Best new cars for under £40,000

If you’ve got £40,000 to spend on a new car, we’ve got some great ideas…

Simon Ostler Chris Rosamond
Jun 10, 2022

With all the excitement of browsing the mouth-watering selection of shiny new cars within reach of a budget of £40,000, there is a sensible question that needs to be asked.

It revolves around road tax, and the huge difference between the cost of taxing a car that costs more than £40,000 and another that costs less than that. That’s because the government applies a tax penalty to any new car that costs more than £40,000.

That £40,000 threshold is judged upon the actual value of the car. So while the most basic entry level Mercedes C-Class will cost just under, ticking a few options boxes and opting for a better trim level will take the cost over the line.

The difference in road tax is stark, cars under £40,000 will cost £140 per year while cars over will cost £450 per year from year two to year six. That’s an extra £1,550 to bear in mind. Electric cars over £40,000, meanwhile, are exempt from the surcharge.

So, if £40,000 is your budget, be sure to stick to it if you want the absolute most for your money.

Talking of getting the most for your money, you could instead take a look at some used car deals instead. With £40,000 you could be upping the ante even further and taking home a low-mileage Mercedes E-Class or BMW 7 Series - how about that for luxury?

Best cars under £40k

1. BMW 3 Series

Best saloon for under £40,000

Our pick BMW 320i M Sport
List price £39,055
Used deals from £27,390
Monthly finance from £432*

The chances are drivers with around £40,000 to spend will have heard it said before that BMW’s 3 Series sets the standard by which other saloon cars are judged. We make no apologies for saying as much again.

It feels better to drive than any rival. The interior is relaxing, with supremely comfortable seats. And space is more than generous enough to let five adults sit in relative comfort.

The tough choice for buyers is to know which engine will best suit their needs. With a £40,000 budget, you can take your pick from a range of trim levels and engines. If you can afford to part with a bit more cash, the super-economical 330e plug-in hybrid sits just outside the £40,000 range. We've picked the mid-range petrol-powered 320i, capable of over 40mpg, in high-spec M Sport trim 


2. Kia Niro EV

Best electric car for under £40,000

Our pick Kia Niro EV 64.8kWh Long Range '3', with Heat Pump
List price £39,895

Kia's e-Niro crossover was a big hit, and remained one of the most affordable electric cars until it was replaced in 2022 with this new, second-generation model. Prices have increased slightly, with entry-level '2' models starting at a little over £36,000, but this is still a reasonable price for a high quality electric car that can do well over 200 miles on a single charge.

Mid-spec '3' models are the cheapest to be available with the optional heat pump, which we think is worth the upgrade. Electric cars' batteries are less efficient in the cold weather, and warming a cool cabin can take a lot of energy. Heat pumps are a more efficient way to warm up the inside, so range shouldn't drop as much as other models when the mercury plummets.

'3' spec is also the cheapest to get the pair of 10.3-inch displays - one touchscreen media system and another set of digital dials. '2' models get a smaller eight-inch touchscreen media system, which is still great to use.

3. Audi TT Roadster

Best convertible for under £40,000

Our pick Audi TT Roadster 40 TFSI S line S tronic
List price £37,540
Used deals from £17,500
Monthly finance from £259*

It’s not often we get to say the cheapest model in a line-up is the most desirable. The 2.0-litre version may not be as fast as the punchy five-cylinder TT RS Roadster, but the four-cylinder turbocharged 40 TFSI has more than enough power and performance for a satisfying drive. It'll still do 0-62mph in less than seven seconds.

All models are well equipped, including entry-level Sport, but the desirable S line is the one to go for. It gets bright LED headlights, lowered suspension for a more engaging drive, and plenty of sporty styling tweaks. Avoid Black Edition and Vorsprung models, which don't add an awful lot more but get to be costly. That is, unless you're considering buying used, where Black Edition and Vorsprung models can be found from £24,990.


4. Volkswagen ID.4

Best electric SUV for under £40,000

Our pick Volkswagen ID.4 Pure Performance Life
List price £38,720
Used deals Limited stock

With electric power for cars rapidly becoming the ‘new normal’, there’s an increasing amount of choice available from mainstream brands. One of the most impressive recent arrivals in the VW ID.4 SUV, which proves EV practicality and affordability can go hand-in-hand.

The ID.4 shares its tech with the smaller ID.3 hatchback, but with SUVs currently so fashionable it’s a more appealing machine. It’s also much more attainable than many premium electric SUVs, thanks to pricing that’s designed to rival diesel and petrol alternatives.

A £40,000 budget means you’re limited to the smallest 52kW battery, but range is still decent with a realistic 150-200 miles between charges. The ID.4 is good to drive too, while the minimalist interior is spacious and stylish.


5. BMW M135i xDrive

Best hot hatch for under £40,000

Our pick BMW M135i xDrive
List price £39,825
Used deals from £30,490
Monthly finance from £428*

To hard-core BMW fans, the previous generation 1 Series hatchback was one of the best family cars ever made. This is because it used a rear-wheel drive setup which is typically more fun to drive. While the latest version, introduced in 2019, has reverted to front-wheel drive, the 'M' version uses a four-wheel drive setup to get power down more easily.

The previous generation also used a 3.0-litre six-cylinder engine which sounded great, but this version uses a more common 2.0-litre four-cylinder engine. This is good news for fuel economy, though, with BMW claiming that it can do up to 38mpg, despite a 0-62mph time of 4.8 seconds (that's really quick) thanks to 306hp.

If you're looking to spend a little less, the 265hp 128ti is over £4,000 cheaper when new (used models are available from £32,490). It doesn't get four-wheel drive, and it's not an awful lot more efficient, so if you have the budget, it's worth stretching to the range-topper.


6. Honda CR-V

Best SUV for under £40,000

Our pick Honda CR-V 2.0 i-MMD SR AWD
List price £38,230
Used deals from £23,500
Monthly finance from £405*

This isn’t the most frugal SUV in its class. Toyota’s RAV4 Hybrid is more efficient, while most diesel-powered SUVs can better the Honda’s fuel economy of 39mpg. However, in this age, not everyone buys a hybrid for outright efficiency – some drivers are now skeptical of what’s coming out of the exhaust pipe of diesel-powered cars and would prefer to switch to hybrid or electric because of it.

The hybrid system pairs the petrol engine and electric motor together, or allows the car to be driven on electric power alone for a short distance. It’s complemented by a pleasingly smooth ride comfort, which makes this a great cruiser and ideal for long trips with the family aboard. Also helping in this respect is the larger interior, which houses more space than most rivals.

The top-of-the-range EX all-wheel drive version, which is a touch over £40,000, comes with all the bells and whistles, although we’d be tempted to save the money and pick SR trim.


7. Range Rover Evoque

Best luxury SUV for under £40,000

Our pick Range Rover Evoque D165 MHEV R-Dynamic automatic AWD
List price £38,180
Used deals from £28,844
Monthly finance from £367*

The Evoque is the supermodel of the SUV world, born to strut its stuff on the catwalk – albeit, in this instance, a catwalk that consists of suburban roads, school run routes and supermarket car parks.

The latest generation gracefully blends the striking proportions of the original Evoque with the smoother, flush surfaces of its big brother, the Range Rover Velar.

Our pick of the range would be the 165hp diesel-powered model in S trim. While the manual, front-wheel-drive version is a lot cheaper, the automatic version (four-wheel-drive only) should prove more relaxing to drive. It’s more frugal than before too, thanks to the adoption of a mild hybrid system.


8. Mercedes GLB

Best seven-seater for under £40,000

Our pick Mercedes GLB 200 AMG Line Executive
List price £38,565
Used deals from £31,980
Monthly finance from £468*

The Mercedes GLB has got to be one of the most desirable SUVs around, at least for drivers with family commitments. Its bold but boxy lines could be deemed somewhat traditional in sector filled with fashion statements, but Mercedes designers have managed to get the details looking just right - the effect is imposing and upmarket, and not at all utilitarian.

Inside you get a typically high-tech cabin, which looks extra fab if you can stretch to AMG Line Premium trim thanks to its impressive twin 10.3-inch display panels behind a single sheet of bonded glass. It sounds better too, with a superior 225W 10-speaker audio system, as well as featuring Apple CarPlay and Android Auto.

Enough about the toys though, as our favourite GLB at the price also comes with seven seats and a small and efficient 1.3-litre petrol. Go for the GLB 200d with it’s punchy and more frugal diesel engine if you can afford it.


9. Volvo XC40

Best crossover for under £40,000

Volvo XC40 front three quarters view

Our pick Volvo XC40 B3 Core
List price £35,830
Used deals from £38,680
Monthly finance from £577*

Once upon a time Volvos were considered so square – in every sense – that the children of mums and dads would sink in their seats, trying to hide below the window so no one on the school run would see that they owned a Volvo.

Today, Volvos are arguably some of the coolest cars on the road. The XC40 is a case in point, offering excellent design and practicality, with a genuine upmarket and high-tech feel in the cabin.

Business users with a little more than this £40,000 budget will be especially attracted to the plug-in hybrid XC40 Recharge thanks to lower Benefit-in-Kind tax rates than they’d face with a petrol or diesel version. Especially as the budget will get you into the T4 PHEV, which has an 8.2 second 0-62mph time and will drive almost 30 miles on electric power alone, for potentially super-cheap commuting.


10. Volkswagen Golf GTE

Best plug-in hybrid for under £40,000

Our pick Volkswagen Golf 1.4 TSI GTE
List price £38,725
Used deals from £32,789
Monthly finance from £532*

If you're not ready to make the move to electric, a plug-in hybrid provides the security of a conventional engine that can keep you going for hundreds of miles, with zero-emission electric motoring. Early plug-in hybrid cars struggled to reach 20 miles with their batteries, but the latest version of the Golf GTE almost doubles that.

Keep it charged and do most of your motoring in electric mode and Volkswagen reckons you'll be able to do well over 200mpg, but fail to keep it topped up and it could drop to under 50mpg.

GTE versions are good for 0-62mph in 6.7 seconds thanks to 245hp: almost as fast as other hot hatches like the Golf GTI. If you don't need that much speed, consider the regular 1.4-litre plug-in hybrid Golf with a reduced 204hp, which is more efficient and almost as quick as the diesel-powered Golf GTD.


*Representative PCP finance - Ford Fiesta:

48 monthly payments of £192
Deposit: £0
Mileage limit: 8,000 per year
Optional final payment to buy car: £2,923
Total amount payable to buy car: £11,926
Total cost of credit: £2,426
Amount borrowed: £9,500
APR: 9.9%

BuyaCar is a credit broker, not a lender. Our rates start from 6.9% APR. The rate you are offered will depend on your individual circumstances.


Latest best cars & vans

  1. Most customisable cars

  2. Cars with suicide doors

  3. Best American cars