When you are budgeting for new car finance, it’s important to remember the hidden costs that are going to be involved. As well as the purchase cost and initial registration, you also need to consider ongoing running costs.

One of the most difficult costs to anticipate is that of insurance, especially if you’re male and in the 16 to 25 year old age group. Many buyers in this group find that insurance costs seem extremely high next to the cost of the vehicle itself. This is because drivers under 25 years old have the worst crash statistics of any age group, including not just the highest percentage of fatalities, but also high rates of accidents leading to property damage alone.

If you’re in this age group, it’s important to research insurance costs in advance, or you could be in for a severe shock after purchasing a vehicle. While high performance cars are obviously attractive, they’re also going to attract the highest insurance premiums, due to the statistical connection between young male drivers, excessive speed and fatal accidents.

Some buyers’ families try to get around this problem by putting their son’s vehicles on their own insurance. This is fine while you’re a learner driver, as you’ll be covered without your parents having to pay a higher excess. However, once you’re a P-plater, the excess required will increase dramatically. This is because a 17-year-old with a P1 licence is four times more likely to be involved in a fatal accident than a driver over 26 years (source: http://www.youngdriverfactbase.com).

Sometimes, parents try to play the system by insuring the new car in their own name, as if it belongs to them. This certainly brings the cost of the insurance premiums down, but it can create huge problems if the young driver has an accident. It may transpire that the insurance is invalid or, worse still, fraudulent. This leaves the driver open to large costs, or even prosecution, while their parents may have trouble getting economically priced insurance in the future.

What should drivers under 25 years do when selecting a new car to buy? We recommend that as soon as you have an idea of the type of car you want finance for, you check out how much the driver insurance will be.

1. Shop around for the best insurance deal before deciding on a particular model.
2. Look at whether committing to a higher excess could bring the premiums down.
3. If the overall cost is too high, consider a smaller vehicle that comes into a lower insurance group.
4. Don’t get drawn in by non-standard or optional extras on a new vehicle, as these can push the premiums up too.
5. Add an older driver with a clean licence to your policy. You could benefit from their claim-free driving.

Follow these steps and research insurance before applying for a new car loan, as there’ll be less chance of being caught out by hidden costs, now or in the future.