The rising cost of motoring

The global price of oil rose steadily during 2021 and in the first half of 2022 following a slump at the start of the pandemic as major economies imposed lockdowns to slow the spread of Covid-19. However, Russia’s invasion of Ukraine in February 2022 – and the sanctions that followed – caused the barrel to exceed $100 for the first time in over seven years.

Forecourt prices in the UK have followed suit: after averaging just over 133p a litre in 2021, the cost of unleaded hit 163p at the start of May, when the fieldwork for the 2022 Report on Motoring was being carried out. Fuel prices continued to rise into July, exceeding 191p per litre for unleaded and 199p for a litre of diesel, making the cost of filling a 55-litre family car over £105 for both fuels.

In March, the Government announced a 5p-a-litre cut in the rate of fuel duty – taking duty levels down to 52.95p per litre: while this was a welcome move, it has been more than swallowed up by a subsequent dramatic rise in the wholesale cost of petrol and diesel and, in turn, pump prices. Consequently, the RAC has called on the Government to take more action to help drivers by further reducing the tax take on fuel.

A huge majority of drivers (92%) report a rise in expenditure on petrol or diesel in the past 12 months compared to just 27% last year. Although this is likely to be predominantly the result of higher pump prices, it should be noted that drivers will generally have used their vehicles more – whether for commuting or leisure purposes – following the end of UK’s second major lockdown at the start of 2021.

The cost of fuel is a much greater issue for younger drivers: this is arguably a result of their lower incomes and their propensity to drive more miles. In both the 17-24 and the 25-44 age groups, 62% say the cost of filling up is a top concern compared to 47% of those aged 65 and older.

Petrol and diesel are not the only means of powering a car, and owners of battery electric vehicles have also seen their costs increase as a result of rising electricity prices. In September it was reported by the RAC that the average price of charging an electric car on a pay-as-you-go basis via a public rapid charger had risen by 42% since May 2022 to 63.29p per kilowatt hour (kWh). However, this still represents better value for money than filling a petrol- or diesel-powered car, with an 80% charge at a rapid charge point costing EV (electric vehicle) owners £32.41.

Just over half of drivers (51%) say they are paying more for motor insurance than a year ago, although concern about the cost of cover has fallen steadily in recent years: from a level of 29% in 2015 to just 17% saying the cost of insuring their vehicle is a top concern in 2022.

This may reflect some recent changes in the insurance industry: during the pandemic, for example, many providers reduced premiums for customers who were no longer using their cars as much for commuting as a result of lockdowns or a shift towards home-working.

Meanwhile, at the start of 2022 the Financial Conduct Authority introduced a ban on insurers charging existing customers higher prices for renewing policies than they would charge new customers for the same level of cover.

Only 12% of drivers say their motor insurance premiums have fallen in the past 12 months, while 35% claim they have stayed the same. This, however, runs contrary to the Association of British Insurers (ABI) reporting in May 2022 that motor insurance premiums had started to fall by 5%. Maintenance costs, including those for servicing and MOTs as well as ad hoc repairs, have increased for 54% of drivers, almost certainly because of inflation and the rising costs of parts. A further 42% say their expenditure on servicing and MOTs has not changed in the past 12 months.

Almost half of drivers (49%) say that parking charges in general have risen since 2021 while 35% think they have stayed at last year’s levels. But concern about the cost of parking is at its lowest level in recent years: only 12% of drivers name this as a top concern in 2022 compared with 20% in 2018 and 18% in 2019.

As fuel costs have risen, nearly four in 10 drivers (38%) have taken steps to reduce their overall motoring expenses. The most common include no longer taking a vehicle to a car wash/valet service (16%), switching to a cheaper insurance provider (13%), and putting off minor repairs (12%).

But alarmingly, 12% say they have put off getting minor repairs done while 4% have deferred major ones. Younger drivers are much more likely to avoid having repair work carried out in order to save money: a huge 37% of under-25s say they have delayed making repairs as a result of cashflow issues, including 16% who admit to putting off major repairs. This is almost certainly due to the fact younger drivers tend to have older vehicles which are more likely to need repairing while also struggling financially due to higher insurance premiums and lower incomes. Breakdown cover, however, remains vital as very few drivers have reduced their level of cover or switched to cheaper providers to lower their motoring costs.

This year’s Report also shows a continuation of the trend towards drivers holding onto their cars for longer before switching to a newer model: in 2022, 65% of drivers say their main vehicle is at least five years old compared to 62% in 2021 and just 41% in 2018. Just 28% of drivers in 2022 say they expect to trade up to a newer vehicle within the next two years compared with 36% in 2019.

Among drivers who are not planning to change their vehicles in the near future, the majority (77%) say this is simply because they are happy with their current car. But 14% blame rising costs elsewhere – for example higher energy and fuel prices – and 8% point to high second-hand vehicle prices. Drivers aged 64 and older are most likely to say they are happy with their current car (83%) and least likely to say rising costs are preventing them from changing their vehicle (10%). Those aged between 25 and 44 are more likely than other age groups to say they are not planning to buy a new car because of high second-hand prices (14%).