Financial Advisor

Car insurance – The financial effect of emissions

Many of us who care about issues such as climate change tend to see the purchase of emission-friendly cars as one way of showing we care about the environment. In fact, there is another powerful reason for choosing the right vehicle: cheaper running costs – and even lower insurance.

To understand why, you only have to look at how much a car costs to run each year: up to £3,500 a year on average, taking into account insurance, vehicle tax, fuel, servicing, maintenance and finance costs, where applicable. This is a considerable expense.

Many motorists also face much higher running costs due to the relative inefficiency of their car’s engine. It follows, therefore, that engines where efficiency is higher and emissions much lower will typically be much cheaper to run.

Lower emissions also mean your vehicle tax is cheaper. This is because current pricing strategy for vehicle tax in the UK rewards environmentally-friendly cars. Since March 2001 vehicle tax is calculated by taking into account the emissions of the vehicle in terms of grams of CO2 produced per kilometre, or g/km. Put simply, the less CO2 your car churns out, the less vehicle tax you pay.

The difference can be striking. For example, a car that produces between 101 and 120 g/km pays £35 a year in vehicle excise duty, or VED. This includes cars such as the new Volvo C30. By contrast, a 2-litre petrol Renault Espace with emissions of more than 225 g/km will cost more than £300 a year to tax.

The new VED system includes Y-registration and newer vehicles and did not start with the inception of the 51-plate, as is commonly believed. Vehicles produced before this date are charged in terms of engine capacity in cubic centimetres.

In this case your vehicle could cost you much more to run if it is a 2-litre engine (2,000 cc), even if its emissions are quite environmentally-friendly – especially relevant in the case of a diesel engine.

It should also be admitted that if a vehicle has low emissions it will not usually return the highest performance figures.

This may be a little different when it comes to the average diesel car, as the majority have turbo boosts to make up for the lack of power in this type of engine. Driven carefully they usually return exceptional fuel economy, depending on size of engine, but will usually still give you a reasonable level of performance compared to a petrol car with similarly low emissions.

Even so, having a car with a more economical engine means you save plenty of money on your annual fuel bill.

Another important point is that you will usually find that your motor insurance will be cheaper on a car such as this, as the engine will not normally be huge in capacity and not too performance-orientated.

All in all, helping to protect the environment as a motorist can significantly cut your driving costs.

Remember the lower the emissions your car produces the cheaper you will find your vehicle tax, fuel bills and, in all probability, your car insurance quote.

Motor insurance is usually cheaper on a car with a smaller engine capacity and lower emissions.

Always shop around to find the best car insurance quote .

The car to many is the second most expensive item you’ll ever own, running a vehicle with high emissions can increase this cost unnecessarily.

Tag: motor insurance, car insurance quote