Driving a hard bargain

In the sixth part of our savings series, we present a summary of measures that cut the cost of motoring

Cars are typically the second most expensive purchase of our lives - only our homes cost more. What is more, according to a recent analysis conducted by the Automobile Association, the average weekly bill for running a car is £79, which means we spend more on them than on our homes or food.

Cars are typically the second most expensive purchase of our lives - only our homes cost more. What is more, according to a recent analysis conducted by the Automobile Association, the average weekly bill for running a car is £79, which means we spend more on them than on our homes or food.

Not surprisingly, cars provide major opportunities to save money - £2,000 a year or more could be saved by many families through buying and using more wisely. Nowhere has this more effectively been highlighted than in comparing international new car prices. The United Kingdom is consistently the most expensive part of the EU for buying cars.

Astonishingly, it was possible to buy a Ford Mondeo in Denmark last year for little more than half the price of a similar model in the UK - it retailed in Denmark for £6,406, compared with £11,834 in Britain.

Other cars do not offer the same savings opportunities, but they remain substantial - a Corsa could be bought for £5,243 in the Irish Republic, saving £1,136 on the British price. No wonder cars are now Ireland's top export to the UK. List prices are typically about 16 per cent cheaper in the Republic than in Britain.

The Consumers' Association produces a Which? factsheet (www.which.net) advising on how to import a new car. As the table on this page shows, different models can be bought most cheaply in different countries. But Denmark, Belgium, the Netherlands and the Irish Republic are regularly among the cheapest nations. Indeed, it is often possible to buy a new car abroad for the same amount as a year-old second-hand model here. Depreciation, though, is likely to be sharper than on a car bought in the UK.

Dealers abroad may be reluctant to sell right-hand drive cars, but they are required by European Union law to do so. It may take some months, though, before the preferred specification becomes available. Registration with the Drivers and Vehicle Licensing Agency (or Driver and Vehicle Licensing in Northern Ireland) is straightforward, costing £25 plus £155 annual taxation.

Indeed, so simple is the procedure and so great are the benefits that 16 per cent of all new car registrations are of vehicles bought abroad. An increasing number of independent dealers, too, are buying new cars abroad. The Consumers' Association (www.carbusters.com) is one of several online operators that will import a car on behalf of buyers, though at a higher price than motorists can arrange for themselves.

The cost of buying a new car here will fall dramatically next week. Secretary of State for Trade and Industry, Stephen Byers, this month moved to enable dealers to buy cars in bulk for discounts, to pass reduced costs onto customers and to prevent manufacturers discriminating against dealers that sell cars for less than the recommended retail price. Mr Byers said this should reduce new car costs from September by about 11 per cent.

But the Consumers' Association says this will not bring UK car prices down to the level of other European nations. "As the [Government's] Competition Commission recognised, the real impediment to consumer choice and price competition is the Block Exemption which allows manufacturers to rig the European market," says Phil Evans, senior policy adviser at CA.

Competitive pressures may also increase as the supermarket chains, led by Sainsbury's, move into car retailing and purchase financing. But the vehicle which retails at the lowest price may not cost the least in the long term. Other factors should be borne in mind, including fuel consumption and running costs.

A useful website (www.topcalc.co.uk) - designed for companies but equally usable by any motorist - compares the cost of competing vehicles over the intended period of ownership. In the growing people carrier market the Kia Carens is the cheapest model available, but it works out significantly more expensive than competitors such as the Mercedes Benz A Class over three years' use (see table on page 2).

One of the other considerations, suggests the AA, should be whether to opt for a petrol- or diesel-fuelled car. "Diesel fuel costs roughly the same as petrol, new car costs are similar, but you get 10 to 20 per cent more miles per gallon from a diesel engined car," says AA spokesman Luke Bosdet. While there have been concerns over carcinogenic particulates generated by diesel engines, these are caused by older cars, buses, lorries and taxis, says the AA. Cleaner engines and ultra-low sulphur diesel dramatically reduce the emission of particulates while producing less CO2 emissions than a petrol fuelled car.

The AA says the jury is still out on the economic case for liquid petroleum gas. But it does suggest changing driving styles and better car preparation. A journey from London to Exeter may cost £15 to £20 if driven efficiently, but might cost an extra £5 if the windows are opened or air conditioning is used.

Under-inflated tyres may increase fuel consumption by as much as 2 or 3 per cent, and leaving the engine running for a few minutes every morning could cost as much as £50 a year. One of the most costly errors, says the AA, is to leave a roof rack on when it is not being used - it can reduce fuel efficiency by around 11 per cent.

Cutting speed from 70mph to 50mph saves around 1.5 pence per mile, which is worth around £150 a year to a motorist with an annual 10,000 mileage. Equally, the running costs for a car of less than 1100 cc is 31 pence per mile on that level of use, compared with nearly £1 a mile for a car over 3000 cc.

Vince Yearley, from The Institute of Advanced Motorists, says: "The current trend is to recommend smaller, more fuel efficient cars. The IAM recommends, regardless of the size of vehicle, a smoother driving style and planning your journey. You should avoid sitting in traffic. There should be no last-minute braking, more feathering of the accelerator, rather than hard driving. Advanced drivers usually report an immediate 5 per cent fuel saving."

Then there is the possibility of no longer owning your own car. The Environmental Transport Association says motorists who drive 5,000 miles a year would be better off by £600 if they travelled one-third of their journeys by taxi, one-third by train and one-third by bus. Another alternative is shared ownership.

With car rental prices coming down, led by EasyRentacar.com, there is also a growing interest in regular car rental, particularly for those who live in traffic-clogged London. Rental should be cheaper than car ownership for people who do not use a car to commute to work. Leasing can be about 30 per cent cheaper than buying a new car through hire purchase, and is available to individuals as well as companies (see www.lease123.com).

And then there is the issue of how to borrow the cost of a car more cheaply than through a dealer's tied loan, but we will consider this in a future article. For the moment we should be pleased that we have found ways of saving as much as £5,400 on the cost of a new car, another £500 or more by planning our journeys better and driving in a more fuel efficient way, and perhaps a further £2,000 a year by choosing a fuel efficient model.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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