Young driver insurance and tax push up cost of motoring by £300 a year

The cost of running a car for young drivers has jumped by almost £300 in the last year as motorists face rising tax and insurance bills.

Despite a drop in the price of fuel over the last 12 months, new data showed that motorists aged 17 to 24 now face average bills of £2,559 a year - 13% more than a year ago. The results have raised concerns that keeping mobile is becoming increasingly difficult for young people hit by the cost-of-living crisis.

The analysis of annual costs by Compare the Market, based partly on quotes generated on its site, suggests that the average insurance premium jumped by more than a quarter between 2022 and 2023 and now costs young drivers £1,464. As a result, car insurance now represents 57% of the total car running costs for young drivers, who are viewed as one of the highest-risk groups on the road. That is up from 52% a year ago.

The data comes after the Association of British Insurers (ABI) revealed that average premiums across all age groups had increased by 16% (£60) in the last year. Premiums have been pushed up as insurers pass on to customers the rising cost of settling claims. Soaring repair bills and the rising cost of used cars have seen payouts hit £2.4 billion in the first three months of this year. 

Alongside rising insurance bills, the average young driver has also seen a jump in the cost of car tax. Based on tax bands for petrol and diesel cars registered since 2017, the cost has jumped from £165 to £180 per year, although drivers using older cars or electric vehicles could be paying far more or far less on tax. 

Offsetting that is a minor £21 per year drop in the cost of fuel, based on government figures for average mileage, fuel efficiency and petrol costs at the start of each year. Fuel prices have fallen dramatically in recent months but that decline has mostly just offset the sharp rises seen between January and July 2022, so the average price of a litre of unleaded in the first quarter of 2023 was 148p, compared with 151p in early 2022.

Running costs for younger motorists plummeted in 2021 as the impact of a series of lockdowns saw them slash their annual mileage in half - saving on insurance and fuel. However, as travel returns to pre-pandemic levels, costs have climbed too.

Julie Daniels, motor insurance expert at Compare the Market, comments: "Young drivers will be concerned that the cost of their car insurance is accelerating. The cost-of-living crisis and higher insurance premiums mean that many young drivers could face a struggle to stay on the road. For young drivers looking to save money, it is a good idea to shop around for car insurance and compare policies to see if there is a better deal available. Switching to a telematics policy may also be a suitable option for some young motorists."