How to budget for your first car

When you're new to driving, it's easy to fixate on one number: the monthly payment. 

But the real cost of being on the road is made up of smaller monthly costs that add up fast, such as fuel, maintenance, parking, and insurance (which can be a big one for younger drivers).

In this guide, we’ll show you how to budget for your first car, a few handy rules of thumb to keep you on track, and how leasing can make getting behind the wheel feel a lot more stress-free.

Before even looking at new cars, decide what you can comfortably spend every month on everything car-related. 

A simple way to do it: 

• Write down your monthly take-home pay 
• Subtract your non-negotiables (rent, phone, food, bills, travel)
• Leave yourself a comfortable buffer
• What's left is your maximum monthly car spend (remember, this isn't just your monthly payment, it's everything)

There's a few common ways to fund a car: 

When buying a car, you'll normally pay an initial deposit and monthly payments (often with interest) to own the car. 

Repairs and depreciation risk sit with you, and monthly costs can vary depending on the deal. 

Leasing a car is perfect if you're after a stress-free way to drive a brand-new (or used) vehicle. 

You pay a fixed monthly payment to use the car for an agreed term and mileage, then hand it back at the end.

You'll get predictable monthly costs and have the option of adding servicing and maintenance to your contract, making budgeting much easier. 

If you're weighing up whether to buy or lease, check out our guide: Buying vs Leasing. 

You'll need to budget for expenses like: 

• Insurance 
• Fuel/charging
• Servicing & maintenance 
• Day-to-day costs 

For many new drivers, insurance can cost as much (or sometimes even more) than the car itself. 

MoneySuperMarket's New Driver Report 2025 found the average annual premium for drivers who’ve held their licence for under two years is £1,640, up 31% compared to 2021

That’s why it’s worth doing everything you can to keep costs sensible:

Therefore, it's essential that you do everything in your power to keep costs sensible: 

• Check insurance groups before you fall in love with a car 
• Avoid high-performance models (they usually mean higher premiums)
• Consider basic but brilliant cars with small engines, good safety ratings, and affordable repair costs 
• Compare quotes early

Fuel is the most obvious running cost for any car, and good fuel economy should be at the top of your list when searching for your first car.

A simple way to estimate fuel spend is to use the manufacturer’s official MPG figure, then apply your expected mileage.

Example: If you drive 8,000 miles a year, and your car averages 40mpg, you'll use about 200 UK gallons annually. That's roughly 909 litres. 

With petrol averaging around 134p per litre in 2026, you’d spend roughly £1,217 a year on fuel, or about about £101 a month.

Note: Fuel prices move around, so treat this as a sensible guide rather than a fixed number.

Switching to an EV could be worth it

If fuel prices put you off, an EV can be a strong alternative. They can cost more upfront, but charging is often cheaper than filling up, and EVs can be cheaper to run overall depending on your charging setup and driving habits.

In order to keep your new car in the best possible condition, you must service it at regular intervals as advised by the manufacturer, which is usually every 12 months or 12,000 miles. 

Costs vary by vehicle, but Checkatrade estimates the average cost of a full car service is between £170 and £395. 

If you're leasing, you can add a serving or maintenance package to your contract which covers all servicing, necessary maintenance of tyres, brakes, the exhaust and the battery of your vehicle, plus any necessary labour costs.

For more information on maintenance, check out our Vehicle Maintenance hub. 

These vary massively depending on where you live, but don’t forget to budget for things like:

• Parking at home or work 
• Congestion/clean air charges 
• Car washes 
• Tolls 

As a simple buffer, we’d recommend putting aside £25–£50 per month for these smaller extras.

Leasing can be a smart option for your first car because it keeps things simple and predictable. You’ll know what you’re paying each month from day one, which makes budgeting easier, especially when you’re also juggling insurance, fuel, and maintenance.

If you lease a brand-new car, it will come with the manufacturers warranty, and road tax is also included in your contract, meaning there fewer surprise bills to worry about. 

You can also choose a contract length and mileage that suits your lifestyle, rather than guessing what you’ll need long-term. 

Budgeting for your first car doesn’t need to be complicated, it just needs to be honest.

Once you’ve accounted for insurance, fuel or charging, servicing, and everyday costs like parking, it’s much easier to choose a car you can genuinely afford.

If you’re ready to start your search, Nationwide Vehicle Contracts offers straightforward pricing and helpful UK support from real people. We've been around since 2002, and have helped to arrange over 180,000 contracts. 

Take a look at our latest lease deals, or visit our Young Drivers hub for more first-car guides and tips.