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
Oct 26, 2021

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 V60 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 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 for under £40k

1. BMW 5 Series

Our pick BMW 520i SE
List price £40,125

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. With a £40,000 budget, you'll be limited to the 2.0-litre 520i, but if you're willing to part with more cash you can opt for diesels or a plug-in hybrid. Of these, 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.


2. Polestar 2

Our pick Polestar 2 Standard Range
List price £39,900

The Tesla Model 3 may be the most happening electric exec-mobile at the moment, but if you’re not keen on the Tesla style or the hype, then the Polestar 2 could be seen as the thinking person’s alternative. Helpfully it also suits the remit of this guide, as the Tesla entry price has crept over the £40,000 mark while the Polestar just sneaks under it.

Your £40,000 budget will secure a Polestar 2 in standard range with the single motor configuration, which means 0-62mph in seven seconds and a quoted range of 260 miles before you need to plug it in for a recharge. It has fast charging capability of 150kW if you need a motorway top-up, and its Android-powered touchscreen is something of a novelty too.

As well as looking good, the Polestar is great to drive and arguably has a higher quality feel than the Tesla. It’s also practical for family users, with a tailgate opening onto a decent 405-litre boot.

3. BMW Z4

Our pick BMW Z4 sDrive20i Sport
List price £38,760

It’s not often we get to say the cheapest model in a line-up is the most desirable, but there’s a good argument for extolling the virtues of the 2.0-litre BMW Z4 above its peers. It may not be as fast as the punchy six-cylinder version, but the four-cylinder turbocharged sDrive20i has more than enough power and performance for a satisfying drive.

It does 0-62mph in 6.6 seconds, but the lighter weight of the smaller engine actually improves the driving experience, making this the nimblest feeling Z4 if not the fastest.

In other respects the Z4 offers everything you’d want in a traditionalist front-engine two-seater sports car, with a luxuriously-appointed cabin and even a decent 281-litre boot - perfect for touring. You’ll get more driving thrills in a Porsche 718 Boxster or Alpine A110, but they’re much less practical on a daily basis - and more expensive too.


4. Volkswagen ID.4

Our pick Volkswagen ID.4 Pure Performance Style
List price £39,545

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 200 miles between charges. The ID.4 is good to drive too, while the minimalist interior is spacious and stylish.


5. Mini Clubman JCW

Our pick Mini Clubman JCW
List price £36,255

The MINI Clubman may not be the most practical of estate cars in spite of its van-style split rear doors, but in John Cooper Works (JCW) guise it’s definitely one of the most fun.

The reason? Under the bonnet lurks a 306hp 2.0-litre engine that’s the same spec as that fitted to the BMW M135i hatch, which in the MINI’s case means a 4.9 second 0-62mph time and a 155mph top speed. Suspension and brakes are uprated to match the performance, as you’d expect.

The Clubman JCW Sport looks the part too, thanks to black 18-inch alloy wheels, aggressive air intakes as the front and meaty twin exhausts. Inside it features special sports seats and steering wheel, to help get you in the mood for the model’s go-kart like handling.


6. Honda CR-V Hybrid

Our pick Honda CR-V 2.0 i-MMD SR AWD
List price £35,780

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

Our pick Range Rover Evoque D165 MHEV S AWD automatic
List price £39,625

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

Our pick Mercedes GLB 200 AMG Line Premium
List price £39,420

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

Our pick Volvo XC40 T4 Recharge R-Design
List price £39,445

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 £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 sporty-looking T4 R-Design, 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 Sharan

Our pick Volkswagen Sharan 1.4 TSI DSG SE Nav
List price £34,720

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, it’s just as easy to get comfortable.

Nearing the end of its time on sale, the Sharan is only available in SE Nav trim with a 1.4-litre turbocharged petrol engine. Our pick would be the automatic gearbox which should ease the stress of up to six passengers asking whether we're nearly there yet.


*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.


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