The Pricewatch five-grand challenge: cutting corners on car costs

TOTAL SAVINGS SO FAR

€4,360

Can we help you save €5,000 a year without draining the colour from your life? We think so. Austerity has forced most consumers to reduce spending already, but many of us can cut our living costs further. In weeks one, two, three and four, we showed you how to save €2,200 on your weekly shop, €800 on health insurance, €500 on car, home and life insurance, and €460 on utility bills. This week we suggest savings of €400 on car costs. That’s €4,360 and counting

Owning a car grants great freedom, but freedom comes at a cost. A two-adult household will easily spend €5,000 a year on running just one car. Add in a second car and the bill skirts €10,000.

An easy way to reduce your bills is to get rid of your car entirely and rely on a bicycle and public transport. Sadly this is not realistic for most people.

Even if you’re lucky enough to live in an area well-served by public transport, you’d be hard pressed to manage without any access to a car.

But if you are part of a two-adult house, do you really need two cars? And if you have just one, what kinds of savings can you make?

Before we answer those questions, let's look at some of the costs. According to the website Pumps.ie, you will spend about €1,868 this year on petrol if you drive an average-sized family car the average annual distance of 16,000km.

Comprehensive car insurance for two will set you back €800. The average age of a car in Ireland is more than seven years, so motor tax based on a 1.6-litre mid-sized, fairly modern car will be €478 each year.

According to the AA, a heavy parker will shell out about €4,000 a year on parking. That seems excessive, but, even if you cut it by 90 per cent, you are still looking at €400 a year on parking.

Another €400 will have to be put aside for servicing and maintenance, and if your car cost €10,000 to buy, and you plan to keep it for five years and sell it for half the price you paid, the annual depreciation is €1,000. All told, total running costs for a single car are €4,946.

Shopping smarter

A litre of petrol costs €1.46 now, compared with just €1.17 in the summer of 2008. The average price of diesel is €1.37, compared with €1.08 in the summer of 2008. This means that petrol will cost nearly €500 more this year than it did six years ago.

If you could knock just 5 cent off the cost of a litre of fuel by “shopping smarter”, you would save €100 a year. How? First get out of the habit of throwing €20 or €40 worth of fuel into your car or filling it. Instead buy a set number of litres, which will make you aware of the price gaps between forecourts.

Check out Pumps.ie for prices, and download the app, which points you to the cheapest nearby garage. Bigger supermarkets frequently give discounts at their petrol pumps if you spend a minimum amount in store.

You can also save a surprising amount of money by changing the way you drive. The AA advises that you don’t over-rev your engine, that you drive in the right gear and keep your boot empty. Keep tyres at the right pressure, get the car serviced, don’t use air conditioning and remove roof racks. Do this and shop around for fuel, and you could reduce your annual spend by €200.

This series has already suggested savings by shopping around for car insurance, which could knock at least €100 off your policy next year. Another €100 could be saved from motor tax if you stop paying it quarterly. If your annual motor tax is €514, it climbs to €612 if you pay quarterly.

New bike

One of the few tax benefits not yet cut by the Government is the Cycle to Work Scheme. If you have yet to sign up for it, then spring is a good time. Your employer buys your new bike and any equipment you may need, up to a total value of €1,000.

If you buy a bike for €600 and spend another €100 on accessories such as a helmet and lights, the total cost will be €700, but thanks to the scheme, the net cost to you will be just about €340, and payments are spread out over 12 months. See Biketowork.ie.

People who live within 10km of their place of work will spend at least €15 a week on commuting if they drive or take public transport. A cyclist spends nothing. If you live in Dublin, Galway or Cork, sign up to the city bike schemes.

If you do give up your car, and need to travel longer distances than your bike will carry you, public transport is the most likely option. While the cost of public transport is climbing, you can use it wisely.

The Government’s TaxSaver scheme could save you up to 52 per cent off the annual bill when tax, PRSI and USC cuts are factored in. An annual Dublin Bus ticket, for example, will cost you €1,230. Buying it through the scheme will cost you just €590.40 if you’re in the highest tax bracket. A Leap Card will give a reduction of close to 20 per cent on bus fares and Luas fares, and more on Dart and commuter rail.

If you get rid of a second car and find you still need one occasionally, you can hire a Ford Ka for about €25 a day. If you hired such a car twice a week for a whole year, it would work out cheaper than owning it.

A better option might be the GoCar service. It works like a DublinBikes scheme for cars and vans. The car club is currently confined to Dublin, where it operates 50 cars. Joining costs €50, and you also pay a €5 monthly fee.

After that, you pay for each individual trip you make, with a fee of €4.99 an hour for a Hyundai i10 or Ford Fiesta model during peak hours of 8am-8pm, dropping to €2.49 an hour outside those hours.

You also have to pay a fee of €0.45 per kilometre, dropping to €0.35/km for distances of more than 40km, but the fees include all fuel, insurance, road tax and vehicle maintenance. You can hire a larger car or van for €5.99 an hour.

While getting rid of a car is the way to make the biggest savings, it might not work for everyone.

But by shopping around for fuel and insurance and paying your motor tax differently, we reckon you could easily knock €400 off your annual spend.

A CHANGE OF WHEELS: ‘GETTING RID OF A CAR WAS AN OBVIOUS WAY TO MAKE SAVINGS. THEY’RE MONEY PITS’

Thom Malone lives with his wife and two young children in Inchicore, Dublin. Almost two years ago, like many squeezed consumers, the couple found they had virtually nothing left at the end of each month when all bills – including high childcare costs – were taken care of.

He looked at ways he could make savings, and decided his 10-year-old Alfa Romeo had to go.

“I live in Inchicore and I work in Clonskeagh, and cycling is actually faster than driving. I have also lost at least two stone since I gave up the car – and it is not like I was particularly overweight,” he says.

He does get rained on, but only occasionally, and says that when you have the right gear it is not such a big deal. The savings are a big deal, however. “I was spending €300-€400 a year on tax and the same again on insurance, and petrol was costing me around €200 a month. And because the car was an ’04 it was starting to break, so that was costing me money too.

“When I made the decision, I just went with it. I can stick the two-year-old on the back to take her to creche, and my son, who is in senior infants, cycles alongside me.”

Two years on, Malone is delighted by his decision. “Getting rid of one of the cars was an obvious way to make real savings and it allowed my wife to take on a part-time job instead of working full-time just to cover the bills. Cars are just money pits.”