Useful facts to know before buying a used car

We show how much car tax you’ll need to pay on petrol, diesel, hybrid and electric cars as of April 2021, whether you still need to pay during the coronavirus pandemic, and which cars are exempt from vehicle tax.

Car tax rates rose again in April 2021, with owners of hybrids, diesel and petrol cars all paying more. Owners of expensive cars pay an extra £335 a year.

Electric cars are fully tax-free

Zero-emission cars have been zero-rated for car tax. And, as of April 2020, they are also exempt from the ‘expensive car’ tax supplement, which requires vehicles costing more than £40,000 to pay an additional car tax of £325 per year for five years from registration.

This means if you own a pure electric vehicle you don’t need to pay any road tax at all, regardless of whether or not you drive it.

Useful facts to know before buying a new car:

If Moneysaving is your goal, buying a brand spanking new car off the factory line is no way to put pounds back in your pocket. The moment you drive a shiny new model off the forecourt you’ll lose money, typically in the £1,000s.

The best time to buy a new car

Dealers have targets to meet, with bonuses up for grabs. Typically, these are based on quarterly sales, making the end of March, June, September and December a good time to buy. They need to shift cars, so will be more willing to negotiate and offer attractive finance packages.

For example, June 2015 turned out to be a great time to buy a car with loads of offers available, e.g., Audi offering a deposit contribution of £5,000 on some of its A4 models.

For a quiet time, try to avoid weekends or the start of the month just after payday. A dealership crammed with wannabe buyers isn’t a good place to bargain hard, so it may also be worth avoiding new number plate seasons too.

‘What car do I need?’

There’s no point buying a two-seater convertible if you’re about to start a family, so work out what is realistic. Ask yourself:

  • What are my essential requirements? 
  • Fuel efficiency or enough room for all the family?
  • Do I need the car to do anything specific? 
  • Fuel efficiency or enough room for all the family?
  • Smaller engines can be cheaper.
    • The choice of a 1.0-litre or a 2.0-litre engine isn’t just about pure horsepower. A large engine will usually burn more fuel than a smaller one. So engine size is a vital consideration if fuel economy is an important factor in your decision.
    • Of course, this depends on how you use the car. A small engine is most efficient when it’s used as intended, such as to pootle around town. If a small engine is used at a high speed, it’ll need to work much harder to keep the car moving – burning more fuel.
  • Petrol cars tend to be cheaper than diesel.
    • Diesel engines are often more economical than their petrol counterparts. But don’t be fooled into thinking this makes diesel a better option. These cars are more expensive, and they usually cost more at the pump than petrol. 
  • Manual cars are cheaper than automatic. Switching between gears is extra work – particularly to those of us prone to stalling at traffic lights. Yet while automatics take some of the hassles out of driving, they come with a higher price tag.

A manual Audi A3 diesel hatchback, for example, costs £20,801. This compares to the automatic version, at £22,290 – or a rise of £1,489. Yet many automatics are more fuel-efficient than their manual counterparts, as they ‘know’ the best gear to be in, so you could recoup the extra cost over time.

  • Hybrid cars are cheap to run, but cost more to buy. Technology is improving every day with modern hybrids coming in all shapes and sizes, from supermen to luxury SUVs. Fuel economy and cheap or even zero tax rates make part-electric models appealing, like the Toyota Prius. They also tend to hold their value for resale.

But they usually cost more to buy – so weigh up the savings.

  • Check its CO2 emissions, as they affect the duty you pay. Buyers of the most polluting cars pay the most road tax.

Apart from a minority of electric cars that produce zero carbon dioxide (CO2) emissions, all new cars now attract vehicle excise duty (VED) from day one.

Smaller cars are cheaper to insure. If you’re looking to save money, you’ll want a car that’s cheap to cover. The cheapest to insure tend to have a lot in common, including size. Put simply, it’ll cost you more to insure a 4×4 than a small city run around.

Cars are placed in groups ranked between one and 50, using research by the Motor Insurance Repair Research Centre (Thatcham). This is based on a range of info including performance, safety features, price of a new model and cost of spare parts. 

Tax payment: 

You can check out how much road tax you’ll need to pay on the Gov.UK website. You can also search for cars in a particular tax band. These range from A-M depending on the car’s CO2 emissions, with the cost of tax ranging from £0 to over £1,000 in year one. Standard rates then apply, at up to £500/year.

How do I get the best financial deal?

Here are a couple of tips to make sure you get the best deal:

  • Car dealers rake in the cash from selling finance – so haggle hard.
  • The lower the APR, the less interest you’ll pay, so compare rates.
  • But vitally, check the total amount repayable over the term.
  • Do your sums – ads may quote weekly payments, disguising a pricey deal.
  • Stand firm against pushy salesmen – there are tons of deals around.
  • Check for additional fees such as set-up or early repayment charges.

What should the warranty cover?

Warranties should cover most mechanical and electrical faults but typically won’t cover wear and tear to tires and brake pads. Most problems that might occur with a new car should be covered, which is why it can be valuable to have a decent warranty attached to the sale.

Are hybrid cars cheaper to tax? The rates are slightly different for owners of alternative-fuel cars. These are vehicles that don’t run purely on diesel or petrol and include: hybrids plug-in hybrids liquefied petroleum gas (LPG) cars compressed natural gas (CNG) cars biofuel cars (bioethanol or biodiesel). Drivers of alternative-fuel cars pay £10 less than petrol and diesel owners in the first year. They then pay £145 every year after.

First-year car tax rates, which are based on official CO2 emissions, were adjusted for the change. As an example, if testing had continued under the old, NEDC test, which measured a car as producing 135g/km CO2, the owner would have paid £215 in their first year. 

However, if that same car was bought just after April 2020 and its official CO2 output had been adjusted to 155g/km following the adoption of WLTP CO2 values, the owner of that same car would have had to pay £540 as it moved up to the next band. That’s an increase of £325. The standard rates that apply from the second year of a car’s life onwards are unaffected. 

How can I pay my car tax?

Arguably the easiest way is to set up a direct debit. You can make annual, six-monthly, or monthly payments; there is a 5% surcharge for those paying every six months or monthly. You can also pay by cash, debit or credit card, cheque, or postal order in some post offices. 

If so, you will need to bring one of the following: V5C logbook (or V5C/2 if it’s a new car) V11 form. In addition to one of the documents above, you also need to bring: a valid MOT certificate a valid Exemption Certificate (if you claim disabled vehicle tax). If you live in Northern Ireland, you’ll also need a valid paper copy of either your current certificate of insurance or a cover note.

You can pay for your car tax monthly by Direct Debit. You can buy six months car tax or pay for the full year in advance. You will pay 5% more over the year if you buy six months or pay monthly by Direct Debit.

You can keep driving your vehicle until the date your next Direct Debit payment was due. … Choose the Direct Debit option when you tax your vehicle. Then choose how often you want to pay – either monthly, every 6 months, or every year.

What if I don’t pay my car tax?

If you don’t pay your car tax, initially you’ll get a letter in the post accompanied by an £80 fine (although this should be halved if you pay quickly enough). 

If you continue not to pay, the fine could rise to a hefty £1,000 – plus court fees should it go to court. 

It’s illegal to drive without car tax, and the police can issue you a Fixed Penalty Notice of £1,000 if they stop you and find you haven’t paid it.

If we find that you have claimed your vehicle is worth less than it is, so that you pay less duty, we’ll impose a penalty, which includes: interest on any unpaid duty, calculated daily until you pay. a penalty tax, which can be up to 90 per cent of the unpaid amount of duty.

According to the UK Vehicle Rental and Leasing Association, there will be no “grace period” – for example, to allow the buyer to drive to the Post Office to purchase road tax. The buyer must always obtain new vehicle tax immediately upon the point of sale before driving the vehicle away.

Is car tax the same as road tax?

Road tax per se doesn’t exist, as car tax goes towards more than just the upkeep of roads. However, understandably, a lot of people search for it when they’re looking for car/vehicle tax or, to use its official name, Vehicle Excise Duty (VED). The UK government website commonly refers to vehicle tax.

The annual flat rate of road tax is £155 (up from £150 in the 2020/2021 financial year). There’s a £10 annual discount for alternatively fuelled vehicles (hybrids, mild hybrids and plug-in hybrids), so their owners pay £145 a year (up from £140 in the last financial year).

Taxing your car can be done 24 hours a day using the government’s online system at www.gov.uk/tax-disc. One of the following is required to pay your road tax: V11 – a 16-digit reference number detailed on your vehicle tax renewal letter. V5C – an 11-digit reference number on your vehicle’s logbook.

Tax on company cars

You’ll pay tax if you or your family use a company car privately, including for commuting.

You pay tax on the value to you of the company car, which depends on things like how much it would cost to buy and the type of fuel it uses.

This value of the car is reduced if:

  • you have it part-time
  • you pay something towards its cost
  • it has low CO2 emissions
  • If your employer pays for fuel you use for personal journeys, you’ll pay tax on this separately.

How does gap insurance work?

If you have a crash, or your car’s stolen, your insurer will usually only pay out the amount the car is worth at that time.

Gap insurance is a policy you can buy, which pays out an amount above this, either to get you back to the original sale price of the car, to the amount you have outstanding on finance (which can, at times, be greater than the car’s worth), or to the amount it would cost to buy the car new now.

It’s offered because cars depreciate quickly. The AA calculates that on average new cars lose 60% of their value within three years.

So, imagine you drive your shiny new Ford Focus off the forecourt. You paid £20,000 for it and took £18,000 of finance from the dealer to pay for it. But, if you crashed it a few weeks later because it’s not a new car, your insurance might only pay out £15,000 – the car’s worth now. But you still owe £18,000.

Read more...

What does clocked mileage mean? Guide to rolled back cars
What does clocked mileage mean? Guide to rolled back cars
When it comes to buying a second-hand car almost everything impacts it’s value.
Car Tax Checker
Car Tax Checker
Find out how much it costs to tax your car using our free car checker. Enter your car reg to find out its tax and mot status + car history for free.
A guide to the MOT Test
A guide to the MOT Test
If you own and use a vehicle on the road it is your responsibility to ensure this vehicle is maintained and kept in a condition that deems it roadworthy at all times.