How to minimise your motoring costs

By | 21st February 2017


Of course, the absolute best way is by not having any – eliminating unnecessary journeys and instead utilising taxis, public transport and feet.

But, should you have need of a vehicle then I’ll cover three common possibilities to see what costs you the least amount.

For the purposes of this, we’ll take the costs over 6 years as that gives a good comparison and also there is a high possibility in 6 years time we will have a lot more electric vehicles and at least semi-autonomous cars.

We could even see a situation in the future where cars are just hired like a taxi when needed, and drive themselves to you.

So, whatever route you take, it could very well be ‘the last car you’ll ever own.’

(Although you should remember that you never actually own a car on PCP or by leasing unless you make a large final payment. Up to then you just have a liability, which could be for nearly all the monthly payments left on the contract depending on the terms.)

The most popular car is the Ford Fiesta in the UK, so we’ll use something similar but with an eco flavour and automatic to cut down the driving stress – a Toyota Yaris Hybrid. Also available in the US as the Prius C or in Japan as the Toyota Aqua.

We’ll assume 10,000 miles per year for ease of calculation initially, and buying the car before the new UK road tax rules so there is no road tax to add.

I’ll then run the numbers at a more realistic 4,000 miles pa once unnecessary journeys have been eliminated, although perhaps 2,000 miles might be more appropriate once you plan your life to minimise all unnecessary travel – saving you money and also the environment too.

Below are the results, and underneath them are my assumptions:

10,000 miles paNew Car3 Years OldOld Banger
Extended Warranty/Banger Repairs£0£1,480£1,850
Fuel Costs£7,640£7,640£9,545
Road Tax£0£0£660
Per Mile52p33p34p
4,000 miles paNew Car3 Years OldOld Banger
Extended Warranty/Banger Repairs£0£1,480£1,850
Fuel Costs£3,056£3,056£3,818
Road Tax£0£0£660
Per Mile104p59p59p

As you can see, the costs for running a 3-year-old car up to 9 years old are actually almost the same as the costs for running that ‘old banger.’ The extra maintenance and running expenses with a banger really do take their toll on overall running costs.

Having run a few of these, you do find that the maintenance costs are significant – little things such as suspension, seat belts, brake discs, etc. that wear out add up to a considerable amount over the years.

You will also benefit from more modern safety systems and reliability, etc. with a 3-year-old car

The three options:

1) Leasing/PCP

6 years isn’t available so instead we’ll use 2 x 3 year terms:

Including the initial payment, admin fee and monthly you are looking at £260 per month for a lease or £290 for a PCP.

Taking the average of the two, that gives us £275 per month, so:

£19,800 in rental costs over 6 years.

£7,640 in fuel costs over 6 years (60,000 miles at 50mpg and £1.40 per litre)

£1,250 in servicing costs (5 services at an average of £250)

assuming no extra costs for tyres or maintenance, as there are two terms.

no MOT

£2,400 in insurance costs (6 years at £400pa)

Total cost £31,090 over 6 years or £5182 per year or £432 per month or 52p per mile.

2) Buying second-hand

Buying a 3-year-old car under the manufacturer approved used scheme would cost £8,000 and the trade-in value 6 years later would be £2000 =

£6,000 depreciation over 6 years

£1,480 extended warranty £370 x 4 (the first two years are already included as 5 years from new are standard)

£7,640 in fuel costs over 6 years (60,000 miles at 50mpg and £1.40 per litre)

£1,500 in servicing costs (6 services at an average of £250)

£500 for tyres and extra maintenance

£300 for 5 MOTs

£2,400 in insurance costs (6 years at £400pa)

Total cost £19,820 over 6 years or £3300 per year or £275 per month or 33p per mile.

3) The ‘old banger’/beater/hooptie route

You would really want to spend something like £4,000 in order to secure an 8-year-old car from a dealer. Although you can indeed buy cars for £1,000 if you don’t want hassle and potential maintenance issues then a small trusted local car dealer is the way to go. £4,000 gives you a good choice of cars like a non-hybrid Yaris or Honda Jazz, etc.

£3,000 depreciation over 6 years

£1,850 self funded extended warranty/extra maintenance fund £370 x 5 assuming the dealer gives a first year free (Although not a hybrid, it’s likely that you will spend this on repairs. Having run several older cars, there are regular bills that come up due to age and wear. You may be lucky and have some extra cash left after 6 years, but it’s unlikely to be worth paying for a warranty that is likely to have age/mileage exclusions. 8 years is usually the limit for a manufacturer extended warranty.)

£9,545 in fuel costs over 6 years (60,000 miles at 40mpg and £1.40 per litre)

£2,100 in servicing costs (6 services at an average of £350 – many cars require extra maintenance as they get older: belts replaced, etc.)

£500 for tyres and extra maintenance

£300 for 5 MOTs

£660 for road tax (6 years at £110)

£2,400 in insurance costs (6 years at £400pa)

Total cost £20,355 over 6 years or £3,393 per year or £282 per month or 34p per mile.

James McBrearty started his own business from scratch in 2006, to help the self-employed.

He helps people to escape from the corporate world and shares his thoughts here on the changing world of work, technology and personal finances; as well as the occasional travel post.

Over the next 10 years things are going to change significantly. James is a follower of frugality and minimalism; and an advocate of F.I.R.E. to minimise the coming disruption.

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