Most 17 year-olds are surprised to discover that their first car will usually cost less than their first year’s insurance. But smart car-buying decisions can cut insurance costs.
The cost of running a car has increased for young drivers by 2.7 percent over the last year, taking their average annual driving bill to more than £2,400 a year, according to the latest Young Driver Index from Compare the Market.
For young people living in areas with poor public transport, that’s having a major impact on their ability to travel to work or college.
And despite the rising prices at petrol pumps, the most significant factor is not fuel (36%) but insurance (54%) – accounting for an average £1,309 a year of their running costs.
That’s £600 a year more that under-25s are paying for their car insurance, compared with older drivers. Which hits hard, since they’re the least-able to pay.
Why is insurance so expensive for young drivers?
It comes down to lack of driving experience. The higher premiums are because one in five new drivers is involved in a crash within 12 months of passing their test. And drivers aged between 18 and 21 account for 70% of all claims for fully comprehensive insurance.
On top of that, the Insurance Premium Tax has doubled over the past three years to 12%, which adds an average £161 to young drivers’ premiums. (Because young drivers already pay the highest car insurance costs, a percentage rise hits them hardest.)
Young drivers can’t change any of that (except by driving carefully and building up their no-claims bonus – possibly with the help of monitoring by a “black box” on a telematics policy).
But they can make substantial savings by choosing the right car.
Cut costs by choosing your car wisely
A teenager is most likely to be focused on saving to buy their first car, possibly hoping to have the car insurance funded by Bank of Mum and Dad. (On average, parents help out with a fifth of young people’s car insurance costs.)
But the cheapest car that comes along (or the best-looking, or the hand-me-down from Nan) isn’t necessarily going to be the cheapest to insure.
Analysis shows that choice of car can be the most significant factor in reducing insurance premiums. This is because different models of cars are rated by their car insurance group, ranging from group 1 (the cheapest) to group 50.
Young drivers can save up to £280 a year by checking the insurance rating of a car before they buy, and doing a careful comparison of premiums.
More information on Young Driver car insurance