Petrol price rises could make cars worthless
Friday, 13 June 2008 12:00 AM
If petrol prices continue to rise so quickly, the ludicrous situation of a car being worth less than its annual running costs could become a reality
Industry analysts have warned that if the price of petrol hits £2.30 a litre in 2009, as has been predicted, it will cost more than £3,800 a year just to keep a car on the road.
This means the average driver will find that their car will only be worth £385 more than its annual running cost.
This could be enough to force many motorists off the road altogether, says uSwitch.com.
Some motorists face the befuddling situation where it will cost more to keep their car on the road than it is actually worth. This 'negative equity' will come about if petrol prices reach £2.30 a litre.
With petrol prices currently at 117.2p per litre, British motorists are now forking out more than £65 each on average to fill up their tanks.
However, at £2.30 a litre, motorists could expect to pay £128.80 every time they fill up at the pumps in 2009.
This amounts to an mind-boggling £3,387.29 a year and, when you add in tax and insurance, the average driver will find that their car will only be worth £385 more than its running costs.
Almost 15 million cars on the UK's roads are over five years old, making the average car now worth £4,227.
In other words, 91 per cent of its value will be spent on fuel, tax and insurance. For many motorists it will be even worse - it will cost more to keep their car on the road than the car is actually worth.
For example, a six-year-old Ford Focus valued at £2,895 would cost £3,368 a year to fill with petrol - £723 more than the car value.
The owner will then be hit with a tax bill of £120 a year under the new bands announced in this year's Budget. The car will then need to be insured, of course. In total, the running cost of the car would be £3,754 - £860 more than the value.
Motorists have already seen a 33 per cent increase in the cost of a full tank since 2007. A hike in petrol prices to £2.30 per litre would see a motorist's annual fuel bills soar by £1,661.25 in 2009.
This is equivalent to 24 per cent of the predicted net salary in 2009 of £19,167.98 (£25,189.84 gross). In total, the national spend on fuel in 2009 could be as much as £104 billion.
