What Does a Car Really Cost in 2026 compared to 2016? Far More Than Most Drivers Realise

The cost of owning a car in the UK has risen sharply over the past decade, with increases across vehicle prices, insurance, fuel and finance all contributing to higher overall motoring costs.

New research from ALA Insurance estimates that the average annual cost of car ownership now exceeds £11,500 in 2026, compared to around £6,500 in 2016.

That represents an increase of approximately £5,000 a year, or around £415 more per month, while average wages have grown at less than half the same rate.

The research combines data from organisations including the ABI, RAC, ONS and Bank of England, alongside leading price comparison platforms, to build a picture of how motoring costs have changed over the last ten years.

New Car Prices Have Increased by 89%

The average new car price has risen from £18,000 in 2016 to £34,000 in 2026, an increase of 89%.

During the same period, wages have increased by around 35%.

In practical terms, the average new car represented around 33 weeks of gross pay for a typical UK worker in 2016. Today, it equates to approximately 47 weeks’ salary before tax.

Used car prices have also increased significantly. The average second-hand vehicle now costs close to £18,000, compared to around £12,000 a decade ago.

Rising Running Costs Continue to Add Pressure

Vehicle purchase prices are only one part of the overall increase.

Insurance premiums have risen from an average of £400 per year in 2016 to £695.50 in 2026, following a peak of almost £1,000 in 2023.

Fuel prices have also increased substantially over the past decade. Petrol has risen from around 104p per litre to between 147p and 155p, while diesel has increased from 108p to more than 170p per litre.

As a result, the average annual fuel bill has increased from approximately £1,180 to £1,705.

Servicing costs have also risen by more than 66%, increasing from £225 annually to £391.50.

Finance Costs Have Also Increased

Our founder and MD, Simon England, says many drivers now focus primarily on monthly finance payments, rather than the total cost of ownership.

“Most people buying a new car are handed a monthly payment and told that is the cost, but it isn’t that simple,” he says.

“Once you account for depreciation, fuel, insurance and tax, the average new car driver is spending well over £900 a month to keep it on the road.”

PCP finance rates have increased from around 2–4% in 2016 to between 6–9% today, while around nine in ten new cars are now purchased using finance agreements.

Depreciation also remains one of the largest ownership costs, with the average new car expected to lose around £14,000 in value over three years.

EV Drivers Are Also Facing Higher Costs

Electric vehicle owners are also seeing changes to running costs.

Many EV drivers now pay road tax for the first time, with standard vehicle excise duty adding around £200 annually after years of exemption.

Combined with higher insurance costs and increased vehicle prices, overall ownership costs have risen across both petrol, diesel and electric vehicles.

A Decade of Increasing Costs

According to ALA Insurance, general inflation over the last decade has been around 35–40%, but many motoring costs have increased far beyond that level.

Insurance premiums have risen by more than 70%, new car prices by almost 90%, while finance costs have approximately doubled.

The result is that the overall cost of owning and running a car in the UK is now significantly higher than it was ten years ago, regardless of whether drivers are buying new or used vehicles.

Methodology
ALA Insurance’s analysis draws on data from industry bodies and government sources including the ABI, ONS, RAC and Bank of England, cross-referenced with leading price comparison platforms.

Total annual cost figures are built from average new car transaction prices, first year depreciation at 25%, fuel costs based on 10,000 miles at 40mpg, comprehensive insurance premiums, standard VED and average annual servicing. Where figures varied across sources we have used the midpoint or noted the range. All calculations represent a typical private motorist in a mainstream petrol car and are intended as a realistic average rather than an exact individual figure.

Where costs or percentage increases were calculated from a range of figures, the median has been used.

Sources:

• Insurance premiums: Average comprehensive premium (£400 to £695, peak of £995 in 2023): ABI Motor Insurance Premium Tracker, Confused.com , Quotezone 
• Fuel: Petrol prices (104p to 147-155p): RAC, PetrolPrices.co.uk, House of Commons Library – Diesel prices (108p to 170p+): RAC, Confused.com – Annual fuel cost (£1,180 to £1,705): calculated from pump price data.
• Road tax: EV road tax (£0 to £200): DVLA, RAC , Honest John
• Car finance: PCP APR rates (2-4% to 6-9%): Motorfinity, FreepriceCompare, First Response Finance – Nine in ten new cars on finance (80% to 90%): car.co.uk , FCA 
• Depreciation: £14,000 loss over three years: calculated from RAC and car.co.uk depreciation data.
• Used cars: Average used car price (£12,000 to £17,000-£18,700, up to 56%): Carhealth, Marketcheck UK.