Yes, you can buy the cheapest car but you will pay for it in other ways

How to save your motoring money in 2013? You buy a Dacia Sandero 1.2 for €9,990. Job done. Well, not quite but there is a perception out there that simply by finding the cheapest new car, with the smallest engine, your motoring budget will suddenly balance.

Sadly, things are never that simple and while there are many ways to save money on sections of your motoring budget, there are an equal number of pitfalls. For instance, take the above mentioned Sandero. Yes, it’s cheap, as a small and therefore mostly frugal engine and for an extra €300 you can extend its warranty from three years to five, which should give you some peace of mind.

Of course, if you’re someone who does regular long motorway trips, then forget it. The base Sandero’s 1.2 petrol engine simply can’t cope and your fuel bills will rocket.

Quite apart from the fact it’s not especially Co2 efficient, which means you’ll pay more for motor tax than if you’d gone for the 895cc TCe turbo petrol or the 1.5 dCi diesel. Both of which cost more to buy, though, so, oh dear, now your calculations have gone right out the window.

Sorry about that, but there simply is no one-size-fits-all cost reduction regime for motoring, no four-wheeled Operation Transformation.

What you have to do is figure out exactly what your driving needs are, what your driving habits are and how much leeway you need around your normal driving regime to find the right car at the right cost with the right running costs.

So, if you live in town, drive mostly only in town and don't do high mileage, forget diesel. I know, it's a risk – the Irish market is diesel obsessed at the moment (although petrol sales have begun to make a small rally) and I do know people who bought perfectly serviceable petrol versions of popular cars a few years back and cannot sell them on.

Extra purchase cost
Still though, the extra purchase cost of pretty much every diesel model versus its petrol stablemates is a figure worth paying rapt attention to. You need to sit down, do your sums on mileage versus fuel cost and see exactly how many litres of diesel the saving on the new price will buy you.

You might also need to factor in the fact that you can likely haggle a bit more off the price of a petrol-engined car, new or used.

If you do regular long journeys then yes, diesel is the way to go, without question. But even then, some careful shopping is needed.

We’ve all read in the past few weeks how the car makers are massaging their fuel consumption figures, so you’ve got to shop carefully to make sure you’re not getting bitten once you get up and driving.

If you’re taking some cars for test drives then make sure you zero the average fuel consumption figure in the trip computer (assuming the car has one) and go for more than just a spin around the block.

Then check to see if the figure is even in same ballpark as the claimed one. It’s for this very reason that we cannot recommend any hybrid purchases at this time...

Generally speaking, if you’re shopping in the most popular category – that of family cars with a 1.6-litre diesel engine – then you’re probably looking at around 50mpg on average and an annual motor tax bill of around €180-190.

All of which is pretty good news from a running cost point of view. But then there’s depreciation to consider and it’s the trickiest subject of all. If, like me, you’re one of those people who turns and runs away from offers of playing the stock market then the news is bad – that’s exactly what you’re doing with a new car purchase.

You are essentially betting that in five years time, someone you've never met will give you the money you expect for a car looking, driving and consuming exactly as yours does right now. That's taking a big risk, with a significant stake.

Personal Contract Purchase
You can take some of the heat out of that risk by going for the ever-popular PCP or Personal Contract Purchase. Essentially, this is a personal lease, where you pay a deposit, finance a certain amount of the price of the car over three or five years and at the end, there is a "bubble" payment left hanging, which will be covered because the finance company will guarantee the final value of your car (within certain parameters).

That value can either pay the bubble payment and you hand back the car, or you can pay cash for the payment and keep the car or you can hand back the car and use any value in it over and above the bubble value as the deposit on a new model.

It’s a simple system, that gives the buyer mostly good value and many people are happily buying cars on it right now.

But beware, there are terms and conditions. Of course there are. You may have to keep within strict mileage limits and the car’s condition will have to be maintained (which may make it well worth paying a little extra at purchase time for an inclusive servicing package).

And it more or less means you’re locked into buying cars from that brand for some time, which may suit you but if you choose to venture outside, to other potential purchases, you may find that your second-hand value is not what you had been promised.

More than a few car buyers have been stung by that one recently, especially those who bought at the height of the Scrappage special offers frenzy.

A more straightforward bank loan, credit union loan or hire purchase agreement may well be simpler, but the up-front costs can be greater and while a finance company attached to a car dealer or car maker mostly wants you to keep the car and keep coming back, if you get into repayment difficulties, a bank may well be less understanding when it comes to issues with unsecured credit.

And then, of course, there's the question of buying new at all. For many of us, buying second hand is actually a much more financially sound choice, as evinced by the fact that last year, with only 75,000 new cars bought in the country, there were more than 40,000 second hand transactions in January 2013 alone.

Buying used
Certainly an expert such as James Ruppert, author and motoring journalist who just happened to begin his career as a car salesman, thinks buying used makes vastly more sense.

“I still think that buying an older car is a sensible way to go. I’m lucky enough to have driven the Sandero, which is a very basic car, a very good one but it’s something you would have to buy and keep forever because if you sold it in two or three years time, I think you would be very disappointed with the money you got back. And still, buying a brand new car just doesn’t work out for the majority of us, I think.

“If you have a company car or if you’re worried about the prestige, then fair enough, buy a new car and lose a load of money. But for the most of us who use cars for a commute, for shopping, for the daily grind, I think we can make our money go much further by buying a slightly used car.

“I think that manufacturers have caught on in the past 10 years that there’s money to be made from us because we are worried sick about going to buy a used car, it’s a thing that worries most of us because we do it so rarely, ever five years or so.

“We are quite scared, so the manufacturers are very clever and now they have these schemes where you simply don’t have to think about it, where you can return the car after 30 days if you don’t like it and they are fine, they suit a certain kind of person.

“But if you’re willing to take a tiny bit of a risk, certainly it’s worth looking at a car built in the last 10-15 year which will easily do 160,000km without giving too much bother. . .”