When spending their own money, almost two thirds (64%) of people intend to buy a pre-owned car. A quarter of people will opt for a brand new car and 26% will pay over £10,000. Those buying their first car will spend an average of £3,400.
Buyers are also cautious in financing their car, with 41% saving the money and a quarter (26%) borrowing, the majority (60%) opting for personal loans.
Financial experts at RAC believe people are having to make adjustments on price to balance the amount running their car takes from their overall household budget.
RAC Financial Services spokesman, Philip Hale, says: "In real terms, cars are cheaper to buy and better equipped than ever, but daily running bills are creeping up. The average car costs £5,300 a year to run, including £1,000 in fuel and these costs don't reduce significantly with the age of a car. People need to accommodate this - for many, running a car can be as expensive as buying one."
However, RAC Financial Services also found many people are still ignoring potential savings - only 27% of buyers are looking for a more fuel- efficient vehicle and 7% are switching cars to reduce their insurance premiums, or take advantage of cars that run on alternative fuels.
18% of people were prepared to haggle a deal with a vendor.
"Most people are still not aware of the savings they can make against high running costs. Opting for smaller cars, negotiating a good purchase price, getting several quotes for finance options and insurance and even seeking out the cheapest places to fill up can all reduce your costs in the long run", added Hale.