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Can you afford the yearly costs of your next car?

By raccars Published

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You may be able to afford to buy a new car, but can you afford the running costs?

If you're considering buying a new car, it's worth taking the time to work out not only how much it will cost you to buy, but also how much you will have to pay out every year on items such as road tax (VED) and insurance. We all know how important fuel economy is, and VED is based upon emissions. This means, essentially, that the more powerful the car, the more it will cost you.

Traditionally the same has always applied to car insurance. However, as insurance costs grow ever higher, it's no longer that simple. In the UK, insurers now categorise cars into 50 groups, with the higher group numbers indicating higher premiums. Cars are assigned to groups according to the level of risk.

How risky is your new car?

Insurance group classifications are compiled by car security specialist Thatcham, working for the Association of British Insurers (ABI). Thatcham analyses two key areas for every vehicle: damageability, which looks at how cars are affected by collisions; and repairability, analysing how difficult and expensive cars are to repair after an accident. High dealership repair costs can push cars up the repairability scale and therefore up in group ratings.

Thatcham's analysts assign a group reference after calculating a range of different factors, using both manufacturer data and their own testing procedures. Key factors include:

Price and availability of parts

A list of the prices of 23 commonly used parts.

Performance

Looking at each vehicle's top speed and how long it takes to accelerate from 0-60mph.

Repair costs

Considering both the parts and labour costs involved in repairing a vehicle after low speed collisions.

List price

The car's original cost helps to work out how much insurers offer as a settlement in the event of a write off.

At this point a 1-50 group rating is assigned, before cars are given a security rating.

Security ratings

The security score depends upon security features such as alarm systems and tracking devices. Group ratings are then reassessed so that cars with strong security systems can move into a lower, cheaper insurance group and poorly secured cars move up to a higher and more expensive group. Thatcham assigns security ratings according to its own tests, in the form of a letter:

E: the highest level of security, which can reduce the group rating. A: acceptable security features for this type of car. D: security does not meet the required standards, which will increase the insurance group rating. U: unacceptable security, possibly uninsurable without installing extra security features. P: a lack of data at the time of testing prohibited classification. G: applies to grey imports, which Thatcham does not classify.

Since theft accounts for a large percentage of insurance claims, this part of the classification process can have a major impact upon a car's insurance group rating.

In the same way, car insurance group ratings can also be improved by modern safety features such as autonomous braking.

Insurer risk factors

So when you are buying a new car, these in theory are the main factors which will determine how much you pay for your insurance. However, you should bear in mind that insurers also exercise a certain degree of autonomy when setting premiums, so that cars which are deemed to attract a riskier 'boy racer' type of driver will carry a higher premium than apparently sensible cars, even if they are assigned the same group rating.

You will also need to take into account the risk factors associated with where and how you keep and use a car; your annual mileage; if it is garaged or parked on the street, for example. These elements all count towards the level of risk to which a car, and therefore an insurer, is exposed.

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