Every Friday I publish “Frugal Friday!“, an open-ended series with some of the simple and best ways to really save you money both now and in the future.

This week I am concentrating on cutting down the costs associated with owning your car. Nearly everyone has one, nearly everyone needs one, and nearly everyone pays more than they need to for the privilege.

Cut Your Insurance Costs

Get Comprehensive Cover

Despite the lesser cover that third-party insurance provides, unbelievably the quotes are usually more expensive than if you had taken out comprehensive cover in the first place.

Shop Around

Always shop around for your insurance using price comparison websites to see how the quotes come up (GoCompare, MoneySupermarket, Confused, Compare The Market). Phone your present insurer and see if they can beat it if you’re otherwise happy with the service they provide. Remember, not all insurance providers are on price comparison websites (such as Direct Line), so be sure to get separate quotes from them as well.

Pay In Full

It may seem convenient to your budget to pay over 10 or 12 months, but invariably you will be stung by the company for doing so, as in effect they are loaning you the money to get the policy. APR’s range from 15-30% for this ‘privilege’, so if you can always always always pay for your policy in one go.

This has the advantage that if your vehicle is written off in an accident, you do not continue paying for car insurance on a car you no longer even own.

Up Your Excess

If you are not already penalised for being a young or inexperienced driver, then up your excess (deductable). The quotes vary wildly when you change your excess from £100 to £500. Be  sure you will be able to access such an amount in the event you need to make a claim though, as this will instantly be taken out of any payout you get. Any claims under your excess you will be expected to meet in full.

Drive Carefully

Hopefully this one is obvious, but if you drive like Jensen Button but on the M3 rather than Silverstone, you will end up having an accident, getting stopped by the police or if really unlucky, both at once. Not only do insurance claims knock up your costs, but so do points on your driving license.

Play With Your Job Title

I am not suggesting outright fraud here, but there is no escaping the fact the work you do has a very real impact on the cost of your premium. Martin Lewis over at Money Saving Expert has put together a job title picker to see if you could save money by tweaking your job title. Remember the general rule of thumb: If a family friend would agree on the spot that is a reasonable job title for the work you do, it is reasonable to give it to the insurance company. Don’t outright lie though, if the company finds out during a claim you could find your cover nullified.

Purchase via a Cashback Site

Once you have found a quote you are happy with, see if you can get the same quote again but via a Cashback site. You could find an insurer paying you £25-£150 for taking out their cover in doing so! Check out the CashBack Optimiser to see which site pays the most for the company you’re looking at.

Cut Your Fuel Costs

Shop Around

Just as I advocate shopping around for your insurance, shop around for your fuel as well. Costs in a 10 mile radius can vary by as much as 15 pence a litre, so it pays to spend a moment to check PetrolPrices.com and see who is charging what today before you go fill up. The site requires registration but is completely free.

Do Not Fill Up

Unless you have a long journey ahead, do not fill your tank right up. If you want to be really frugal, don’t go much beyond half a tank at any one time. Fuel is heavy, and your engine will have to work harder to move the car and its contents around the more it weighs. This tip won’t make you rich overnight, but over the course of the lifetime of the car, it could save you hundreds of pounds.

Empty The Boot

If your vehicle is anything like mine, the boot becomes a storage cupboard over time. Anything not immediately required seems to end up in it somehow. In much the same way as the extra fuel weight means less miles per gallon, so does the extra weight of the rubbish in your boot. Keep it regularly spring-cleaned, and only carry around what you really need day-to-day. Every additional 50kg of weight you carry in your car increases fuel consumption by an average of 2%.

Take Your Foot off the Pedal

Simply driving a little more efficiently can add up to 25 more miles per gallon of fuel! If your tank holds 13 gallons, that is possibly upwards of an extra 250 miles per tank. Anticipate traffic flows, look further ahead than you normally would, and knock some speed off your clock. Posted speeds are maximum limits, not targets.

Consider a Cash Back Credit Card

Citi offer a Shell-branded MasterCard that pays 1.5% back on the price of your petrol if you fill up in a Shell garage. This used to be 3% and much more worthwhile, but you may now find simply shopping around saves you more over the long term.

AMEX offer a Platinum Cashback credit card with a whopping 5% introductory cashback rate, but this also drops to between 0.75% and 1.5% over the long term.

Finally Egg Money offers 1% cashback but unless you spend considerably on it throughout the year, the £12 annual fee will eat into any cashback you earn, making the card uneconomical for anyone but the higher spenders.

If you choose to go for a cashback card, remember to pay off the balance in full every month. The APR of these cards will stunningly dwarf any return you could have expected from the cashback.

Keep it Serviced

A well looked after engine, is a happy fuel efficient engine. Change the oil regularly, change the oil and fuel filters and clean or replace the air filter regularly and in any case within the servicing schedule of the manufacturers handbook.

Keep Them Inflated

A tyre just a few PSI short of its target starts to lose efficiency. A 5 PSI drop can see the drag increase by as much as 4%, and this increases the work your engine has to do to keep you rolling. It will also start to damage the tyre and cause uneven wear, making it unsafe over the long term and also speed up the replacement schedule biting your wallet.

Turn The Air Conditioning Off

AirCon increases your petrol consumption by as much as 10 per cent – so if it is only a little warm, put the fan on or wind down your window. That said, if you are travelling over 60mph then having the window down increases drag which increases your fuel consumption – so air conditioning would be better. Better yet, keep below 60mph and keep the window open!

Other Cost-Saving Ideas

Wash At Home

Taking your vehicle through the car wash may save time, but at £5 a go for a decent one, it is not cheap. It will also likely start damaging or scratching your paintwork, only do half a job on your alloys and cover your windscreen in wax. For the sake of an hour on a weekend, it is far cheaper to do it yourself. Even if you want to buy brand-name goods to do it with, it will work out considerably less than £5 per wash. If you are content with a bucket of soapy water then you may as well put the whole £5 back in your pocket.

Avoid Dealer Servicing

If your vehicle is outside of its warranty period, avoid the dealership like the plague. An independent garage will likely do the same or better work for half the price. Case in point: My Ford dealership charges £125 for an oil and filter change. KwikFit do the same for £25, and my local garage charges £19.50. All use the same parts and oil, and the cheapest one also had me back on the road in the shortest amount of time.

Downsize

If it has come the time to replace your old banger with something a bit more modern, consider going smaller. A smaller vehicle will be more efficient, generally cost less to insure, and cost less time to wash as well.

Avoid Financing A New Car

Aside from the fact brand new cars lose value the moment you drive them off the forecourt (as much as 20% in some cases), if you have bought it on finance you could be making it much more expensive in the long run. See my own story on doing this, as it effectively doubled the cost of my car over the 6 years.

And the Biggest Saving?

Use your car less. This does not mean don’t use it where doing so would be useful, but if you can, combine your journeys into one and spend a moment planning out the most efficient route to do everything you need to do without driving along the same bit of road three or four times.

If you are just “popping down the shop” and the weather is pleasant, grab your bike or take a walk instead. Short journeys are arguably the most fuel-expensive, and if you can cut them out you will be well on your way to cutting your annual vehicle costs.

Anything I missed? Come help out in the comments.

• The Long Term Cost
• Personal Recessions
• The SCRAM Plan
• A Fundamental Question
• Job Front Update

I’ve become fascinated by the long term cost of things of late. I suppose this is merely a natural progression in a personal finance journey; you are no longer content to know just what things have cost to date, but what they will cost you in the future, too. Of course no one knows what will happen in the future with any degree of certainty although two outcomes remain a given: you’ll pay taxes, and die at some point.

Beyond those two cheery thoughts, a little artistic license may be required.

As I was driving to work yesterday evening, a thought started buzzing around the fringe of my consciousness. “Just how much have I paid for this car in its 6 and a half year life?”. As many personal finance bloggers have mused in the past, cars are expensive. They are even more expensive on a finance ‘deal’.

I realised I could probably answer my question with a reasonable degree of accuracy, as I keep all documents relating to my car since purchase no matter how small. I promised to add it all up and find out, If I remembered between the thought coming to the surface and getting back home.

This afternoon I dug out my “Car Expenses” docket and opened up a new Google Spreadsheet to start typing in numbers.

I drive a 2003 diesel Ford Focus 5-door hatchback and this is if I am an honest, a superb vehicle. It’s extremely efficient if driven right (currently 67.5mpg according to its computer), still looks great, can haul anything I put in it, and is extremely comfortable and reliable.

Unfortunately, these are the only good things about my purchase.

When I first bought it at age 19, I wanted “the best” – after all, my consumerist desires had been nicely nurtured by the salesman and two decades of advertising exposure – so I went all out. I had metallic paint, supaguard protection inside and out, the highest trim level (Ghia), a 6-disc CD changer, 115 bhp engine rather than the usual 100 and so on and so forth. The list of ‘extras’ goes on for miles.

In total the “there and then” purchase price would have been £16,209. Not too bad for a brand new reasonably  specified vehicle, even in 2003 money.

Purchase Mistake #1: Unfortunately, that wasn’t what I paid. When I first bought the car, I had £8,000 in savings to put towards a new vehicle. In hindsight I could have got a lesser vehicle – still new – for that alone. The purchase price of the car I wanted was £16,209.01 which meant I needed to source £8,209 from elsewhere. I probably found the necessary 1p in my pocket to save getting that on finance also, so £8,000 needed to be financed. The place I bought the car was all too keen to sell me their finance package and looking back it wasn’t a bad deal: 6% APR over 3 years.

Purchase Mistake #2: I thought I could do better. I telephoned my employer who ran an assisted purchase scheme for new car buyers. The headline rate is 3.5%, so I signed up to get my missing £8,000 and made up the difference that way. However, 3.5% is not the APR, that’s the flat fee per year. The APR which I subsequently found buried in the small print) is 7.5% if taken over 3 years like I did. Adding the arrangement fees and paperwork costs on top, I paid nearly £1,000 over the purchase price to borrow that £8,000. The only good point about this loan was the payments were taken from my gross wages, meaning the money was taken before my income tax and national insurance payments were calculated.

Purchase Mistake #3: In 2005 I got married, and so that we could set up home together having started with nothing, we took out a £15,000 loan over 5 years. Included in that was some consolidation of our existing commitments and operating capital on top. I paid off the loan from work, and rolled it up in this loan instead. Now my car would have been paid off in 1 more year if I’d kept the original repayments going, instead I had just extended them for another 5 years at 9.9% instead!

Purchase Mistake #4: In 2009 I filed for divorce. In order to restructure my finances to help get me debt free more quickly, I paid off the remainder of this loan and a few others with one super-loan from my bank for £10,000 at 8% over a further 3 years (although my intention from day 1 was to pay this off inside 12 months). This wasn’t a mistake per se, but does theoretically mean that 6 years after taking delivery of the car I am still paying for it and could do until 2012, almost 9 years after driving it off the forecourt!

So far, purely courtesy of finance costs, arrangement fees and interest my £16,209.01 car has actually cost £22,962.09 – nearly 30% more than the original price of the car.

Put another way I would be debt free right now if I had not taken out my car on finance. My net worth is at August’s calculation -£4,951.49 so I’d actually have almost £2,000 in the bank, instead of still owing others money.

I then went a step further and totaled up my insurance, road tax, servicing and other car-related expenses such as my annual diesel spend and played around with the Google Spreadsheet graphing toys to produce the following:

As we can see the Total Cost of Ownership goes down year on year from the point of purchase to about 3 years in, and then climbs rapidly. In 2003 (year of purchase) it cost me £1,771.71 excluding the down payments. In 2004 that dropped to £1,597, and in 2005 it dropped again slightly to £1,587.89. 2006 saw my servicing costs rocketing courtesy of crash #1, but lowering insurance premiums saw the TCO continue to drop slightly to its lowest point of £1,461.60.

Mistake #5: From that point onwards though, it has year on year cost me more and more to own the car. I began to neglect the servicing schedule. As a couple, our financial issues began to really cause a lack of disposable cash. Non-essential spending was cut to a bare minimum and there just was not enough to service the car beyond the absolute essentials to keep it running.

2007 saw fuel prices start to get noticeably more expensive as well so despite spending less than I should have been on maintenance, TCO went up to £1,814.35. Since then, fuel prices seem to have only one long-term direction: up. At this point I had not really correlated that keeping the car serviced and driving sensibly actually reduced my fuel bill…

2008 continued much the same as 2007 but problems were building up with the car thanks to the reduced love and care it had been given over the past 2-3 years. A further crash in the icy weather stored up further problems towards the end of 2008 that could only be put off very temporarily. My marriage came to an abrupt halt, and I saw the light.

2009 consequently became very expensive for servicing. I had to have 3 years worth of remedial work done, crash damage fixed and the 100,000 mile service performed, which is a big deal in a diesel Focus (timing belt change). As a direct result of this, the 2009 servicing cost is the highest to date but does follow the general rule that “the longer you own a car, the more expensive it becomes”. You can see from 2009 my fuel cost reduces despite higher prices, as I made an effort to drive more sensibly.

Mistake #6: The cost of my insurance dropped every single year by always shopping around for the best deal, but I wasted money here as well. I had always opted to pay over 12 months rather than paying for my insurance in one go. This is all well and good for budgeting purposes, but not too good for balance purposes when you consider the typical APR for doing so is 27.9%! I have paid £320 over 5 years just for choosing to pay monthly instead of annually for my car insurance. I corrected that error of judgment in 2009 as well.

The total expenditure of owning my car from new, crashing it twice (minor damage to my own vehicle only – no insurance claims), servicing it and keeping it fed?

£32,146.28!

• Frugal Friday! 5 Easy Ways to Spend Less
• Petrol Hedging - Update
• Dig Yourself Out of Debt: Avalanches and Snowflakes
• Credit Card Analysis: From Hell to Heaven
• Frugal Friday! Batch Cooking

Just a very quick call to all British vehicle drivers – this is your last opportunity to fill up before the 2p tax increase hits on Midnight Tuesday September 1st. If you’ve got room in your tank and money in the bank then find your nearest cheapest petrol station and go fill up. Depending on how much you buy, you could save a few pounds in one go. (source)

• The Long Term Cost
• Dig Yourself Out of Debt: Know What You Owe
• Notice of Disassociation
• My Financial Meltdown: Part 3
• 10 Economic Predictions for 2010

The RAC has issued a warning to motorists, and I’m not entirely shocked. Sources are reporting that it is expected the price of petrol will rise to £1.20 or more per litre by Christmas. This is not only due to the 2p duty increase, but also the general rising  cost of oil.

So, it’s time to update my hedge from 115.9p to 125.9p as of my next fill, with authority to myself to begin withdrawing from the fund when prices hit £1.20. You may still think “what’s the big deal?” about rising prices, like a lot of my colleagues. “It’s only a few pence” is something I hear regularly. But when you add up the cost over the year, it really does hit your bottom line.  Let me show you:

If you purchase 50 litres a week (an average tankful in an average family car), right now at 104.9p/litre you’d be spending £52.45 at the pump per visit. If this rises to 120.9p, you’d spend £60.45 instead, an £8 increase. That’s an extra £32 a month just filling the car up, which is a staggering £384 a year. Yes per litre it’s “just pennies”, but those pennies soon add up to become a huge amount of real pounds.

You can find some of my tips to reducing your cost of motoring here but the real saving comes from simply using the car less. Walk more, and group your trips to make less journies in total.

• My Financial Meltdown: Part 3
• 6 Mistakes That Doubled The Price of My Car
• A Guide to: Individual Savings Accounts (ISA)
• My Financial Meltdown: Part 2
• Cash ISA Allowance Increased for Over 50's

If you haven’t started hedging yet, now really is the time to start. Even if you only manage to hedge one tank-full, you’ll be relatively better off than if you don’t. Here’s why:

From next Tuesday (September 1st) the government’s 2p/litre rise in fuel duty announced in the last budget comes into force. Analysts are saying fuel prices will rise far beyond that initial rise due to the renewed increases in the price of oil, partly thanks to world economies picking up again as the recession eases worldwide.

Get Hedging – If you haven’t read my ‘Part 1′ on doing it, now is the time to do so.

Give Some Love – Your vehicle is a complex piece of machinery that works at its best when well cared for. Clean out or change that air filter, give it an oil change, or drop it in a little early for that annual service. A well-serviced vehicle can improve your MPG by up to 15%.

Clear the Crap – Is your vehicle used like a secondary storage cupboard? Do you have a boot filled with ’stuff’? Every time you accelerate your car down the road, you’re using fuel unnecessarily by having to accelerate that ’stuff’ as well as you and the vehicle itself. Take 5 minutes today and assess what is in your car. Do you need it? If the answer is no, take it out.

Inflation is Good – When it comes to your tyres, anyway. Dig out the owners manual for your vehicle and find out what tyre pressures you should have, then check them. If you don’t have any method of doing this at home, next time you’re passing a Shell petrol station, dive in. They offer free Water & Air at every garage. If you do a lot of high milage high speed driving, consider pumping 1 PSI above the recommended level for a little bit more of an efficiency edge. Check them monthly to keep your edge.

Kill Your Speed – Speeding might hurt your pocket in obvious ways, i.e. 3 points on your license and a £60 fine in your wallet. But it hurts in less obvious ways as well. If you get caught, you lose time. An average traffic stop consumes around 30 minutes. Your insurance premium may well go up if you get points on your license, which will keep costing you for up to 4 years. But going faster also consumes more fuel as well; Slowing down and keeping to the limit will keep the police off your tail, and more miles traveled between tanks.

Drive Smoothly – Harsh acceleration drinks fuel. Harsh braking eats brakes. Cut your maintenance costs and fueling costs by anticipating further ahead than you might be accustomed to by training yourself to look to the horizon. Anticipating events that appear to be brewing ahead (traffic lights, queues, junctions etc) and laying off the accelerator 20 seconds earlier will reduce your speed, and cut the amount of petrol you burn. As an added benefit, your passengers will enjoy being in the car with you as they no longer feel like they’re in an Exocet missile.

Idle Waste – It happens, and yes it is annoying, but it doesn’t have to cost your wallet as well as your timepiece. The gates come down at the level crossing just as you approach. Kill your engine: chances are you’re going to be there for at least 5 minutes. In a modern engine, 1 minute of idling is the same as driving 1km. Save yourself 5km’s of road driving, and switch off while you wait. You’ll also help cut emissions and noise pollution at the same time.

Find Cheap Fuel – A little forward planning goes a long way. Don’t wait until your car is complaining you’ve got less than 2 minutes to find it some fuel or it’ll dump you on the side of the motorway. While I advocate only buying half a tank at a time (remember – extra weight costs money to shift, and fuel is heavy!), I recommend doing your homework first before pulling in to any random garage. Today, the prices range from 110.9 in my area, to 100.9 for a litre of diesel! That’s a whole 10p per litre difference. If you’re buying 50 litres, that’s a whopping £5 difference! Sign up at PetrolPrices.com and you can see what stations near you are charging right now. A few minutes work here will save you potentially hundreds of pounds over the course of a year with minimal effort.

• Dig Yourself Out of Debt: Psychology 101
• Savings Roundup - September 2009
• 6 Mistakes That Doubled The Price of My Car
• Last Chance to Fill Up!
• Giving to Charity