Is 2025 the year to go electric? Will driving costs increase under a Labour government? Here’s a breakdown of what you can expect this year.
Price of Used Cars
Used car prices are set to remain strong in 2025, driven by high demand. If you’re holding out for a big drop in prices this spring, think again. Despite political uncertainty and economic challenges, used car demand stayed resilient in 2024, with Auto Trader reporting a record 971 million visits, up 74 million from 2023.
In December, the average used car price was £16,649, just 0.6% lower than November. Petrol cars averaged £14,782, diesels dropped to £14,087 (down 4.1% year-on-year), and used electric vehicles (EVs) saw a notable price drop of 10.6%, bringing the average to £26,139.
By the end of 2025, the market is expected to recover to nearly pre-pandemic sales volumes.
Price of New Cars
New car options are changing fast. 2024 marked the peak for petrol and diesel sales, and 2025 will see fewer of these on offer as manufacturers push toward EVs in line with government legislation.
Good news for EV buyers: as of January 2025, there are 29 new electric models priced under £30,000—up from just nine a year ago. Discounts are still available, but don’t expect 2024’s average 12% markdowns to stick around.
In some cases, it’s already cheaper to buy a brand-new EV than a lightly used one. For instance, a three-year-old electric Peugeot e-208 costs just £444 more than its petrol equivalent. Similarly, a used Jaguar I-Pace is £383 cheaper than a diesel E-Pace.
Road Tax (VED)
Big changes are coming to Vehicle Excise Duty (VED) in 2025:
- Electric cars are no longer exempt. New EVs will pay £10 in the first year and £195 annually after that. If your EV was registered between April 2017 and March 2025, you’ll also start paying £195 per year from your next renewal after April 2025.
- Hybrids will face higher first-year taxes, with CO2 emissions between 1-50g/km taxed at £110 (up from £10), and 51-75g/km taxed at £130 (up from £30).
- Petrol and diesel drivers, especially those with high-performance vehicles, will be hit hardest. For example, cars emitting 151-170g/km of CO2 will now cost £1,360 in first-year VED, double the previous rate.
Cost of Going Electric
If you’re thinking of switching to electric, 2025 could be the year. Several new models like the Dacia Spring, Renault 5 E-Tech, and VW ID.2all will be priced under £25,000. On the used market, one in three EVs is now priced under £20,000—a 25% increase compared to 2023.
However, the Government’s Expensive Car Supplement (£355 annually for six years) now applies to EVs over £40,000, whether new or used, if they’re under six years old.
More charging points are being installed across the UK, now exceeding 70,000, but home charging remains the cheapest option. If you can charge at home, you could save up to £750 annually compared to fueling a petrol car.
What About Pay-Per-Mile Taxation?
While no pay-per-mile taxation is planned for 2025, the Government will eventually need to fill the gap left by declining fuel duty revenue as more drivers switch to electric. For now, fuel duty remains a significant source of income, so it’s worth keeping an eye on future announcements.
2025 brings both opportunities and challenges for drivers. Whether you stick with petrol, go hybrid, or make the leap to electric, staying informed can help you navigate these changes and make the most cost-effective decisions.
