5th August 2013 at 12:00pm
Your house may be the biggest purchase you’ll ever make, but for many a car is in second place.
And with petrol, insurance and other running costs on the rise – not to mention the cost of buying a car in the first place – the amounts involved are not insignificant.
Here we look at the pros and cons of car ownership and suggest a few tips on how you can save money, or even kick the car habit altogether.
When buying or changing your car, perhaps the first question to ask yourself is, does it need to be a new car? A car can lose as much as 20% of its value as soon as your drive it away from the showroom. After 3 years, most cars will have lost around 60% of their value.
You can see how car models compare when it comes to depreciation with this handy tool.
In general terms, a car that’s around 4 years old with average or below average mileage offers the best compromise between depreciation and reliability. For example, the oh-so-trendy Fiat 500 city car costs just under £10,000 when new.
Yet a good condition four year old one with low miles can be had for as little as £5000.
But which used car should you buy? You may find this Telegraph article, the 10 best used cars, helpful.
You might also want to check out the winners and losers in terms of reliability here.
Of course, cost of purchase isn’t the only factor you need to consider. Although second hand cars are much more reliable these days, a brand new car comes with at least a 3 year warranty. Some, like the Hyundai and Kia brands, stretch as far as 5 or 7 years – that’s a lot of peace of mind.
Then there are the other costs of car ownership – insurance, servicing, fuel, road tax, and possibly a parking permit if you live in city. A new car may have significantly greater fuel economy and much lower insurance and tax costs due to technological and safety advances. So, when considering changing your car, it’s important to look at the total cost of ownership, not just the purchase price. The AA’s car running costs tables are well worth checking before you go any further.
If you live in a city with good public transport and drive less than 7,000 miles a year, a good alternative to owning a car is to join a car club. Membership of an organization like City Car Club, can offer savings of £300 a month or more. Try this handy little calculator to see how much a car club could potentially save you.
Or perhaps you could consider doing without a car altogether? It’s not for everyone, but changing from four wheels to two or even walking to work can generate big savings and help you get fit too. You can get a good idea of just how much you could save here.
Even saving a small percentage of your motoring expenditure can add up to a lot of cash. Instead of spending it, why not consider saving it for a rainy day? Just £100 a month invested over 5 years in a Standard Life Stocks and Shares ISA could turn into a handy nest egg of £6,000.
You could buy a car with that.
As with any investment the value of a fund can go up or down and may be worth less than what was paid in. Returns are dependent on investment performance and are therefore not guaranteed.