You might be staring at the spiralling figures on a fuel pump display and, justifiably, be thinking about buying a newer and more economical car.
Fuel bills, after all, are typically the most visible cost of running a car – and creeping fuel prices alone can make a newer or all-new car, with better economy figures, a tempting proposition.
Many of the more modern options may also benefit from lower VED and ongoing maintenance costs, making them even more appealing compared to older and more needy options.
However, if you’re not careful, the potential costs associated with changing your car and running another can easily outstrip the potential savings.
If you’re worried that you might inadvertently end up spending more in the long run, by buying a supposedly more cost-effective car but overlooking a crucial financial factor in the process, then bear these pointers in mind.
Figuring out the annual running costs of your car, as a starting point, usually doesn’t take too long. Totting up insurance and VED bills, the cost of an MOT, approximate annual servicing and repair costs, and your fuel bills, usually gets you into the right ballpark.
To best work out the money you might save by moving to a more efficient car, though, will ideally entail you working out the real-world economy of your current car.
Catalogue the required data for several tanks and you’ll quickly generate a realistic picture of your car’s actual fuel economy.
With that information to hand, you can then work out what your average fuel costs should be each year, based on current fuel prices and whatever annual mileage you have in mind.
You can then easily factor your car's economy and fuel bills into subsequent running cost comparisons, adjusting the annual mileage and fuel prices to suit as required, granting more accurate and useful results.
As is the case with your outgoing car, it shouldn’t take long to get a handle on the potential replacement’s running costs. Its VED costs will be identifiable online, insurers will be able to quote a policy cost, and a garage or dealership should be able to outline servicing prices.
If relevant, don’t also forget factors such as ULEZ charges – as they could quickly swing the balance in favour of the more modern, cleaner alternative.
For new or newer cars, you might also be able to get your hands on beneficial fixed-price service plans and warranty extensions, which can further keep expenditure manageable and in check.
Older cars can be more difficult to figure out, due to maintenance and reliability-related question marks, but religious servicing, proper care and perhaps a good aftermarket warranty can help minimise risk.
What can also help, in terms of ascertaining realistic economy figures for running cost calculations, are owners’ forums and websites offering real-world fuel economy results.
With the potential costs and fuel bills for old and new worked out, and compared on paper or in a spreadsheet, you may have discovered that significant savings are possible if you change your car.
What you then have to look at is how much the next car is going to cost you. It might be that your current car is worth more than whatever you’re looking to get next, so you might end up with some additional cash in your pocket.
For the most part, however, it’s often the case that you’ll be trading up into something newer and more expensive: you sell your car, add several thousand to the pot, and then buy the new one.
If the new purchase is expected to save you £1,000 a year, for example, but you have to invest an additional £3,000 to buy it, it’s going to take three years before you’re actually at a point where you’re starting to save money.
Consequently, you need to think long and hard about how long you plan to keep the new-to-you car, and consider the other costs that might be incurred along the way.
You might have found a more economical car, that’s sensibly priced, which is several years old and has some 60-odd thousand miles on the clock. It benefits further from low VED costs, making it even more appealing, and it otherwise looks to be in great shape.
However, because of its age and mileage, it might well be the case that it’s soon due a comprehensive service, along with a set of discs, pads and tyres. And, just like that, you’ve suddenly racked up a bill for £1,000 or so, which immediately obliterates a significant chunk of any potential savings.
This will vary significantly depending on what you’re looking at, and your annual mileage and driving conditions, but such expenditure has to be considered to avoid unpleasant surprises – so make sure you account for any servicing or repair work that a new purchase might require.
It’s also worth reflecting on whether simply spending a little money on your current car could extend its life significantly, or improve it and make you happier and more comfortable with it. Sometimes, better the devil you know.
If you’re seriously looking to minimise your car ownership costs, you must bear depreciation in mind. Buying another car to save £1,000 a year in fuel bills, for example, will be rendered completely moot if said car depreciates by double that amount in the same timeframe.
Sure, it’s not like that money is visibly pouring out of your bank account every month – but you’ll certainly recognise the hefty financial hit when the time comes to sell that car, so don’t overlook depreciation and inadvertently trash your financials.
That isn’t to say you shouldn’t buy a newer or all-new car, mind; improved safety, reliability, equipment levels, performance and comfort are all factors that might appeal, and might serve to justify a purchase.
You might just outright like the car, too, and want something different – and that, provided everything else is manageable and acceptable, is as good a reason as any to buy something new.
It might also be the case that your current car is depreciating, albeit perhaps slowly, and that might help skew things further in favour of the new car.
In any instance, unless you’ve done the sums very carefully, just don’t glibly assume that buying another car, with improved economy figures, will automatically save you money.
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