Save money on running costs: 10 best tax-free cars

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The price of fuel may have dropped by around 8 pence a litre over the last year, considerably reducing the petrol bill for many motorists, but with wages stagnating across the UK saving money on other running costs is as vital as ever.Car insurance

And if you’re looking to buy a car, whether new or second hand, there are certain models and types which will automatically cost you a lot less to own than others.

Why some cars are tax-free

One of the most significant costs associated with owning a car is the ‘Vehicle Excise Duty’, or road tax as it’s commonly known, which you pay for the privilege of driving it around.

The cost depends on the vehicle’s tax ‘band’, which is related to engine size and the pollution emitted. This can be anything up to £500 a year if a car’s in the most expensive band, which is band M (or £1,090 for the first 12 months of ownership if it’s brand new).

Band M is for the most polluting vehicles, such as high-powered sports vehicles, which usually do very few miles to the gallon.

Owners pay thousands in tax over a car’s life

However, for a more ordinary car, owners currently pay tax of around £225, which is just over 10% of an average car’s running costs each year.

So if you own an average type of car for, say, 10 years, you’ll shell out £2,250 at the current tax rate, which generally goes up with inflation or more each year. Unlike costs for repairs and fuel, which can be mitigated by careful maintenance and driving, Vehicle Excise Duty can’t be avoided.

At an annual increase due to inflation of 3%, the total cost over 10 years will be more like £2,579.

10 best tax-free cars

But there are cars which are exempt from tax. Such cars are categorized as being in band ‘A’ for the purpose of Vehicle Excise Duty.

To qualify for band A, the car needs to emit an average of 100g of CO2 (pollution!) per kilometre driven or less.

Such cars are more and more in demand as the world wakes up to the effect of vehicle emissions on global warming and most of the major car manufacturers offer models that are in band A.

Leading car magazine and website, Carbuyer.co.uk, recently put together a list of the best road-tax-free cars you can buy. The cars were not only selected because they fall into the band A category for tax purposes, but also because they’re comfortable, a good drive and great value for money.

Here’s the top ten, including miles per gallon and marks out of five for each car:

  1. Skoda Octavia estate: 1.6-litre TDI diesel- 74.3mpg (or 88.3mpg for the newest ‘Greenline’ version out this Autumn), 5 stars out of 5.
  2. Hyundai i10 hatchback: Blue Drive model, 3-cylinder – 65.7mpg, 5 stars out of 5.
  3. Skoda Citigo hatchback: 1.0 MPI GreenTech – 68.9mpg, 4.9 start out of 5.
  4. Nissan Qashqai SUV: 1.5-litre dCi diesel – 74.3mpg, 4.8 stars out of 5.
  5. SEAT Leon hatchback: 1.6 litre TDI diesel – 85.6mpg, 4.8 stars out of 5.
  6. Ford Fiesta hatchback: EcoBoost 125 1.0-litre petrol – 65.7mpg, 4.7 stars out of 5.
  7. Citroen Grand C4 Picasso: e-HDI diesel – 70mpg, 4.4 stars out of 5.
  8. BMW 1 Series hatchback: 116d EfficientDynamics – 74.3mpg, 4.3 stars out of 5.
  9. Mercedes C-Class saloon: C300 BlueTEC SE diesel electric – 78.4mpg, 4.1 stars out of 5.
  10. MINI hatchback: Cooper D – 80.7mpg, 4.1 stars out of 5. 

Policy Expert

The customer service team at Policy Expert is always on hand to help – either online or over the phone. Whether you want assistance in finding the right policy or even handling a claim, we make sure it’s all handled by experts. For more information on what‘s covered under your Car Insurance policy, speak to one of our experts on 0330 0600 600 or email ask@policyexpert.co.uk

The views expressed here are solely those of the author and do not necessarily reflect the views of Policy Expert.