pay around £250 a month for petrol, but do always try to find the cheapest place to fill up locally. I also shopped around to reduce the cost of my insurance.
‘Until recently I had been paying a hefty £1,600 to Aviva for annual cover, even though I had been driving for several years and never made a claim.
‘I have now got a cheaper deal from Admiral, but it still costs £744.’
She calculates that servicing costs around £250 a year and the MOT £40. This equates to a total annual motoring cost of almost £6,000.
‘It puts a real strain on my finances,’ she admits.
CONSIDER ALL FINANCE OPTIONS FOR YOUR CAR
When working out how to finance your new set of wheels, beware of costly forecourt finance deals.
Recent reports warn that young drivers are being tempted into dangerously high levels of debt by car dealers offering big loans.
While ‘personal contract purchase’ can seem appealing, motorists are then committed to expensive monthly payments.
James Walker, of consumer rights website Resolver, says: ‘Many personal contract purchase agreements are complex and being missold. It is vital you are not pushed into signing up on the spot to such a loan without fully understanding the implications.’
As forecourt finance options can be complicated – and often costly – it is worth considering other routes such as a low-rate personal loan or a zero per cent credit card. The key is to do the maths to ensure the purchase is affordable.
TRACK DOWN CHEAPEST FUEL
Save on filling up: Look out for discount vouchers and/or use a rewards card
An easy way to cut your spending at the pumps is by visiting website Petrolprices to find the cheapest place to fill up locally. As a general rule, supermarkets offer the lowest prices.
Before filling up, look out for discount vouchers and if possible pair these with a card that offers rewards on your spending.
Also try driving more economically. Figures from the AA show that cruising at 80 mph will use 25 per cent more fuel than driving at 70 mph.
Savings can also be made by letting your car slow down by itself rather than braking heavily. Further savings can be made by clearing out the boot, removing the roof rack and ensuring your car is serviced regularly.
Ian Crowder, of the AA, says: ‘Check your tyres regularly to ensure they remain in good condition and properly pressured. Soft tyres increase rolling resistance and increase fuel consumption.’
THE CAR CLUB ROUTE
If you cannot afford to own a car, a car-club or car-share service may prove a good alternative.
With peer-to-peer car-sharing platform HiyaCar, you can rent cars from people in your local community.
Simply log on and search for vehicles in your area – then contact the owner via instant messaging. All cars must be insured, taxed, and have a valid MOT.
In addition to the rental cost, you pay a £3 booking fee and the cost of insurance. Cover starts from around £6 per day.
Rob Larmour, co-founder of HiyaCar, says: ‘We want people to think twice about buying a new car.
‘We want them to assess whether they really need a car all the time and if they could just as easily borrow their neighbour’s vehicle.’
HiyaCar has just launched keyless mobile technology which means there is now no need to pick up a key.
Members simply download the app and can then use their mobile as a multi-purpose tool for car hire. Also check out Zipcar and Easy Car Club. If you are interested in car-pooling, you can search for someone making the same journey as you through websites such as Blablacar and Liftshare, and split the cost of fuel.
Elsewhere, Sharemine is set to launch an online tool next month which you can use to create a car-sharing community.
…AND EVEN RENT OUT YOUR VEHICLE
Driving seat: Edward Turay uses HiyaCar to rent out his Corsa
Alternatively, if you have a car but leave it sitting idle on the road in front of your home for large periods of time, you could make a bit of money from it by renting it out.
You can do this through HiyaCar and Easy Car Club. To get started on HiyaCar, simply make your own profile and list your car – all for free. You then pay a 30 per cent commission each time you rent it out. While the firm will suggest guide rental rates when you sign up, you can set your own.
Comprehensive cover is offered to car owners via Axa Insurance. If your vehicle is damaged, the policy will cover 100 per cent of the costs – and will not affect your current personal insurance policy in any way. If you are making money from your car, you need to declare this to Revenue & Customs.
If buying a car with a finance scheme check your provider is happy for you to proceed.
Young driver Edward Turay, from Battersea, South-West London, hires out his car when he is not using it to earn extra income.
The 25-year-old signed up to HiyaCar just under a year ago, and has already earned around £2,000 from his Vauxhall Corsa.
Edward, who works as a project manager and also as a part-time games designer, pays between £20 and £40 a week for petrol and £1,000 a year for insurance.
He says: ‘I do not need my car for my commute as I go by public transport, so it is unused a lot of the time. Renting it out is an easy way to make some extra cash.’
On average, Edward tends to rent out his car at least once a week, mostly at the weekend.
He adds: ‘During the summer, I get lots of bookings as people need to travel to weddings and other family gatherings. I charge between £30 and £35 per day.
‘Initially, I was quite nervous about renting out my car to strangers. But I have had no really bad experiences and on the rare occasion when there has been an issue, HiyaCar has stepped in to resolve matters.’
Nine golden rules to help keep the lid on the spiralling cost of motor insurance
1. Never automatically renew car insurance. Website Gocompare says more than five million motorists allow their insurance to renew automatically every year, often paying over the odds as a result.
It also reveals that more than 40 per cent of 18 to 24-year-olds say they renew out of loyalty to their insurer – but there are no rewards for loyalty when it comes to insurance.
Shop around by using a price comparison website such as Gocompare, Moneysupermarket, comparethemarket and Confused.
It is well worthwhile as annual savings of as much as £250 are possible.
Tweaking your job title: A PA will often get cheaper car insurance than a secretary
2. Renewing early can also prove a smart move. With some insurers, you can buy cover 30 days ahead of the renewal date, and this can save around £100 compared with buying the day before.
This is because some insurers view organised people as more risk averse, and therefore less likely to take a chance behind the wheel – or miss a premium.
3. While paying for your insurance in monthly instalments can help you spread the cost, it often works out more expensive than paying in one go upfront, as insurers treat your premiums as a high-interest loan.
4. Opting for a higher voluntary excess can reduce your premiums. But in accepting a big excess, make sure you can afford this cost if you need to make a claim.
5. Fitting a car alarm or immobiliser can bring down the cost of your insurance. Also, if possible, try to park your car in a garage or driveway rather than leaving it on the road. Insurers look kindly on this.
6. By adding a safer driver – such as a parent – to your policy, it can reduce your insurance premiums significantly.
But take care not to fall into the ‘fronting’ trap. This is where a more experienced driver claims to be the main driver of a younger motorist’s vehicle to obtain cheaper insurance. This is illegal and fraudulent.
7. Try tweaking your job title because job descriptions are important and determine how risky an insurer will view you.
According to MoneySavingExpert, an illustrator will often get cheaper car insurance than an artist. The same goes for an editor rather than a journalist and a PA rather than a secretary.
8. Do not assume that third-party cover is the cheapest option – this is not always the case. Comprehensive cover can sometimes prove a smarter purchase.
9. By getting a ‘black box’ fitted to your vehicle, your insurer can monitor your driving behaviour, and reward good, safe motoring with lower premiums. Try providers such as Smartdriverclub, Marmalade, Insurethebox, Co-op Insurance Smartbox and Admiral LittleBox.
Smartdriverclub offers insurance costing up to 42 per cent less than a traditional policy for good drivers.
Additional services include a crash alert (to the insurer), warnings of emerging mechanical problems, fuel monitoring and theft tracking.
Courtesy: Daily Mail Online