Running a car is never cheap, but our latest Young Drivers report shows that the cost of running a car for young drivers has continued to rise over the past year. This is primarily driven by an increase in the cost of fuel and motor insurance. On average, Compare the Market data shows a 17-24-year-old driver will now pay £2,442 to run his or her car in the first year.

The cost of car insurance for young drivers

Our latest report shows thatthe cost of running a car for young drivers has risen by 2.7% over the past year, primarily driven by an increase in the cost of fuel and motor insurance. This has left the average young driver having to pay out £2,442 on their car in the first year. 

Over the past six months, there has been a slight reduction in premiums after a long period of hikes. However, insurance costs for young drivers have significantly increased over the two years, growing by £67, to an average of £1,324 today. This means that car insurance makes up over half of young drivers’ first year running costs.

The rises in insurance premiums are primarily due to increases in Insurance Premium Tax and changes to the personal injury discount rate (Ogden rate) that have forced insurance providers to up their prices. 

Not only has there been an increase in premiums, but the increase in the cost of fuel has also been a major driver of the rise in overall motoring costs for young drivers. Over the past two years fuel has shown to be very volatile. In the past year, the annual cost of fuel increased by over £80 to an average of £891 and recent reports anticipate fuel prices will rise even further. 

Young drivers index

Why is young driver insurance so expensive?

Young drivers face expensive insurance premiums because they’re far more likely to be involved in a car accident than older drivers. Whilst insurance costs for young drivers have slightly decreased by 1.76% to £1,324 over the past six months, they have risen by £67 over a two-year period and the average young driver now spends an eye-watering £1,324 a year for their car insurance.

The main factor in increasing insurance premiums for young drivers is the three hikes to Insurance Premium Tax. IPT now stands at 12% after doubling in the past three years and is priced into the overall premium that drivers are charged.  

Our Tank of Mum and Dad report found that over half of young drivers are now reliant on their parents to subsidise the cost of running a car, parting with an average of £762 per child. Parents contribute most towards the cost of their child’s motor insurance – paying out an average of £288 each year.

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Dan Hutson

Head of Motor Insurance

Compare the Market

Driving costs for young people are becoming worryingly high. Each quarter, our Young Drivers Report shows an increase in the cost of getting on the road for 17 – 24-year-olds. The price of insurance for young drivers remains awfully high and now the price of fuel is also expected to rocket. Fuel costs have always been volatile but the significant rise in price over the past six months will have a large impact on the affordability of driving, especially for young people. 

“The unaffordability of keeping a car has significant ramifications on young people’s ability to travel to work and hold down jobs, especially when a large proportion of their salary may be spent on travel alone. Not all parts of the country benefit from public transport and for those that rely on a car, these figures will be concerning. As a result, Compare the Market is calling on the Government to abolish Insurance Premium Tax for young people.

How to cut the cost of young driver insurance

The Insurance Premium Tax and other factors are increasing the price of car insurance for young drivers, but thereare definitely ways to cut the cost of young driver insurance:

  1. Choose a cheaper car to insure - The car you drive can have a big impact on your insurance, with some models offering lower premiums. 
  2. Consider a black box policy -  telematics policies are on the rise and can help to reduce premiums for sensible young drivers. The device is installed into your car and it monitors factors such as your speed, acceleration and braking.
  3. Reducing your mileage - Consider the possibility of reducing your mileage, as providers will use this to calculate your insurance premium.
  4. Avoid modifications to your car - You can reduce your premium by avoiding any modifications to your car and improving your car security, such as with the use of a dash-cam.
  5. Add a (responsible) named driver - You can cut the cost of your premium by adding an experienced driver, or someone with a low risk occupation, as a second named driver if they share your car. Be aware that it is illegal to state that someone is a main driver when that isn’t in fact true.
  6. Shop around to get the best deal by comparing quotes with our comparison tool.

What’s the best car for your budget?

The car you drive can have a big impact on your insurance, with some models offering lower premiums. Young drivers could save over £375 by choosing a different car to some of the most popular models on the market. The average premium of the top ten cheapest cars to insure stand at £908 compared to an average of £1,284 for the top ten most popular cars. However, you will need to have more money saved upfront as the savings in insurance are offset by the cost of the car itself. 

The average cost of the most popular cars stands at £3,973 compared to an average of £5,176 for the cheapest car to insure. The Vauxhall Corsa remains the most popular car for drivers for young drivers, whilst the Fiat 500 is still the only car to make both the list of most popular cars and the cheapest cars to insure.

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If you’re a young driver, or you have one in your household, don’t let the costs deter you. There is still a significant difference between the cheapest and average premiums for young drivers, providing an opportunity for savvy motorists to save money. The cheapest premium for 17 – 24-year olds stands at £1,066 – almost £260 lower than the average premium, so it pays to shop around.

Choosing the right car and finding the right insurance are two easy ways to reduce your costs. You can compare car insurance now and make sure that you’re getting a great deal for you.

All research from September 2018 Young Drivers report.