Drive Down Your Car Costs!

Wonder how the headline grabbing road tax rises will affect you and your car? Here's the full lowdown, plus some handy tips on how to cut your car costs...

Cars, oil prices and fuel duty have been giving Gordon Brown a rather big headache lately.

As disgruntled lorry drivers blocked London roads this week in protest against this autumn's fuel duty rises, Gordon Brown and his Darling have once again hit the headlines -- this time, over road tax.

Following the government's recent U-turn on the 10p tax band, backbench rebels are now campaigning for a reverse on the rise in vehicle excise duty (VED) set to come into effect next year, claiming some of the poorest families will be hit hardest by the rises.

So what exactly is the fuss all about? And more importantly, what can you do to tackle it?

VED Explained

Under the current system, cars are divided into seven road tax bands, ranging from £0 for the lowest emitting cars to £400 for the most gas guzzling. From next April, car groups will be split into 13 new bands, with the highest road tax band increased to £440.

In addition, from 2010, the worst gas guzzlers, with a CO2 emission of over 255g/km will see their road tax leap to £950 in the first year.

This is because of government plans to launch a `showroom' tax, payable in the first year to penalise the worse offending cars.

The good news is that if your car emits less than 150g/km of CO2, from next year your VED will either come down or stay flat.

But while this will be welcomed by the smaller car owners among us, as well as hitting the worse offending cars, the changes will hit the pockets of a lot more people, including family-orientated cars such as the Vauxhall Zafira 2.0i, the Ford Galaxy 2.3i Zetec and the Vauxhall Vectra 2.8i V6 turbo, which will all see their road tax nearly double from £210 to £415.

In this way, rises for family cars such as those mentioned above will in some cases outstrip those for Porsches and other gas guzzlers, which will only rise by £40.

A Retrospective Reprimand

Personally, I think that higher road tax for the worst offending cars is a good idea, because let's face it, if you buy a real gas guzzler, you can probably afford to pay for it. However, what I find slightly unfair is the fact that the tax is being introduced for retrospective purchases.

This means even if you purchased your car before the measures are introduced, the new car tax rules will still apply to you, as all models purchased after March 2001 fall into this new VED trap.

This seems harsh, as even if, like millions of unsuspecting motorists, you bought what you thought was a rather modest model back in, say 2003, you would now be hit with these changes.

To put it into perspective, here's a quick idea of how the changes might affect you. Looking at the top five cars according to The Society of Motor Manufacturers and Traders (SMMT), here's a comparison of what you'd pay now compared to next year:

As you can see, in most cases, the rises are little above inflation, and in one case, the VED will actually come down. However, the really big changes can be seen when the emissions go above 150g/km.

Because of its higher emissions, the Golf will see its VED jumpstart from £145 to £175, with charges leapfrogging even further for cars with higher emissions.

So, apart from the drastic, and for many people, impractical all-in-one solution of just giving up your car, here's a few ideas you may want to consider if you're looking to trade-in or buy a new car in the coming year:

Go Diesel

If the recent diesel prices haven't already sent you into cardiac arrest, opting for a diesel powered car next time you're in the showroom may save you money in the long haul.

No longer the noisy beasts of yesteryear, diesel cars have lower emissions than their petrol counterparts, and may soon provide the solution to rising road tax prices, with some diesel cars paying no VED at all.

Candidates include Volkswagen Polo BlueMotion and the Seat Ibiza Ecomotive, which both have a comparatively tiny emission of just 99g/km, and will remain VED exempt next year. If you live in London, both cars will also be exempt from the congestion charge when the rules change in October.

If you require a bigger car, the Volkswagen Golf is the latest in the VW range to get the efficient `Bluemotion' treatment. The car costs £520 more than the standard 1.9TDI model, but saves £85 in road tax (£80 from next year) and £140 when compared to the 1.4S petrol model. It too will be exempt from the London congestion charge this October.

A Hybrid Solution

If you're willing to splash out a little bit more, you could always go hybrid.

Perhaps only viable in big cities where you can maximise the benefits of having one, hybrid cars claim to give you more miles per gallon than its petrol counterparts.

And, to push the benefits of going `green', when the new rules come into place, alternative fuel cars will receive a discount of £20 (bands A to I) or £15 (bands J to M) in 2009-10, and £10 for all bands in 2010-11.

Alternatively, with sky-high fuel prices, drivers are turning to more alternative fuel methods to help cut the cost of their petrol bill. For example, Liquid Petroleum Gas (LPG) or Autogas is another 'green' alternative to the traditional petrol/diesel engine.

Fuel is typically about half the price of standard petrol, and you can buy either a new car which uses this type of fuel, or convert your existing car for about a couple of grand. LPG refuelling spots are becoming more common too, though in some places they are still hard to come by.

Used and Unabused

If you're going for a used car, you may want to bear in mind that for cars registered before 1^st March 2001, old road tax rules apply.

This means you'd pay:

So, if you want to dodge the new rises, you may want to consider buying a car built before the VED cut-off point in March 2001.

For example, one of the most popular second hand cars, the Ford Escort stopped making new models in 2000, so any used Escorts would fall under the old rules.

An X or Y reg car may not appeal to everyone, but could be a viable alternative to those wishing to avoid the VED charges, as the maximum you'd pay in car tax is £185.

So, whether Darling stands his ground or not, in the mean time, car costs are set to increase even further.

Regardless of whether you go green, or bear the brunt of the charges, I doubt Darling's plans will overhaul the way we drive. However, it should give us some food for thought next time we're in the showroom...

Drive A Brand New Car For Less / Ditch Your Car and Save £2042