Petrol price surge could erode improved UK motoring costs

Motoring costs for UK drivers are on a knife-edge as rising petrol prices threaten to erode the benefits of improved fuel-efficiency, greater reliability, price competition, and more advantageous servicing schedules for new cars, The AA Motoring Trusts annual motoring cost figures show (PDF 59k).

The cost of driving for a typical petrol car owner has dropped by just over half a penny per mile^*1 compared to last year. However, if continuing pressure on the price of petrol drives it up another five pence a litre, all the savings will be wiped out.

Savings from better fuel consumption, with new petrol cars gaining an extra 1.6 miles per gallon and new diesels an extra 2.5 miles per gallon^*2, have been bolstered by new car owners tending to sell cars at four years instead of five. This new trend in the market has been helped by fierce competition driving down list prices.

Shorter ownership, longer warranty intervals and far greater mechanical reliability have reduced the impact of repair costs as replacing clutches, exhausts and batteries virtually drop out of the equation for the first owner.

Conversely, servicing costs have risen due to higher hourly labour rates and the extra work needed to maintain technologically-complex vehicles. New freedom to have cars serviced outside the dealer network without jeopardising new car warranties may in the long run help bring these costs down. Rising costs also include tyres, in particular with expensive wider and lower aspect styles becoming more popular.

Among diesel cars, there have been moderate increases in the cost of motoring for mid-range models, while smaller-model costs have dropped through improved economy and cheaper cars.

Once again technological advances have come to the rescue of the hard-pressed motorist, who last year saw the cost of motoring leap on average three pence per mile. However, another Katrina-type surge in crude oil prices could undo all the good work, says Ruth Bridger, motoring cost specialist for The AA Motoring Trust.

Even so, the cost per mile for any car other than a supermini doing 10,000 miles per year still leaves workers, who volunteer their cars for business and take the maximum non-taxable allowance of 40 pence per mile, out of pocket. This includes community service specialists, like district nurses and health visitors, and people working in the voluntary sector.

Analysis of motoring costs for six of the most popular 4x4 vehicles shows that they are not the most expensive cars to run on UK roads^*3. This partly explains their growing number and also underlines that the Budgets 45 increase in road fuel duty is a penalty that most of these new owners can bear, adding less than half a penny per mile to a 10,000 annual mileage.

Had the Chancellor set the top band threshold at 250g/km, instead of 225 g/km, 4x4s that fall in the lower-emission and lower-tax band would be more eagerly sought after in the used-car market by motorists less able to afford 210 road tax.

Bridger adds: The AA Motoring Trusts annual motoring costs show that the Chancellors one-size-hits-all road tax band for so-called gas guzzlers, including 4x4s, people carriers and large family estates, makes little difference to the overall cost of running these vehicles. Influencing depreciation values when they move into the used market would.

However, that would require creating a threshold that differentiates between the big fuel consumers and those that use less, charging the latter less tax. That was the basis of the AA Trusts recommendation for a 250 g/km threshold, not the 225 g/km level the Government chose. We hope they see sense by the next budget and introduce the incentive.

Download the Cost of Motoring 2006 (PDF 59k)

NOTES TO EDITORS:

Note *1 - 2005-6 comparative pence per mile (ppm) motoring costs by new car list price range:

Petrol cars averaging 10,000 miles per year

Purchase price

up to 10,00034.97 ppm (2005)
34.62 ppm (2006)
-0.36 ppm (difference)