Vehicle Excise Duty rises to add £162.9m to car buying costs
New car buyers will pay an extra £162.9m in tax next year following a rise in Vehicle Excise Duty for first-year vehicles.
According to a study carried out by Go.Compare, the VED rise will add £417 on average to the cost of each new car purchase. Based on sales figures in the first half of 2024, that will cost car buyers an extra £162.9m next year.
Diesel drivers will be hit hardest with an average VED increase of £1,113 per vehicle and a combined cost increase of £26.1m, while petrol increases will be £503 per sale and £89.4m accumulated.
Even buyers of hybrid vehicles can expect tax rises of between £135 and £327, while battery electric vehicle (EV) buyers will only need to spend an additional £10.
Tom Banks, car insurance expert at Go.Compare, said: “The increased VED rates mean most new car buyers will be paying a lot more than they were expecting in 2025, but there are ways you can minimise the impact this will have on your finances. For instance, consider purchasing a low-emissions car that will place your vehicle in the cheaper tax bands.
“If you can’t purchase a suitable hybrid or EV, consider opting for a nearly new vehicle instead. This gives you that new car feeling for a fraction of the price, and will allow you to dodge the increased tax.”
