Automotive businesses have welcomed the Budget’s extension of the fuel duty freeze, while warning that high pump prices and planned electric vehicle mileage charges continue to put pressure on motorists.
The Chancellor has extended the temporary 5p-per-litre fuel duty cut until July 2027, avoiding a planned increase this winter.
Autotrader welcomed the relief for petrol and diesel drivers but questioned the Government’s approach to electric vehicle taxation.
Ian Plummer, chief customer officer at Autotrader, said: “The Chancellor’s fuel duty freeze will be a relief for millions of motorists struggling with the cost of living. But the Government is still planning to hit electric vehicle drivers with pay per mile duty in 2028, putting up costs and putting a handbrake on their own efforts to get people buying electric cars.”
Fuel duty relief has limits
Graham Conway, managing director of Select Car Leasing, said the decision would provide breathing space for households reliant on their vehicles.
He said: “Drivers will breathe a huge sigh of relief that the Chancellor has listened to concerns from motorists and put the brakes on January’s planned fuel duty rise, while retaining the 5p-per-litre cut.”
However, he cautioned: “But this is only a temporary relief. The 5p cut has now been extended time and again, and at some point the bill will come due.”
Motorpoint also warned that freezing the tax would not reverse the increase in diesel costs. Its calculations suggest that a driver covering 9,200 miles annually in a diesel car averaging 46.8mpg would face an annualised fuel bill of around £1,770 at October 27 pump prices, compared with £1,267 at the prices recorded on February 28. The £503 increase represents a rise of 39.7%.
Motorpoint based the comparison on diesel prices of 198.96p and 142.38p per litre respectively, which it attributed to RAC Fuel Watch.
Ownership costs shape buying decisions
Tim Rodie, motoring expert at Motorpoint, said: “A fuel duty freeze will be welcome news for drivers, particularly those already feeling the pressure of higher fuel prices. However, it’s important to understand that freezing fuel duty doesn’t automatically mean prices at the pumps will come down.
“Fuel duty is just one component of what motorists pay, alongside wholesale fuel prices and other costs. Even with the freeze, drivers could continue to see fluctuations in their fuel bills.
“However, I wouldn’t recommend selling a diesel vehicle based on the Budget announcement alone. For motorists regularly covering long distances, diesel can still offer excellent fuel economy, and replacing a reliable car could end up costing more than keeping it.”
Rodie said changes in annual mileage, a shift towards shorter journeys and the cost of replacing an existing vehicle should inform decisions about switching powertrain.
Conway pointed to the potential savings available from electric vehicles for customers able to charge at home.
He said: “We know from our own research that running an EV over the course of a year and 10,000 miles could help you save more than £1,000 compared with a traditional petrol or diesel car, when you charge at home. You can save even more than that if you have access to a low off-peak energy tariff.”
For dealers, the responses underline the importance of comparing overall ownership costs against each customer’s mileage, journey patterns and charging access, rather than treating the duty freeze alone as a reason to favour one powertrain.
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