MotorsAnalysis: Cost per kmThe key to working out which car to buy is to know the potential whole-life cost of the car, writes Donal Byrne
Most of us tend to put a lot of effort into researching the purchase of a new car, but we tend to focus on individual considerations. We may prefer a saloon to a hatchback, a diesel engine to a petrol one, a three-door to a five-door or we may simply be guided in our choice by cars that have a greener pedigree than others in the same bracket. What we don't tend to do, however, is work out the real cost of running of a particular car over the period of ownership.
This is quite understandable. Working out the whole cost is a fiendishly difficult exercise because there are so many elements. How do we really know what the fuel consumption is going to be as a result of a particular driving style ? Do we really know the cost of a full service or the cost of a set of tyres ?
Car finance is a science in itself and most of us prefer a tidy package and a figure we can manage within our monthly budget. We seldom actually look at the finance rate being charged for the car, and this is where most people tend to get caught, paying way above the odds for their monthly motoring. By opting to simply pay the tidy sum of, say, €400 per month when buying a new car we could be paying a lot more than we might if we went out and negotiated a straightforward loan. A lot of people in the motor industry have made an awful lot of money by providing finance to car buyers and it continues to be a very lucrative source of income for dealers.
Starting this month we hope to be able to make it a bit easier for people to make their choice by looking at some figures produced by Merrion Fleet, a leasing company which provides numerous companies with their lease fleets and, on their behalf, carefully analyses the whole life cost of these cars.
For the purpose of the figures featured today, the cars featured are grouped in terms of size and not just in terms of comparable engines. If we describe it broadly as the VW Golf/Ford Focus/Toyota Auris class, we can look at cars of broadly the same size offered by various manufacturers, and with the closest petrol or diesel engine option. Thus while some manufacturers offer a 1.4 petrol engine, another will offer only a 1.6 engine, or while some have 1.4 diesel engines another, such as Fiat, will only have a 1.9 diesel engine on offer. This is an important distinction.
Merrion Fleet's sales director, David Wilkinson, has worked out the figures for this category on the basis of the car being driven 24,000 kilometres a year over a three-year period. Some very interesting facts are revealed. An Alfa 147 petrol version will use 8.2 litres of petrol per 100km travelled, while a Honda Civic with a 1.4 engine, as distinct from the Alfa's 1.6, will use only 5.9. The 1.9 Alfa multi-jet diesel will use 5.8 litres per 100km, while the Mini Cooper diesel will use only 4.4.
The re-sale value after this mileage and three years ownership is also illuminating. A Renault Megane costing €20,650 new is worth €7,475 in the trade after the three-year period, while a VW Golf costing €21,205 new is worth €12,650 in the trade. A 1.5 diesel Kia Cee'd cost new €23,495 and its projected worth in the trade in three years is €9,200, while a new diesel Citroën C4 costs €24,495 new, and its value after three years will also be €9,200, according to the Merrion analysis. The lease rate, incidentally, equates to the depreciation and interest incurred by a private buyer.
"We see companies opting to set a value limit for a company car of, say, €25,000. But by using a whole life cost analysis we can prove that a car costing more may actually be the best choice in terms of actual cost. We also see private buyers entering into finance arrangements when they don't know the interest rate - only the re-payment rate. It can cost them an awful lot more, especially when they see the full ownership costs over three years," says David Wilkinson. "We worked on a conservative rate of 6.5 per cent, but many people are paying between 8 and 9 per cent. When you look at a car valued at €30,000 that depreciates by €20,000, you begin to see the whole picture".
He argues that all costs have to be looked at before you know what you are really paying for a car. "If you have a car with 17-inch wheels, then each new tyre is going to cost you about €200. Even when you are paying cash you need to look at what you will be paying out, and what that car will be worth after three years."
In the coming weeks we will be looking at the cost analysis of cars in the medium-sized bracket.