YOUNG DRIVERS INDEX FEBRUARY A bi-annual vehicle maintenance index for young people by

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1 YOUNG DRIVERS INDEX FEBRUARY 2017 P A bi-annual vehicle maintenance index for young people by

2 Young Drivers: The annual cost of running a car Key Statistics Annual cost of running a car rises 4.2% to 2,397 in the past six months, which is almost 200 higher than March 2016 Fuel costs shot up by 140 (19%) over the last year Average insurance for year olds jumped again by 3.9% to 1,306 accounts for more than half of a young driver s first year running costs The cost of running a car for young drivers has hit record levels again, edging closer to the 2,500 mark. Now standing at 2,397, the cost of running a car for young drivers rose by 4.2% compared to the last Young Drivers report, which was released in September The report, which analyses costs for insurance, fuel, taxes, MOT, general maintenance and breakdown cover, found that for drivers between the ages of 17-24, expenses have risen by almost 100. Additional analysis found that the cost of running a car for young drivers equates to 15.5% of their after-tax income, before the cost of purchasing a car. The huge costs, combined with lower wages of year old s has meant that the number of younger people getting on the road has declined steadily over the past five years, from 2.88 million in 2012 to just over 2.7 million in The biggest cause of the rise in running costs has been the resurgence in the price of oil over the past year, which led to a year on year jump in petrol costs of 140 or 19%. The analysis of fuel costs, which is based on average annual mileage and the cost of premium unleaded petrol, found that in the past six months, the average cost of fuel had risen by over 50. Cost of running a car (17-24 year olds) Cost Feb-17 Sep-16 Feb-16 Cost difference % Change (Feb 17/Sep 16) (Feb 17/Sep 16) Insurance 1, , , % Fuel % Est. VED (Road Tax) % MOT % Breakdown cover % Total cost per year 2, , , % 1 Sourced from Gov.uk 2

3 Despite the huge rise in fuel prices, insurance remains the most significant cost for young drivers, rising by 3.9% over the past six months, to an average cost of 1,306 per year, equating to an increase of 49. The third hike in Insurance Premium Tax (IPT) will likely have added to the continued rise in car cover cost, as the tax is priced in by insurers ahead of implementation in June Younger motorists are now spending almost 2.5x more than the average driver on insurance, due to the higher perceived risks associated with insuring the younger generation on the road. Insurance 1,306 Fuel Est. VED (Road Tax) 110 MOT Breakdown Cover These figures show that buying a car is only half the struggle when it comes to getting on the road. While young people may save up for years to purchase a car, it is likely that they will need to save for a similar amount of time to afford the first year s running costs. It is therefore no surprise that the number of driving licenses for year old has steadily declined over the past five years. Many of the younger generation simply cannot afford to shell out almost 2,400 to get on the road without support from their parents. However, these excessive costs will likely be unavoidable for some who require a car to get to work Simon McCulloch, Director of Insurance, comparethemarket.com 3

4 The cost of insurance to young drivers Key Statistics year olds paying an average of 1,306 for car insurance each year accounting for 54.5% of the total cost of running a car Premiums for this age group shot up by 4.8% in the past year adding around 60 to every policy Young drivers could reduce insurance costs by 265 on average by shopping around The seemingly unrelenting rise in the cost of motor insurance has rapidly continued, with average premiums for year olds rising by 3.9% to 1,306 in the past six months. On an annual basis, premiums have risen by 4.8%, or 60, as the IPT hikes began to take full effect. Age group Average premium , Difference The cheapest premiums on the market for young drivers have also continued to increase over the past six months, averaging 1,040 over the period and reaching a new high of 1,076 in December The cheapest premiums have risen by 35 since the last Young Drivers report when the average cheapest premium stood at 1,005 breaking the 1000 mark for the first time. The good news is that there are still significant savings available to consumers who take the time to shop around for car insurance. The difference between the average premium and the cheapest average premium now stands at 265, an increase of 15 compared to the last report. IPT has risen three times in successive budgetary statements, ballooning in the past year and a half from 6% to 12% (from June 2017), significantly adding to the cost of insurance as it s likely the insurers price in the latest 2% rise in the lead up to implementation in June These rises are disproportionately hitting young people, as the tax is based on the total value of policies, which is typically highest among the younger generation. 2 The shop around saving is based on the difference between the cheapest click-through price presented and the mean average of the top five cheapest prices presented to a customer, where a consumer has clicked through to buy. 4

5 Changes in motor insurance premiums for year old drivers since September ,00 1,400 1,200 10, Sep 12 Dec 12 Mar 13 Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 Dec 16 Average premium - age Average cheapest - age Motor insurance premiums for year old drivers (Six months to February 2017) Shop around price Average price Saving 1, , As the single greatest cost that young drivers face, car insurance represents a serious barrier to getting on the road. There is little doubt that rising insurance costs have contributed in some way to the decline of young drivers. However, for those determined to overcome these costs, there are a number of options that can dramatically reduce the bills. The average year-old could save around 265 on car insurance if they were to switch to the cheapest deal available to them. Although it is not a silver bullet, the savings would go a long way to making driving more accessible for many. Simon McCulloch, Director of Insurance, comparethemarket.com 5

6 What is the best car for your budget? Key Statistics Young drivers spent an average of 3, on their cars over the past six months year olds could save an average of 331 on insurance by choosing different cars Vauxhall Corsa kept the top spot as the most popular car for drivers aged years old Fiat 500 is the only car to make both the list of most popular cars and the cheapest cars to insure The average value of the top ten most popular cars amongst young drivers rose significantly in the six months to January 2017, according to analysis by comparethemarket.com. The average price of the most popular cars was 3,505 compared to 1,757 six months ago. The Vauxhall Corsa retains the top spot of the most popular cars for young drivers, accounting for over 13% of enquiries and costing an average of 3,110. The Vauxhall Corsa is also slightly cheaper to insure than the average car, with an average premium of 1,297. The Ford Fiesta came in second, with over 10% of enquiries, costing an average of 4,095 to buy and 1,259 to insure. The average insurance cost for the top ten most popular cars, which account for more than 50% of enquiries through comparethemarket.com, now stands at 1,282. The Volkswagen Up! maintains its position on top of the list of cheapest cars to insure, costing an average of 905 per year, although the cost of the car is a lot more expensive than the most popular cars with an average value of 5,687. The Skoda Citigo came in second with an average cost of 908 per year. The Fiat 500 was third on the list of cheapest cars to insure with an average annual cost of 919 and was the only car to make both the list of most popular cars and the cheapest to insure. However, the Fiat 500 was significantly more expensive than the rest of the cars on the list, costing an average of 6,072. Although not a common consideration when buying a car, savvy consumers could find themselves saving hundreds on insurance by choosing certain cars. With the top ten most popular cars costing an average of 1,282 and the average of the top ten cheapest cars to insure costing 951, there is clearly some value in considering insurance when buying a car. Equally, young, new car buyers should take the time to shop around for a policy that both fits their needs and saves them money Simon McCulloch, Director of Insurance, comparethemarket.com 6

7 Top 10 most popular cars Make Model % Enquiries Avg Premium Avg Vehicle Value Vauxhall Corsa 13.27% 1, , Ford Fiesta 10.43% 1, , Volkswagen Polo 5.45% 1, , Renault Clio 5.14% 1, , Vauxhall Astra 4.01% 1, , Volkswagen Golf 3.50% 1, , Ford Ka 3.24% 1, , Fiat Punto 2.73% 1, , Ford Focus 2.61% 1, , Fiat % , Total 1, , Top 10 cheapest cars Make Model % Enquiries Avg Premium Avg Vehicle Value Volkswagen Up! 0.45% , Skoda Citigo 0.17% , Fiat % , Citroen C1 1.79% , Toyota Aygo 1.22% , Fiat Panda 0.23% , Hyundai i % , Vauxhall Adam 0.75% , Peugoet % , Mazda % , Total ,

8 Methodology All data, other than that referenced in the footnotes, is sourced from comparethemarket.com A young driver is defined in this research as drivers aged between years old. When the average price is referred to, this is the mean average of the top five cheapest prices presented to a customer, where a consumer has clicked through to buy. Buying from the top five cheapest prices presented, represents 90% of all car insurance sales. When the cheapest price is referred to, this is the average cheapest price presented, where a customer has clicked through to buy. All premium data refers to motor insurance products featuring comprehensive, third party fire and theft or third party cover. 8