Passing your test is the easy bit to price. The car itself, and everything that comes with it, is where first-time buyers tend to guess. The real question is how much to spend on the car and how much to keep back for running it.
How much should you spend on your first car?
Most first-time buyers in the UK should plan to spend around £5,000 on a used first car. That's enough for a reliable starter car, and it sits close to what young drivers actually pay. In a 2026 survey of drivers aged 17 to 21, the average first car cost £4,867.
Where you live moves that average. Drivers in the East of England paid £3,792 on average. In Scotland, drivers paid over £2,000 more.
Asking prices sit higher than what people end up paying. Half of the used cars advertised for new drivers ask between £5,295 and £12,599. So a £5,000 budget sits at the cheaper end of the market.
The purchase price is only part of the bill, though. Insurance alone can cost a new driver more in the first year than a cheap car does. That's why it pays to price the running costs before you set the car budget.
What is a good price for a first car?
A good price for a first car is one close to the market average for that model, age and mileage. Anything near that average is a reasonable price to pay. Anywhere from £3,000 to £10,000 can buy a sensible used car, and spending more gets you a younger car with fewer miles.
| Budget | What it usually buys | Watch out for |
|---|---|---|
| Under £3,000 | An older small hatchback with higher mileage | Repair bills and a thin service history |
| £3,000 to £6,000 | A small hatchback with average mileage and some service history | Insurance group and MOT history |
| £6,000 to £10,000 | A newer car with lower mileage and more safety kit | Higher insurance on bigger engines |
| Over £10,000 | A car a few years old, sometimes with warranty left | Faster depreciation in the first years |
A price well below the average for the same car usually has a reason behind it, such as high mileage or accident damage. And a bargain like that can end up costing more in repairs.
How much of your income should go on a first car?
Our rule of thumb is that a first car should cost you no more than about 20% of your take-home pay each month. That 20% has to cover every car cost: the finance payment, insurance, fuel, tax and upkeep.
Take-home pay is the right starting point because it's what reaches your account after tax and National Insurance. Two people on the same salary can have very different budgets once rent and bills come out. And other rules of thumb measure different things, such as the finance payment alone, so they can give different answers. Our guide on how much to spend on a car sets out the main ones.
Say you take home £1,800 a month and plan to buy on Hire Purchase (HP). At 20%, you have £360 a month for the car, which splits like this:
- insurance at the new-driver average: about £156
- vehicle tax: about £17
- an MOT and a service, spread over 12 months: about £19
- left for the finance payment and fuel: about £168
HP on a £4,500 car with a £450 deposit at 21.9% APR costs £150.45 a month over 3 years. That leaves under £20 a month for fuel, which won't go far. A bigger deposit or a cheaper car would bring the numbers back in line.
The rule gets tight on lower incomes because insurance costs much the same whatever you earn. For that same car, you'd need to take home about £1,710 a month before 20% covers the payment, insurance, tax and servicing, and that's before any fuel. On higher incomes, 20% is a ceiling, and spending less leaves more room for savings.
Living with your parents can leave more of your pay free for a car. But it's worth setting the budget as if you paid your own way, because the payments carry on if you move out partway through the agreement.
How much should you save for your first car?
To buy your first car outright, aim to save around £5,000 for the car (as we said before) plus your first insurance payment. On finance, you'll usually need a deposit instead. A 10% deposit on a typical first car comes to around £450 to £500, and you'll want a cushion for running costs on top.
- Buying outright: save the price of the car, the first insurance payment (or a year's premium if you pay annually) and a buffer for an early repair or new tyres.
- Buying on finance: save a deposit plus enough to cover insurance and the first month's running costs.
There's no legal minimum deposit for car finance. Each lender sets its own terms, and some offer no-deposit deals. Still, a bigger deposit lowers the amount you borrow, which cuts both the monthly payment and the total interest.
Saving up for a deposit doesn't have to take years. People who set up a dedicated car savings pot typically reach about £600. Most of them save for around 4 months. Our guide on how to save for a car has ways to get there faster.
What does a first car cost to run?
A first car costs roughly £2,300 to £2,500 a year to run before fuel and repairs, for a new driver paying the average premium. That figure adds up insurance, tax, an MOT and a service. Insurance is the biggest part of it. Drivers of any age who've held a licence for under a year paid £1,871 a year on average in 2026, more than a third of what the average first car costs to buy.
Your age and where you live move that figure a lot, and the prices you're quoted can differ from what drivers end up paying. Drivers aged 17 to 20 were quoted £1,813 a year on average for comprehensive cover in spring 2026. At the end of 2025, regional averages for 17-year-olds ran from about £1,940 to £2,800. By age 19, they had fallen to about £980 to £1,480.
| Cost | What to budget | When it applies |
|---|---|---|
| Insurance | £1,871 a year on average for drivers licensed under a year | Every year, falling as you build a no-claims discount (a discount for each year without a claim) |
| Vehicle Excise Duty (VED), or road tax | £200 a year at the standard rate | Cars first registered from 1 April 2017; older cars are taxed on CO2 or engine size |
| MOT | Up to £54.85 | Every year once the car is 3 years old |
| Servicing | £170 to £395 for a full service | Usually every 12 months or 12,000 miles |
| Fuel or charging | Depends on your mileage and the car's MPG | Every month |
| Tyres, repairs and parking | A monthly buffer | Varies with the car's age and where you live |
Repairs are the cost you can't schedule. Older cars tend to need more of them. So the cheaper the car, the bigger the buffer you'll want to keep aside.
For a fuller checklist, MoneyHelper's free guide to the costs of buying and running a car covers what to budget for.
Should you buy a new or used first car?
A used car is the better fit for most first-time buyers. It costs less to buy, and it has already taken its steepest drop in value. In our October 2026 analysis of 41,298 UK used car listings, asking prices fell by about 10% for each year of a car's age.
A new car makes sense if you want a manufacturer's warranty and can afford the higher price. The trade-off is depreciation. It hits hardest in the first few years, and you feel it when you sell. The checks to make before you pay are in our guides to new vs used cars and buying your first car.
In our data, buying at around 3 years old lost the least value if you keep the car for 3 years. A car bought at that age lost 23% of its asking price over those 3 years. One bought at under a year old lost 26.7%. At 6 years old, the loss rose to 30.8%. In pounds, though, an older car still loses less each year, because it's worth less to begin with.
Small petrol cars hold their value better, too, which suits a first-car budget. City cars such as the Fiat 500, Hyundai i10 and Toyota Aygo lost 8.6% of their asking price a year on average. Petrol cars lost 9.5% a year, while diesels lost 11.2%.
The full figures by brand and model are in our guides to how fast used cars lose value and which used cars hold their value.
Which cars make a good first car?
Good first cars on a £5,000 budget are small petrol hatchbacks in low insurance groups, such as the Hyundai i10, Kia Picanto, Škoda Fabia, Volkswagen Polo and Vauxhall Corsa. Used examples of all 5 typically sell for £6,000 or less.
| Car | Insurance group | Fuel economy (mpg) | Why it suits a first car |
|---|---|---|---|
| Hyundai i10 | 1–7 | 51–56 | Small and easy to park; the entry 67hp engine is cheapest to insure, while the 1.2 copes better on motorways |
| Kia Picanto | 1–11 | 54–64 | Built for town driving, with a 1.0-litre petrol |
| Škoda Fabia | 1–14 | 43.5–70.8 | The base 1.0-litre sits in groups 1–4, with light steering in town |
| Volkswagen Polo | 1–15 | 33.6–80.7 | Good visibility and a smooth ride; the 1.0-litre petrol is cheapest to insure |
| Vauxhall Corsa | 10–14 | 45.6–70.6 | Easy to drive and park; 2018 cars with reasonable mileage cost about £4,000 to £5,000 |
Insurance groups change with engine and trim, so get a quote on the exact version before you buy. If resale value matters too, the Fiat 500 lost the least value of the small hatchbacks in our listings data, at 6.9% a year. The Toyota Yaris and Volkswagen Polo weren't far behind.
For more options, see our lists of the best used cars under £6,000 and good first cars for 17-year-olds, or our review asking is the Vauxhall Corsa a good first car.
Should you use car finance for your first car?
Car finance spreads the cost of a car into fixed monthly payments, which suits a first-time buyer with a steady income but not the full price saved. You need to be 18 or over to sign a car finance agreement. The 2 most common types are Hire Purchase (HP) and Personal Contract Purchase (PCP). If you're unsure finance is right for you, start with getting your first car on finance.
Hire Purchase (HP) is a car finance agreement where you pay a deposit, then fixed monthly instalments, and own the car once the final payment is made. Monthly payments are usually higher than on PCP. But there's no large sum to find at the end.
Personal Contract Purchase (PCP) is a car finance agreement where your monthly payments cover only part of the car's value. At the end, you can make an optional final payment (often called a 'balloon payment') to keep the car, or hand it back. You don't own the car until that final payment is made.
Here's how the 2 compare on the same £4,500 used car with a £450 deposit, over 36 months. Both use 21.9% APR, the representative rate on our young-driver finance page. APR is the yearly cost of borrowing (interest plus any fees) shown as a percentage. The figures assume no extra fees, and your own rate will depend on your circumstances.
| HP | PCP | |
|---|---|---|
| Cash price | £4,500 | £4,500 |
| Deposit | £450 | £450 |
| Amount of credit | £4,050 | £4,050 |
| APR (fixed) | 21.9% | 21.9% |
| 36 monthly payments of | £150.45 | £90.46 |
| Optional final payment | None | £2,925 |
| Total charge for credit | £1,366.20 | £2,131.56 |
| Total amount payable | £5,866.20 | £6,631.56 |
| Other possible charges | Any option-to-purchase fee in the agreement | Excess mileage and damage charges if you hand the car back |
The amount of credit is what you borrow once the deposit is paid. The total charge for credit is the interest and fees you pay on top of it.
PCP cuts the monthly payment by about £60 in this example. But it costs £765.36 more overall if you keep the car. That's because you pay interest on the final payment for the whole agreement. Hand the car back instead, and you'll have paid £3,706.56 in total. That only holds if you've stayed within your mileage limit and the car has no damage beyond fair wear and tear.
A shorter agreement means less interest overall, though each monthly payment is higher. For a fuller comparison of the two, see PCP vs HP.
For a real-world benchmark, here's our representative example:
- borrowing: £7,000 over 5 years, no deposit
- representative APR: 21.9%
- 60 monthly payments of £185.33
- total charge for credit: £4,119.81
- total amount payable: £11,119.81
How can you lower the cost of your first car?
The quickest way to lower the cost of a first car is to choose one in a low insurance group. Every car sits in a group from 1 to 50, and group 1 is the cheapest to insure. To build a shortlist, start with the cheapest cars to insure for new drivers.
- Pick a small, low-powered car: small engines usually mean a lower insurance group and better fuel economy.
- Get an insurance quote before you buy: a cheap car can still cost a lot to insure, so price the cover on the exact model first.
- Consider a black box policy: a telematics box records how, when and where you drive, and careful driving can bring your premium down. Risky driving can push it up, too.
- Pay annually if you can: paying monthly often adds interest, so a single annual payment usually costs less overall.
- Raise your voluntary excess carefully: a higher excess can lower your premium, but only choose an amount you could pay if you made a claim.
- Give your real mileage: a low estimate might cut the quote, but underestimating your miles can invalidate your cover.
Our verdict: the right first-car budget
For most new drivers, a used small hatchback for around £5,000 is the sensible first car. It keeps the price near what young drivers really pay and leaves room for insurance. Paying cash? Keep enough back for the first year's cover. Using finance? Check that all your car costs fit within our 20% rule, and if your take-home pay is under about £1,710 a month, aim for a cheaper car or a bigger deposit.
If you'd like to spread the cost, here at Carplus we can show you what car finance for young drivers might cost each month before you pick a car. Check your options – we use a soft search, so there's no impact on your credit score at this stage.
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