Best new cars for under £40,000

The best new cars for under £40,000 come in many different shapes and sizes...

James Mills
Dec 12, 2019

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 Volvo V90 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 will cost £310 per year.


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

Talking of getting the most for you 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 new cars for under £40,000

1. BMW 5 Series

Our pick BMW 520d SE
List price £35,585

The chances are drivers with around £40,000 to spend will have heard it said before that BMW’s 5 Series sets the standard by which other executive 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. For around £40,000, there’s a choice of a four-cylinder petrol, diesel or – if you can stretch to it – even a plug-in hybrid version. To our mind, the petrol, 520i model makes most sense for private buyers who don’t cover more than 12,000 miles a year. The 520d diesel is ideal for company car or high mileage drivers, while the 530e plug-in hybrid is a more costly alternative to both that’s good for reducing company car tax.

BMW 5 Series buyers' guide

2. Alpine A110

Our pick Alpine A110 Pure
List price £46,905

Frustratingly, there aren’t many bonafide sports cars available for £40,000. Happily, however, the one that is just happens to be laugh-out-loud good fun. The Alpine A110 shows other car makers how to create an efficient and entertaining two-seat sports car that makes every drive a pleasure.

That’s because it’s small, light and has its engine placed behind the seats. This makes it extremely responsive, and better still, Alpine’s engineers understand that almost nobody drives their sports car on a perfectly smooth racetrack – they have to make do with the same crumbling roads as the rest of us. So the suspension is tuned to be as compliant as possible, meaning this car flows down the road with the delicate tread of a ballet dancer.

Okay, it’s on the high side of a £40,000 budget, but trust us, it’s worth it. Few cars, regardless how much they cost, are as stimulating to drive as this one.

Alpine A110 buyers' guide

3. Audi Q5

Our pick Audi Q5 Sport 40 TDI quattro S tronic
List price £40,525

Audi knows its customers well. Every Q5 comes with quattro four-wheel drive as standard, which is enough to get you to places without feeling that you’ll need to put on heavy duty hiking boots when you get there. An automatic gearbox is also included, so you can sit back and relax in traffic. And the engine range is simply made up of petrol or diesel units, without hybrid or electric options, because, frankly, that’s still what most drivers buy.

The rest of the package is just as assured. You get an interior that feels special, with attractive design and impressive standards of fit and finish, plus the latest in connectivity and gadgets and gizmos. The interior is more than accommodating for families – we especially like the back seats, which slide and also have an adjustable backrest – and boot space is generous.

A smooth, unruffled driving experience is simply the icing on the cake in what’s such a competitive part of the car market.

Audi Q5 buyers' guide

4. BMW i3

Our pick BMW i3s 120Ah
List price £35,180

There are more practical electric cars. There are more electric cars that will drive further on each charge of their battery. But there’s no electric car that can rival the ice-cool image of the BMW i3.

Recently revised, the i3 now comes with a larger capacity battery that gives a realistic driving range of 160miles. And with the ‘s’ version, a more powerful motor means that this is a seriously nippy EV, zipping from 0-62mph in 6.2 seconds.

But it’s the design of this car that will impress most. The look, feel and engineering that have gone into it are ground breaking. A light, carbon body, rear-wheel drive platform and interiors that have the vibe of a chic hotel bar all make this a pleasure to spend time in.

BMW i3 buyers' guide

5. Ford Mustang

Our pick Ford Mustang 5.0 V8 GT
List price £42,745

You don’t have to spend your £40,000 or so on a sensible car. Instead, why not throw caution to the wind and treat yourself to one of the most loved sports cars in the world – the Mustang?

In our opinion there’s only one Mustang worth having, and that’s the full-fat, 5-litre V8 GT version. The rumble of that V8 engine will transport your mind to the streets of San Francisco, and police lieutenant Frank Bullitt, the character played by Steve McQueen in 1968’s Bullitt.

For the price, it’s almost impossible to find another car with as much character as the Mustang, and the driving experience is hilarious – in a good way. But there are drawbacks. The quality of the interior is not a patch on European cars, the back seats are cramped and fuel consumption is a little alarming. But you’ll forgive it all that for the rumble of that V8 engine alone.

Ford Mustang buyers' guide

6. Honda CR-V Hybrid

Our pick Honda CR-V SR i-MMD AWD
List price £34,545

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 38.7mpg. 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.

You can afford the flagship EX all-wheel drive version, which is comfortably under £40,000 and comes with all the bells and whistles, although we’d be tempted to save the money and pick SR trim.

Honda CR-V Hybrid buyers' guide

7. Range Rover Evoque

Our pick Land Rover Range Rover Evoque S D150
List price £38,250

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.

A new generation model (pictured) is now rolling into showrooms, which 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 diesel-powered, 150hp model in S trim, with an automatic gearbox, as it comfortably undercuts a budget of £40,000. More frugal than before, thanks to the adoption of a mild hybrid system, big things are expected of Land Rover’s most popular model.

Range Rover Evoque buyers' guide

8. Mercedes C-Class Coupe

Our pick Mercedes C200 AMG Line
List price £37,945

Is there a better-looking coupe with four proper seats? Mercedes designers have come up with a curvaceous creation that is more than capable of attracting envious glances from the neighbours. And beneath the bodywork is a surprisingly practical interior.

It will seat four adults in comfort – a rarity in the coupe market – and the boot is more generously proportion than some laughable efforts in this class, offering 380-litres of luggage space. Better still, the driver is treated to one of the smartest dashboards in the class, with a classy look and comfortable driving position that you’ll never tire of.

The petrol models are the most affordable way into a C-Class Coupe, and we’d opt for the C200, as it has more muscle than the slightly lethargic C180. Should you have 4Matic, Mercedes’ four-wheel drive system, though? We’d say not. Save the money and enjoy the drive without it.

Mercedes C-Class Coupe buyers' guide

9. Volvo V90

Our pick Volvo V90 Momentum Pro T4
List price £40,870

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. Take the V90. It’s one of the most handsome estates there is, and the beauty runs further than skin deep. The interior all soft-touch surfaces, natural textures and stylish details, creating a haven of calm that could make you almost forget that there are a couple of wet, muddy dogs in the spacious boot.

If you’re not intending to drive more than 12,000 miles a year, we’d suggest picking the T4 petrol engine over the D4. It’s cheaper to buy and the fuel is cheaper too, so the economy advantage of the diesel is unlikely to be realised.

Volvo V90 buyers' guide

10. Volkswagen Sharan

Our pick Volkswagen Sharan SE Nav 2.0 TDI 150 DSG
List price £34,615

If you have a growing family, with three or more children, then you need a large car. Not just a large car, but also one that really goes out of its way to make everyday life easier. A car like the Volkswagen Sharan.

This seven-seat people carrier might be getting on but it is still one of the best ways to ferry a family about. Its large, sliding back doors give unrivalled access to the back seats and make it easy for people to get in and out, or for mums and dads to lift children into their child seats. And with seven seats that adjust individually of one another, it’s just as easy to get comfortable.

The range starts from less than £30,000, and our choice would be the trusty 2-litre diesel engine with 150hp, paired with an automatic gearbox and SE Nav trim, which pushes the price up to almost £35,000.

Volkswagen Sharan buyer's guide


Latest best cars & vans

  1. Best cabriolet cars

  2. Best summer cars

  3. Cheap cars with nice interiors