Is car insurance group 13 expensive furniture
- 1. New car prices are expected to increase
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- HOW THIS IS MONEY CAN HELP
- 3. Insurance is on the rise and IPT is due to increase
- 4. OPEC oil production freeze could see petrol prices spiral
- Hit the road with the right car insurance policy
- Car insurance coverage types
- How car insurance rates are set
- Shopping for auto insurance
If you're planning to buy a new car, it might be an idea to get your skates on.
Forthcoming changes to car tax and manufacturers bumping up model pricing will make new vehicle ownership that bit more expensive.
But the gloomy outlook isn't exclusively for those looking to make a purchase in a showroom this year - running costs for all drivers are on the increase and could continue to spiral, if experts are right.
Here are four reason why 2017 could be the year that makes car ownership a significant financial burden.
Motorists will need to keep a close eye on the pennies: Here are four reasons why the cost of car ownership is going to escalate in 2017
1. New car prices are expected to increase
The representative body for the automotive industry has warned that car prices will rise in the coming weeks following the drop in value of the pound.
Chief executive at the Society of Motor Manufacturers and Traders, Mike Hawes, told Sky News earlier this month that car customers will see the price of new vehicles increase by two to three per cent in the first quarter of the year.
American electric car maker Tesla has already responded to the slumping sterling, citing 'currency fluctuations' for its five per cent price model range hike that came into force on Sunday (January 15th).
Tesla increased the price of its entire car range on January 15 by 5% in the UK. That includes the new Model X SUV pictured
But the wider market is also expected to follow suit, according to Hawes, who issued the warning to consumers while announcing record-breaking new car registration figures for 2016.
When motoring publication Auto Express last reviewed new car prices in the UK in 2013, it said that Britons spend around £27,500 on a new car - a three per cent increase would mean an extra £825 on that.
In reality, it is likely to be more, as car prices will be higher now than four years ago.
With Brexit on the horizon too, industry experts have also alerted buyers that they could face having to pay £1,500 more for imported cars, if the UK's separation from the UK leads to new tariffs. These make up more than 85 per cent of all new vehicles bought in Britain last year.
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2. New car tax rules will hike the cost of buying and owning
A study by consumer website HonestJohn.co.uk has found that seven in ten new car buyers will be paying more tax when changes are introduced to Vehicle and Excise Duty bands in three months' time.
Why is it happening? Because CO2 emissions figures for cars have now dropped so low that many drivers are having to pay very little tax or none at all, which is leaving a void in the Treasury's income.
The new regulations will mean higher tax outgoings for all new cars - except zero emissions ones - in the first year of registration, and a flat rate of £140 thereafter.
But there is a major catch. Cars costing more than £40,000 new will face an extra £310 surcharge for five years after the first year of ownership.
Only zero-emissions, pure-electric models will be exempt from paying car tax but hybrids - combining electric and combustion power - will fall foul of the new regulations. And even these zero emission cars will have to pay the £40,000-plus surcharge.
|Emissions (g/CO2/km)||First-year rate||Standard rate|
|* cars over £40,000 (listed as Premium) pay an annual £310 supplement for the first 5 years at the standard rate (excluding the first year rate)|
Vehicles built and purchased before 1 April 2017 will not be affected by these rates.
The Ford Fiesta 1.0 Ecoboost 100PS was the best-selling car in the UK last year and until March 31 is free to tax. However, buy one from April 1 and you'll have to pay £120 for the first year and £140 for every year beyond that
Greener cars will be hit
While some owners - especially those with higher emissions vehicles - will have to pay less than they currently do in the long run, buyers of the most economical petrol and diesel cars are going to be hit hardest.
Take the most bought car on the market today - the Ford Fiesta 1.0 Ecoboost 100PS. With 99g/km CO2 emissions, owners currently have to pay no tax whatsoever. However, from April 1, it will cost £120 to tax in the first year and £140 every year after that.
Cars costing more than £40,000 get an extra charge
And to add insult to injury, drivers of 'Premium models' with a value of more than £40,000 will also have to pay an additional £310 a year on top of their standard rate (which comes into force in the second year of ownership) for five years.
VED IN THE FUTURE
Following the Volkswagen diesel emissions cheating scandal in 2015, the EU has been forced to rethinking how emissions and fuel economy is calculated for new vehicles.
With various loopholes and lab-based testing not representing real-world driving currently, the regulations are expected to change to include measurements taken outside of laboratories.
This will ultimately see the claimed CO2 emissions figures - used to differentiate VED bands - increase to more realistic levels.
As a result, we could see car models jump a VED band or two when more representative figures are published.
However, the European Commission's proposed real-world driving (RDE) test was initially planned to be introduced this year and has yet to be confirmed.
Don't think you can use this £40,000 ceiling as a bargaining chip with dealers either - the law defines that the value of the car is based on the list price given by the manufacturer (not inclusive of 'On the road' additions including delivery and registration).
Be careful, though, as that £40,000 figure DOES include the cost of options, so buyers of cars close to the £40,000 threshold will need to be savvy about which additional features they choose for their vehicle to avoid having to pay £1,550 extra in tax from year two to year six.
For instance, you could buy a standard Audi Q5 2.0 TDI quattro S-line diesel that's worth £39,405 and pay £200 tax for the first year (based on a 133g/km CO2 output) and £140 every year after. Over six years that would take the tax total to £900.
But if you bought the same car and wanted metallic paint - a £650 optional extra - the value of the vehicle then increases to £40,025, above the premium model threshold and is therefore subject to an additional £310 a year on top of the standard rate for half a decade. That takes the six-year tax total to £2,450 for a car that's just £650 more expensive to buy.
It also means there are serious inconsistencies with the amount of tax paid on the emissions a vehicle produces. For example, a high-spec Mitsubishi Outlander PHEV (£41,399) might only emit 41g/km CO2, but the value means a buyer from April 1 will have to pay £2,260 in car tax over six years.
A Ford Focus RS buyer, however, will only have to pay £1,700 over the same period for a £30,000 high-performance hot hatch that emits 176g/km CO2 - more than four times the hybrid Mitsubishis output.
|Model||RRP||CO2 emissions (g/100km)||First year rate||Standard rate||Standard rate over 5 years||Premium model rate||Premium model rate over 5 years||Total tax over 6 years|
|Mitsubishi Outlander PHEV||£41,399||41||£10||£140||£700||£310||£1,550||£2,260|
|Ford Focus RS||£30,870||176||£800||£140||£700||n/a||£0||£1,700|
The Mitsubishi Outlander PHEV (left) is an eco-friendly hybrid SUV but it will cost £560 more to tax over six years than a ferocious Ford Focus RS hot hatch (right)
3. Insurance is on the rise and IPT is due to increase
According to the latest Confused.com Car Insurance Price Index, the average premium at the end of 2016 was £767. That was a 14 per cent increase on the year previous, accounting for an extra £95 on average.
Premiums have been gradually increasing since the end of 2015, and in the last quarter of 2016 alone jumped four per cent- the equivalent of £30 on average.
Much of this rise was fuelled by an increase in Insurance Premium Tax to 10 per cent in October. And guess what, there's another rise due this year.
IPT will increase to 12 per cent in June, it was announced by Chancellor Philip Hammond as part of his Autumn statement last year. The news means the price of all insurance - including motor - will again rise.
Confused.com's insurance index showed that premiums are higher now than they have been since the middle of 2012
James Dalton, director of general insurance policy at Association of British Insurers, said 'ambulance chasing' lawyers and fraudulent whiplash claims had pushed the price of insurance higher during 2016.
He said: 'Pressure is growing on premiums. Cold callers and ambulance-chasing lawyers are still finding ways to exploit the system, with government data suggesting a five per cent increase in whiplash style claims. This is driving up costs for honest motorists.
'In addition, the Government has doubled Insurance Premium Tax in just over a year, and repair bills are going up as cars get more sophisticated.
'So while insurers are doing all they can to control costs, these pressures show how important it is that the Government's latest proposals to tackle low value whiplash style claims are implemented fully and as quickly as possible, and that there is no rise in Insurance Premium Tax.'
The oil production freeze announced by OPEC in November has seen oil prices surge by $11 a barrel by the end of 2016
4. OPEC oil production freeze could see petrol prices spiral
UK petrol prices are currently the most expensive they've been for over two years, Government figures showed last week.
The fall in the pound has been a major contributor to that, as oil is priced in US dollars and that price is rising.
Motorists filling up at the pumps are now paying around £1.18 a litre for petrol, the Department for Business, Energy and Industrial Strategy said. At an average of £1.21 a litre, the cost of diesel has also reached its highest since January 2015. It means that the price of petrol and diesel has jumped by 4p in the last five weeks.
These recent higher prices at the pumps have been triggered by a deal by OPEC and other major oil producing countries to freeze production. As a result, the cost of a barrel of oil has gone up from around $45 in mid-November to $56 by the end of December.
The RAC warned that a continued production stall and the slumping pound could combine to hammer British drivers' wallets.
Fuel spokesman for the motoring group, Simon Williams, said: 'If in the months ahead the barrel price was to get nearer to $60 and the pound was to weaken further then that would be the worst possible combination for motorists.'SAVE MONEY ON MOTORING Car insurance Compare policies Warranties Get covered Breakdown cover Find the best deals Personal loans Borrow for a car Insurance tips Reduce your costs
Racing drivers and footballers take first and second position on the podium when it comes to costly car insurance premiums, research has found.
Funfair employees, scrap dealers and exotic dancers also fare badly, while nurses have the cheapest insurance and coastguards and bursars are also favoured.
It may come as a surprise that racing drivers top the list, seeing as they ply their trade behind the wheel – but according to data from comparison website Moneysupermarket.com, it costs on average £1,591 a year for them to insure their motor.
However, it may not come as that much of a shock that footballers are high up. Many Premiership stars have brash over-the-top expensive vehicles, kitted out with the latest gadgets and equipment, while hardly a week goes by without a story of a footballer having a prang in his car.
A tale of two jobs: Nurses, such as Tina Hobley's character in Holby City, will pay far less for their car insurance than a professional driver like Jenson Button.
One example saw Nicklas Bendtner, in 2009, – playing for Arsenal at the time – smash his £120,000 Aston Martin into a tree on the A1, writing off the vehicle. Some crashes have seen more tragic consequences with players and members of the public dead.
Footballers, as well as racing drivers, get hit with high premiums because they are also worth an incredible amount of money to both their clubs and sponsors, with some having price-tags in the double-digit millions.
The average insurance cost for footballers is £1,554. Although that is a fraction of the wages Rooney and his fellow Premiership players earn in a week, it is skewed by cheaper lower league footballers and is likely to be far less than such a high profile star would pay in insurance.
Moneysupermarket says that those topping the most expensive premiums list have a reputation of ‘living hard and fast,’ so insurers might have been stung with high cost pay outs from this type of profession which means they price them higher as the risk is greater.
Written off: An Aston Martin similar to the one Nicklas Bendtner wrote off three years ago
On the flipside, nurses are on average, the cheapest profession to insure. Perhaps some consolation in theregular debate over the wages nurses get for saving lives, compared to footballers’ who some see as overpaid prima donnas.
The average car insurance premium for a nurse is just £255, according to the data. Moneysupermarket say that ‘nurses tend to be female’ which is reflected in the lower premiums they pay.
However, this could change by 21 December when premiums for females are set to rise due to the EU Gender Directive that comes into force. This will stop insurers being able to use gender as a factor when pricing cover.
Industry experts have warned that female drivers, especially young ones, could see their premiums rise by as much as a quarter to bring costs in line with what male motorists pay – and some experts believe females could see their premiums go up by half.
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A number of public sector workers feature in the top ten cheapest professions, including magistrates, school crossing wardens and head teachers.
Cheap insurance: Nurses have car premiums, costing £255 a year
Pete Harrison, car insurance expert at MoneySupermarket, said: ‘Insurers measure risk in a number of ways and your profession could speak volumes about your risk as a driver, according to insurance providers. Our research clearly shows that the racier your job, the more expensive your premium will be.’
Elsewhere in the analysis of over 16million quotes from the past year, students fare badly due to the fact they tend to be young and less experienced drivers – for this reason, the average insurance costs tend to be over £1,000.
The nation’s retirees pay the least overall, with typical cover costing just £253 for the year – whereas motorists registering themselves as unemployed will be charged an average £773 a year.
Retired drivers are considered less risky as they have years of experience, have built up no claims bonuses and are likely to drive fewer miles each year.
Those who are unemployed get hit from both sides, especially if they need to drive to find work and attend job interviews. Insurers tend to charge a lot more for this type of driver, at a time when the case may be that they can least afford it.
MOST EXPENSIVE PROFESSIONS
|Motor racing drivers||£1,591|
|Students and apprentices||£1,059|
LEAST EXPENSIVE PROFESSIONS
|State enrolled nurse||£255|
|Guest house proprietor ||£264|
|School crossing warden||£301|
Kevin Pratt, insurance expert at MoneySupermarket, said: ‘Insurers have built up a bank of knowledge of how those who have a particular profession behave behind the wheel. Mostly it plays into the typical age and gender of the driver.
‘However with some professions it might not be so clear cut and it might be other factors of a driver's profile and personality that has more bearing on the premium they pay.
‘Sometimes people find it hard to class their profession using the lists provided by insurers but I advise people looking for cover concentrate more on picking the most accurate description on the list than the one that might provide the cheapest quote.
‘Giving information that isn't wholly accurate could mean you end up paying for cover that isn't valid or even be classed as filling in your details fraudulently by an insurer.’
Last week, This is Money reported how car insurance costs are starting to be driven down due to increasing competiton amongst insurers - this resulted in premiums dipping by 2.9 per cent between June and September 2012.
However, car insurance costs are still up 5.6 per cent over the past 12 months'.
CROUPIERS AND JOURNALISTS ALSO GET A RAW DEAL
I remember a meeting with an expert in the car insurance industry who said croupiers and journalists get stung because of the nature of their job.
Those who work in places like casinos and do unsociable hours may leave their cars in high risk places overnight, increasing their risk of theft and damage.
Croupiers at casinos also have notoriously high premiums, due to angry punters losing vast money in the casino blaming them and vandalising the croupier's car.
Journalists also get a raw deal – even though the role has changed in recent times. A common presumption is that they still use the car more than average, have a high risk of an important passenger being in the car with them and that they are a higher risk due to social drinking on the job.
Builders and electricians are in an occupation that entails the use of expensive tools for the job - meaning they can be a target for a break-in to steal the tools – and they are a higher risk.
Hit the road with the right car insurance policy
Auto insurance is a must if you own a car. Most states require you to carry insurance, and without it, you face financial disaster if you cause a serious accident and get sued.
Car insurance can also pay to repair your vehicle if it gets damaged in a crash or natural disaster, like hail or wildfire, or is vandalized or stolen.
Car insurance coverage types
One policy can include several types of coverage.
Liability insurancepays for others' damage and injuries when you cause an accident. Most states require you to carry at least a minimum level of bodily injury and property damage liability coverage. See states minimum car insurance requirements.
The coverage limits are expressed as three numbers. Limits of 25/50/25, for example, would provide up to $25,000 per person injured in an accident, up to $50,000 of coverage for injuries per accident and $25,000 for property damage per accident. Remember, liability insurance pays out to other people; it does not cover you, your passengers or your car.
Personal injury protection (PIP) or medical payments (MedPay) coverage pays the medical bills for you and your passengers after a car accident, regardless of who caused the crash. PIP also covers lost wages and funeral costs. Some states require you to buy PIP or MedPay.
Uninsured motorist (UM) and underinsured motorist (UIM)comes to the rescue if you're hit by a driver who has no insurance or not enough coverage. UM pays your medical bills if you're injured in an accident caused by an uninsured driver. UIM kicks in if your medical expenses exceed the other driver's liability coverage limits. UM and UIM are required in some states.
Uninsured motorist property damage (UMPD)covers your car if an uninsured driver hits you, but the coverage isn't available in every state. Roughly one in eight drivers is uninsured, according to a 2014 Insurance Research Council report.
Collision coverage pays to repair your own vehicle after a crash. It's an optional form of coverage, although your car-loan lender might require you to have it. Collision will kick in if you hit a tree, for example. Or, if an uninsured driver hits you and you don't have UMPD, you could make a collision claim for your car's repairs. Any collision payment will be reduced by the amount of your collision deductible.
Comprehensive coverage has a misleading name because it applies only to certain circumstances. It pays out if your car is stolen (and not recovered) or damaged by a natural disaster, if you hit an animal or if your car is vandalized. Like collision, comprehensive is optional, but your lender might require it. Here too, a comprehensive claim payment will be reduced by the amount of your deductible.
Roadside assistance and other extras can come in handy in a pinch. Roadside assistance covers towing and emergency roadside service when your car breaks down. Rental reimbursement pays for a rental car while your car is in the shop after a covered accident. Gap coverage kicks in if the insurer declares your car a total loss, and the payout from the insurance company for the vehicle's actual cash value is less than the amount you owe on the car loan. See: Save yourself some car insurance grief: Buy gap coverage.
How car insurance rates are set
The price you pay for car insurance depends on the type and amount of coverage you buy, the deductible for collision and comprehensive insurance, the kind of vehicle you own and the characteristics of you and the other drivers listed on the policy. Here are the most and least expensive 2016 vehicles to insure.
Factors that insurers generally consider when setting your rate include:
- Your driving record. Speeding tickets and other infractions increase premiums.
- Your accident and claims history. There's no point trying to hide your previous problem. Insurers will access your C.L.U.E. report to find out your claims for the past seven years.
- Your credit record. A good credit history helps keep premiums low. Insurers say there is a link between spotty credit history and the likelihood of filing claims. Not all states allow credit to be a factor in auto insurance pricing.
- Your age. Rates are highest for teenagers because they are risky drivers. Their crash rate per mile driven is about three times that of drivers age 20 and older, according to the Insurance Institute for Highway Safety. Rates begin to drop around age 25, and you'll likely enjoy the best rates in your 50s and early 60s.
- Your sex. Young women usually qualify for lower rates than young men, but the difference diminishes with age.
- Where you live. Car insurance rates vary widely by state and also by ZIP code. Insurers base rates on where the car is garaged.
- How much you drive. Your daily commute and annual mileage will affect your rate. The more your car is on the road, the greater your chance for a claim.
Shopping for auto insurance
Consider your assets when deciding how much liability insurance to buy. The state minimum requirements for coverage are too low for many people. Collision and comprehensive insurance are important for newer vehicles but usually aren't cost-effective for clunkers.
Shop around for car insurance quotes - rates, policy options and customer service vary by insurer. Insure.com's customer satisfaction ratings reveal which insurers get the highest marks.
And make sure you take advantage of discounts in order to lower your bill. Typical discounts include those for multiple vehicles on a policy, auto safety features, antitheft devices and good students. You might also be able to get a discount for paying in full, buying home insurance with the same insurer, or being a customer for a few years or more.Are insurance settlements taxable? By Emmet Pierce, Insure.com / Jan. 20, 2017
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