Is your car costing you a fortune?

By Sarah Modlock

01 March 2006

You don't have to run an Aston Martin to have high monthly car costs (although a chance would be a fine thing). But have you taken a close look at the chunk of your budget which keeps your four wheels running? Would you dream that it could be almost as much as your monthly mortgage payment?

According to new research from Direct Line, we spend an incredible £90 billion a year running our cars in the UK. The insurer's Driving for Less report reveals that the average cost of running a new car is now £511 a month - just £68 lower per month than the cost of an average mortgage. Their calculations are based on a survey of average monthly costs of insurance, petrol, parking, servicing, breakdown cover, depreciation and finance payments.

The cost of motoring in the UK has risen by 56% over the past 20 years, way ahead of increases in the average household income. Even so, three quarters of us own a car and some 400,000 people are expected to buy a new car this March as they race to the showroom for the arrival of the latest 06 registrations. Direct Line says that one in four drivers will sign up to the dealer's finance deal, costing themselves an average £1735 in interest and charges in the process. It compares it's new 5.6% typical APR loan rate to the average 9% APR finance deal from car dealers.

It's certainly true that you should always shop around for general personal loans if you are borrowing to buy a car. You could find much better deals than in the showroom and it will help to keep you level-headed about what you can really afford. There's nothing like a shiny new car gleaming in the background to give you a rush of blood to the head and ensure you cave in the salesman's patter.

10 money-saving car tips

Once you have your dream wheels, it might be easy to forget about the costs from one year to the next between big bills for insurance, servicing or road tax. Here are 10 ways to save:

1. Shop around for insurance quotes. Using the internet is quick and convenient and will help you to compare prices easily. Make a note in your diary before your insurance is due to expire so that you have time to see what the competition will charge. You can then go to your existing insurer and ask them to match the lowest price you find - I do this every year.

2. Regular checks and servicing will decrease the likelihood of potential breakdowns and all the expense and inconvenience that goes with it. There are many simple, regular checks that even the least mechanically-minded can carry out. Believe me, if I can do it, you can do it. A good example of this is checking tyre pressures once a month and before long journeys or carrying heavier loads than usual. Under-inflated tyres increase fuel consumption and are dangerous.

3. Shop around for fuel. Supermarket petrol is often more competitively priced than the high street garages. Try to fill up before going on motorways and don't wait until you get so low on petrol that you have no choice but to use the nearest garage, regardless of price.

4. Control your driving technique - avoid rapid acceleration and heavy braking as this has the biggest influence on fuel consumption and wear and tear. Short journeys are also expensive. If your trip is under 10 minutes then your fuel consumption will be high and you will almost certainly be causing a wear and moisture problem in your engine and exhaust.

5. Buying a second hand car can be fraught with problems. For peace of mind, you can make sure the car you are buying is not stolen, repaired from a ‘write off' or has finance outstanding from a previous owner. The AA and RAC both run checking services and you can also get full inspections which cost from £142.00 and £134.95 respectively, for non-members.

6. Speeding and illegal parking are expensive if you get caught. Look out for clampers - the signs notifying you of their presence may not always be obvious.

7. Shop around for breakdown cover deals – some insurers provide it as part of the deal and it is always nearly included when you buy a new car. I already had breakdown cover with about seven months to run when I switched cars and got free cover. Luckily, the RAC happened to be the firm involved with both policies and so were happy to freeze the existing one until the new one ran out, saving quite a lot of money. If you are in a similar situation, check with your existing breakdown service about freezing cover or ask the dealer to arrange for the new cover to be frozen. They may not be under any obligation to do this but it's worth checking.

8. If you are using your car to commute, keep an eye on parking and petrol costs and compare them to public transport. Don't forget that your insurance will usually be higher if you are commuting by car so factor-in any savings you could make through change of use and lower mileage. Packed trains are unappealing but when I stopped driving to work I was amazed at how less stressed I was.

9. Before taking your car in for an MOT, familiarise yourself with elements of the MOT test. Many people do not realise that their car can fail on minor problems such as blown bulbs, empty windscreen washers and wobbly mirrors – all of which can be remedied by you before the test.

10. Log on to the RAC and AA websites – even if you are not a member. They are both packed with great information on buying and driving cars, safety, maintenance and and ways to save money.