Green Car Insurance

Bring down motoring costs and get cheaper green car insurance premiums

No matter what colour your vehicle, you could save money by going green. Eco-friendly cars pay reduced road tax and use less fuel - and some insurers will even offer lower green car insurance premiums to green car owners. Here we outline the situation for green cars and suggest some ways that you can make further inroads into your motoring costs.

Road tax savings

The amount of Vehicle Excise Duty (VED - sometimes referred to 'car tax' or 'road tax') levied depends on when the car was registered and, for cars registered since March 2001, its CO2 emissions.

For cars registered before March 2001, VED is charged according to engine size: £135 up to 1550cc and £220 for larger engine sizes.
For cars registered since March 2001, the amount payable increases according to the level of emissions. As well as paying VED, motorists also have to pay Fuel Excise Duty (FED), which is levied on all liquid and gaseous fuels and is loosely based on the emissions impact of the fuel - so, in broad terms, the greener you are, the less tax you pay on your fuel.

There are 13 CO2 bands running from A to M. Band A applies to cars that have CO2 emissions of up to 100 g/km. Bands B to L each cover a 10-30 g/km range of CO2 emissions apply between 100 g/km and 255 g/km. Cars with emissions of over 255 g/km fall into the highest band, M.

The scale of charges for each CO2 band, known as the 'standard rate', can be seen on the Direct.gov.uk website.

If you're in the market for a new car, there's good news as far as new cars with CO2 emissions of 130 g/km or less - that's VED bands A to D - are concerned: they are zero-rated for the first year, meaning no VED is charged and bringing a saving of up to £95. The tax charge reverts to the 'standard rate' from the second year.

If you opt for a new car with emissions between 131 and 165 g/km - that's bands E to G - your 'first year' rate is the same as the 'standard rate'. New cars with emissions over 165 g/km (bands H to M) pay a punitive higher 'first year' rate, up to a maximum of £1,000.

Additionally, certain cars that run on so-called 'alternative' fuel (including hybrids and some using liquefied petroleum gas (LPG), compressed natural gas (CNG) and bioethanol) receive a £10 discount on both the 'standard' and 'first year' rates. If you have an electric car you are exempt from paying VED.

It seems inevitable that the price of fuel will continue to rise over the coming year, and there is no indication that the amount of tax levied on fuel will fall. Combined with the benefits relating to VED, it seems certain that interest in fuel efficient vehicles will continue to rise.

Green Car Options

It might once have been the case that 'green cars' were impractical and expensive. But manufacturers have boosted the range and variety of their fuel efficient offerings, meaning both petrol and diesel green car options are available, with the diesel option being the most common.

Hybrid vehicles have an electric engine running alongside the conventional petrol/diesel motor. This has obvious fuel saving potential as the electric motor will run at certain points during a journey, meaning the petrol or diesel-guzzling conventional engine is not used all the time.

'Deep green' cars are powered by electric motors. These are likely to be commonplace in the future as more car manufacturers bring their models to market.

Green car insurance savings

As well as making savings on annual fuel costs, drivers of 'green' cars also benefit from cheaper car insurance deals. Moneysupermarket.com compares deals available through both green car insurance specialists and conventional insurers as part of our quest to find the right deal for your circumstances.

Research by MoneySupermarket.com suggests that some car insurance companies will offer discounts of up to 5% to owners of certain environmental friendly vehicles. While this might not sound like a lot, it can be a worthwhile amount, especially when fuel and tax savings are taken into account.

In addition to reduced premiums, some green car insurance companies will offset the pollution caused by your car with schemes such as tree planting or environmental charity contributions.

You don't have to own an environmental car to take advantage of such deals, so you can be environmentally active without changing your car.

Car Insurance Groups

If you are buying a new car, check its insurance group rating. Insurers allocate every make of car registered in the UK into one of 50 groups according to factors such as engine size and the cost of repairs. The higher the insurance group, the higher the premium. Find out details of car insurance groups at www.thatcham.org - what you see could help determine your choice of car.

Modifications

Refrain from modifying your car with extra lights, spoilers or wheel trims because you may have to pay additional premiums - and if you don't tell your insurer that you have made the modifications, you may invalidate your policy. For more information on this visit our modified car insurance page.

Limit your mileage

The more miles you drive, the more likely you are to be involved in an accident. By the same token, the fewer miles you drive, the lower your insurance premium is likely to be. But be realistic when you specify what mileage you expect to do as the insurer may refuse to pay a claim in full if you breach the limit.

Let the insurer see how you drive

An increasingly popular option is to let the insurer fit a 'black box' monitor to your car which records how you drive - speed, braking patterns, cornering, time of day or night and so on. With this information, the insurer will decide how safe or how risky you are and adjust the premium you pay each month. If you are confident that you are safe, this could save you a healthy amount off what your cover would otherwise cost.

Read more about this new style of cover on our pay as you go car insurance page.

Increase your excess

Any motor policy carries a compulsory excess - the amount you are required to contribute to the cost of a claim. This is usually set at £100, but if you volunteer to pay a larger excess, you should obtain a lower premium. But make sure you can afford the high excess in case you have to make a claim.

If you can avoid making a claim you should be able to build up a healthy no-claims discount that will reduce your premium by up to 70% after five years.

Boosting the security measures on your car - alarms, immobiliser, steering wheel lock, tracking device - can deter and thwart thieves and save you having to claim for theft.

Get the best deal online

You should always shop around for green car insurance quotes and compare deals from a wide range of providers on MoneySupermarket's price comparison website.