How to Create a Driving Budget: From Insurance to Fuel Costs

When we think of the cost of owning a car, we may immediately think about the price of the vehicle itself and the fuel needed to make it run. However, it does not stop there. 🤔 Car owners also need to consider taxes, insurance premiums, and maintenance costs, amongst others. If you’re looking for a guide on how to create a driving budget, be sure to read this article because we’ll share useful tips on how to do it!

Fuel Costs

Your fuel expenses depend on a number of variables, such as whether your vehicle runs on diesel, petrol, or electric power. Apart from that, other things can affect how much you need to set aside for fuel, like the vehicle’s fuel consumption, how you drive your car and the price of fuel.  And remember, fast speeds, quick acceleration and hard braking all use more fuel! Check out how to get the best out of your tank of fuel.

If you compare the prices of diesel and petrol, diesel is more expensive, but it’s more economical if you’re covering a lot of miles on a regular basis. On the other hand, if you don’t drive that much and only use your car to go around the city, then you may want to think about getting an electric car instead. 

MOT and Services

As soon as your vehicle reaches its third year, you are legally obligated to have an MOT annually. It’s important to do this along with the usual services, not only because it’s required by law but because you’d want to be sure that your vehicle is safe and roadworthy. The budget you’ll need to prepare for an MOT would depend on the type of car you have. But if you have a regular car, you can expect to pay £54.85. Some garages will charge more or less but beware of extra cheap MOT charges. Some may recommend work that doesn't necessarily need doing!

As for annual services, they’re not required by law in the same way as an MOT is. However, it would be advantageous for you if you get your car serviced regularly. You might be able to save money if issues are detected early on. Repairs can be done so that costly complete replacements can perhaps be prevented. 

Repairs and Maintenance

There’s no exact amount that you need to set aside for repairs and maintenance of your vehicle. It's impossible to know what car problems might spring up. For owners of electric vehicles, there’s less expense in maintenance costs since EVs actually have fewer parts compared to conventional vehicles. 

If you have a new car, you don’t have to worry so much about spending your own money on repairs. Most manufacturers offer warranties that range from three to seven years. Be sure to check your warranty so you can prepare your finances in case it is no longer valid. Keep a regular servicing schedule for your car so that any issues can be addressed before they become worse. 

Car Tax

The car tax you have to pay varies on a number of factors, such as the vehicle’s engine, what fuel it runs on, and the amount of CO2 it emits. Newer vehicles that have been registered after 1 April 2017 have a rate that is based on their CO2 emissions during the time the car was first registered. Owners would have to pay a standard tax for this type of car. 

For older cars that have been registered from March 2001 up to April 2017, the car tax relies on the CO2 the car produced. There are some exceptions to this, though. If you are a disabled person, you are exempt from car tax. If you drive an electric car, you can also enjoy this exemption. To save money from car tax, choose a vehicle with lower CO2 emissions or consider a hybrid or electric vehicle. The Vehicle Tax Rates are posted on the government website.


Insurance can be expensive, depending on the type of cover you choose, but it is required by law, and it’s also for your own good. In the event of an accident, you will be covered by your insurer. 

There are a number of insurance covers to choose from. You may opt for the most basic cover, often referred to as "Third Party Fire and Theft". This is the minimum by law you must have, as it covers damage to other road users and third-party liability.  But it does not cover damage to your own car if you are at fault. So where at all possible you should go for a "Fully Comprehensive" one. Then you will be fully covered whether it's your fault or not.

Also if you are a younger driver and premiums are high, why not look into "black box" insurance - then if you do drive carefully and sensible you will benefit from lower premiums. 

On average, car insurance costs about £470 annually, but the range is vast, say from £150 to £3000. Checking out the insurance group your dream car is in will help give you an idea before bothering to search for quotes. Factors that may affect how much you’ll pay for insurance, such as how long you’ve been driving, your age, any no-claims bonus you have accrued, the make and model of the vehicle, as well as previous claims, if any. If you were previously a named driver on someone else's insurance, you might be able to transfer across a no-claims bonus to help reduce your premium.

Breakdown Cover

A breakdown cover is an extra expense, but you may want to think about getting one, especially if you’re driving an older car. Breakdowns can happen at any time, and you wouldn’t want to be left stranded on the side of the road for too long. Consider getting a breakdown cover if you can afford it. The cover will save you money in case of car problems since towing services can be really expensive.  Breakdown cover could already be included in your current account monthly charge, so do check that before buying it twice!


If you want a ballpark figure for the annual cost of running a car, it could be about £2,000. It would be best to allow about £170 to £200 every month for expenses ranging from fuel, insurance, maintenance, to parking fees and even car fluids. Keep in mind that these numbers are just rough estimates.  Do check out everything in advance in relation to your specific vehicle before you commit to the purchase, and ensure you can comfortably afford it. Check out our article on what to do if your car budget is lower than you need

The cost of having a car depends on so many factors, including whether you’re paying for car finance. Try to record your car-related expenses so that you have a good idea of how much you actually spend on your vehicle. This will serve as your starting point so you’ll know how to adjust your budget accordingly. 👍🚘