Ten Routes To Cheaper Motoring!

By Cliff D'Arcy
August 18, 2005

The price of unleaded petrol and diesel seems to be going only one way at the moment: upwards.

That's hardly surprising, given the tripling of the oil price over the past 2½ years. Then again, about three-quarters of the fuel price is government duty, so even a sizeable jump in oil prices has less effect than you'd first imagine. Britain's 33 million motorists buy around 33 billion litres of fuel each year, so the 15p-per-litre increase since the start of 2004 means an extra £5 billion on our fuel bill. Ouch!

I think it's only fair to mention that I've never owned a car, and it's been 6½ years since I drove one. That's just as well because, despite passing my driving test at the first attempt, I'm a rotten driver! Still, I worked for several leading motor-finance firms over a ten-year period, so I'm confident that I know my stuff! Anyway, here is my guide to getting more car (and more miles) for less cash!

1. Watch out for depreciation

As happens with many assets, the value of cars tends to fall over time. This loss is known as depreciation, and it is the greatest cost of owning a car. Even while your pride and joy isn't being driven, it's losing money fast. On average, a typical new car loses up to a quarter (25%) of its value in its first year (and around half after three years), which costs the average car owner £200 a month. Depreciation tends to be highest in the Family Car category, thanks to a plentiful supply of used cars in this group.

One way to avoid initial depreciation is to buy a nearly new car, having let the first owner take the biggest hit. For example, my wife's car was under a year old when I bought it, but I saved over £5,000 on the list price because it wasn't brand spanking new. Also, before choosing a make and model, be sure to check depreciation rates by looking at residual values (the price of similar used cars). The amount that you stand to lose may come as a shock!

2. Is a used car right for you?

When legislation was introduced to bring down the cost of new cars, it caused a surge in sales, with 7.7 million new cars being sold between 2002 and 2004. However, this boom had a knock-on effect on used-car prices, which fell by more than a fifth (21%) in the two years to June 2003. Around seven million used cars change hands every year, so this is a thriving market. With the market awash with used cars, there are some real bargains to be found. So, can you justify buying a new car, or are you just trying to keep up with the Joneses? Bargain-hunting for a value-for-money used car could save you a pretty penny!

3. Forget the list price - learn to haggle!

Depending on your negotiating skills - and how desperate the dealer is to hit his/her targets - a bit of patient haggling could cut between a tenth (10%) and a third (33%) off the list price. Learn the rules of the haggling game in The Best Ways To Pay Less! If you can't win a deep discount, ask for free extras to be thrown in, such as floor mats, mud flaps and a full tank of fuel. Also, try What Car's Target Price (telephone 0845 123 2620), which guarantees to find you a fair discount, typically around £1,200.

4. Shop around for online discounts

If you don't fancy haggling, try shopping around online for new and used cars. Try the following dealer and broker websites, plus call or visit a local dealer or car supermarket to see if it can match your lowest price: Autobytel | Auto Trader | Dixon Motors | Drivethedeal | Jamjar | Motorpoint | New Car Discount | Oneswoop | Showroom4cars | Trade Sales | UK Car Discount | Virgin Cars.

5. You don't have to own your car

Personally, I prefer to pay cash when buying cars, because I can then negotiate a larger discount, plus I prefer to earn interest rather than pay it! However, if I had to borrow to buy a vehicle, I'd probably shop around for a Best Buy personal loan (see the next tip). Then again, the alternatives to buying could suit you better, such as hire-purchase, personal leasing or personal contract purchase. I explained the pros and cons of each of these contracts in Tremendous Tips For Motorists!

6. Steer clear of dealer finance and other add-ons!

Having trained car dealers to sell finance and insurance, I know a few sneaky tricks of the trade. For example, salespeople in dealerships are trained to quote 'flat' interest rates, rather than APRs (Annual Percentage Rates). Don't be fooled, the secret is to double the flat rate, which will give you a fair approximation of the APR - and always ask for the APR, which must be quoted to you by law.

Personally, I'd steer clear of all dealer finance, even interest-free deals, because these limit your ability to secure a decent discount. My advice would be to find a Best Buy personal loan: learn how to choose one of the best in Personal Loans Without Moans Or Groans. Choose the wrong finance package and you could easily add £2,000 to the cost of your car, so it pays to tread carefully! Other dealer products that get the thumbs-down include payment protection insurance, extended warranties, GAP insurance and breakdown cover. As I explained in this article, these add-ons range from the over-priced to the breathtakingly expensive, so give them a wide berth!

Find your perfect loan in our Personal Loans centre!

7. Keep your insurance premiums down

British drivers spend around £9 billion a year on motor insurance. According to the AA, the cost of a typical comprehensive policy has almost doubled in the last ten years. Its latest survey found the typical annual premium to be over £750, but shopping around could cut this by £300. So, search online, plus call a few insurers and brokers. Here are seven ways to prune your premium - but the best way to keep costs down is not to claim, so read these tips on vehicle crime prevention and improving your driving skills.

Visit our Insurance centre for low-cost motor insurance!

8. Cut the cost of breakdown cover

This market is dominated by the AA, RAC and Green Flag, but several new entrants are undercutting these established providers - here's our guide to this protection. I'm off to France soon, so I found this useful advice from the AA on Continental motoring. To reduce the risk of breaking down (or having an accident), make a monthly check of your car's battery, tyres (including the spare and tools to change it), water and anti-freeze in the coolant tank, windscreen wash, and dirty headlights. Other common problems include faulty spark plugs, an ill-fitting fan belt and a cracked distributor cap.

Find cheaper breakdown cover in our Insurance centre!

9. Shop around for servicing

When the 'block exemption agreement' was abolished in October 2003, it introduced competition into the car distribution and servicing market. This means that drivers are no longer tied to a single manufacturer or dealer group. Until two years ago, dealers operated a cosy cartel, so having your car serviced at an independent garage would invalidate your warranty. Happily, this shady cartel is a thing of the past, so you should shop around before booking your car in for repairs or servicing.

Here's a recent example of the remarkable savings on offer: earlier this month, my wife's car had its second birthday and needed its first service. A Renault dealer quoted £255, but Mrs D took her car to a reputable independent dealer, which did exactly the same job for £143. That's a saving of £112, or 44% - yippee!

10. Batter your fuel bills!

The average privately owned car uses roughly 1,320 litres of fuel a year, based on an annual mileage of 8,700 miles at 30MPG. With the difference between cut-price and expensive fuel being at least 5p, visiting a cheaper local petrol station could mean a saving of £65 a year. Obviously, don't roam too far when shopping around, because your saving could be wiped out by the extra time and fuel wasted! Check PetrolPrices.com to see if your local petrol retailers are listed, and read Five Ways To Save Money On Petrol.

What's more, several cab drivers have told me that they've almost halved their fuel bills by switching to liquid petroleum gas (LPG). It's a fairly simple process, certain cars qualify for grants of up to £700, LPG is more environmentally friendly, and LPG-fuelled cars enjoy a reduced or zero London Congestion Charge. LPG is about 50p a litre cheaper than unleaded petrol, so payback for the conversion cost is quick. I think that LPG means "Less Petrol Gulped"!

Finally, the average car costs over £100 a week to run, so slashing your motoring costs by, say, a fifth could save you more than grand a year, which is well worth having. One final tip: motoring expenses account for a tenth (10%) of all spending on credit cards, so I recommend using a cashback card, which will reward you with up to £20 for every £1,000 spent.

You'll find several leading cashback cards in our Credit Card centre!

Here's wishing you many years of happy motoring!

More: We'll find you cheaper loans, insurance and breakdown cover | Read the Fool's Car-Buying Guide.