Monday 24 November 2014

Don't get caught behind the wheel of a money pit

Your Money

Published 20/07/2014 | 02:30

Illustration: Tom Halliday.
Illustration: Tom Halliday.
Living on a parent's farm won't get you off the hook on property tax

It's no secret that more of us are splashing out on cars these days. The number of new cars sold so far this year has already surpassed the entire number sold in 2013 - although we are still a far cry from the spending of the boom years.

As you could easily pay €15,000 for a brand new small car, or €30,000 for a family car, new cars don't come cheap. That's why it is important to buy a car which won't burn a hole in your pocket in the long run.

It is vital to buy a car which will hold its value. Many of us trade in our cars when we're buying another one - so you'll probably be doing the same with any car you buy today in a few years' time. You will get a good price for a car that holds its value well when the time comes to trade it in - which should save you a few bob if you are upgrading to a new one.

So which cars hold their value well? The Sunday Independent asked Micksgarage.com, one of the largest online retailers of car parts in Europe, for its thoughts. Micksgarage.com was set up in 2003 by Michael Crean, who previously worked at Wurth Ireland.

The Volkswagen Golf and Passat, the Toyota Avensis, Honda CR-V, Fiat 500 and Audi A3 and A4 all hold their value well, according to spokesman John Smyth. "These cars are very reliable and are reasonably cheap to service, tax and insure," says Smyth. "So they are very popular with all types of drivers."

Another industry insider, who did not wish to named, cited the Peugeot 3008, describing it as a "scarce car, which holds its value well".

Cars that score high on reliability, build quality and safety will usually hold their value. Many diesel cars are also doing well - to the detriment of their petrol counterparts.

"A huge element of depreciation is around the demand for the car," says Smyth. "Generally any petrol car with an engine size above two litres is going to depreciate quickly as they are expensive to run and so demand for them is low. A good example is a 2008 BMW 530i (petrol version). This will depreciate a lot quicker than a 2008 BMW 530d (diesel version). The diesel model became more popular when the new 2008 tax laws kicked in. In effect, they are the same car to an everyday driver - same interior, same features and so on. However, when it comes down to tax and running costs, they're different cars - and so is their popularity."

It became cheaper to tax many diesel cars in July 2008 because since then, the amount of road tax paid on a new car depends on carbon dioxide emissions. Diesel engines usually produce less carbon dioxide than petrol ones - so the road tax often works out cheaper for diesel models.

Remember, the popularity of diesel cars might not last, particularly if diesel becomes more expensive than petrol or if there are any changes to the way cars are taxed.

Some other cars which could lose their value quickly include the Nissan Murano, BMW X5, Mercedes-Benz CLK, Land Rover, Range Rover and the Jaguar XF, according to Smyth.

"Basically, all of these cars have one thing in common - the huge size of the engine," says Smyth. "This means they are expensive to run and to tax and therefore the demand for them is low."

There is no "exact science" to determine whether or not a particular car will hold its value, warns Aidan Timmons, co-editor of Motor Trade Publishers, which has been valuing used cars for more than 40 years.

"One particular model of car might hold its value best for one year - but the value of another model might be better after two or three years," says Timmons. "Some cars will only peak in value [when compared with others] late in their years. Whether or not a car will hold its value comes down to many things, including the exact model, the age of the car, the price of the car when it was brand new, the time of the year that the car is being valued - and whether or not a new model has been released. It's a moveable feast."

Negotiate a discount with your car dealer if you're interested in a car which is known to lose its value quickly. This can help to offset the impact of depreciation. You usually have a better chance of getting a discount if you call into a car dealer at the end of the month or at the end of every quarter (such as late December or late March for example). Dealers often get bonuses from the smaller manufacturers for selling a certain amount of cars each month. So if you walk into a dealer at the end of a month and he has almost met his sales target, he is more likely to offer you a discount so that he can hit his target and get his bonus.

Depreciation is not the only thing which can burn a hole in your pocket when you buy a car. So too will running costs - that is, tax, insurance, fuel and repairs. These costs should be borne in mind whether you're buying a new or a second-hand car.

You'll pay €2,350 a year in tax if you buy a car which was registered after July 2008 and emits more than 225g of carbon dioxide per kilometre. Some 2009-reg cars which emit more than 225g of carbon dioxide per kilometre include the 7-seater Chrysler Voyager SE 2.4 (petrol), the BMW 5 Series Gran Turismo 550i Executive GT, the Audi S4 Avant 3.0TFSI 333HP Quattro (petrol), Grand Cherokee Jeeps and Range Rovers.

Buy a high-performance or high-value car and you'll typically pay more in car insurance. Buy a car that's prone to breakdowns, and you'll pay a fortune in repairs. Buy a car with a two-litre engine or more and you'll pay through the nose in fuel. The amount of fuel burned by a car should be high on your check list if you commute or drive a lot. The Skoda Octavia is one of the most fuel-efficient and reliable large cars, according to a recent survey by the British consumer magazine, Which?. The Peugeot 407, on the other hand, was rated as the worst-value large car in the same survey. Owners complained that it was peppered with electrical faults which can quickly lead to expensive bills.

When checking how much fuel a particular car burns, do so with your driving pattern in mind. The diesel Volkswagen Polo Bluemotion, for example, is one of the most fuel-efficient small cars - if you spend most of your time driving on the motorway, according to Which? - while the Toyota Yaris Hybrid is one of the most fuel-efficient small cars if driving around town.

Remember, you could save yourself thousands a year by choosing the right car - so do your sums before driving off.

Steer clear of trouble when buying used cars

Many of us still can't afford to buy a new car - and so must settle for a second-hand model.

However it can be easy to get ripped off when buying a used car - particularly if you're buying privately.

Here are some tips which should steer you clear of trouble.

"Inspect the car during the day and in dry conditions," says John Smyth of Micksgarage.com. "Rain can often make a car look newer and can help hide scratches and imperfections."

Check for any evidence of repainting, such as overspray on window rubbers or any inconsistency in paintwork, advises AA Ireland. These are warning signs that the car has been touched up to conceal damage.

Check the electrics. "Turn on the ignition, make sure the anti-lock brake system (ABS) and airbag lights come on, start the car and make sure the lights go out," says Mr Smyth. "Check every single button, switch and lever in the car and make sure everything works. If any engine light comes on during your test drive, beware."

Test drive the car on different road surfaces. "See if you can hear any knocks or squeaks from the suspension," says Mr Smyth. "Turn the steering to full lock in both directions and drive forwards - loud clunks or clicking indicate worn constant velocity (CV) joints." CV joints are the joints between the drive shafts and the wheels which transmit power and make the car move.

Dip the oil. "If there is any white milky goo on the dip stick, do not buy the car as it's likely the coolant and oil are mixing and the head gasket is gone - meaning an expensive repair," says Mr Smyth.

Read the car's paperwork carefully. Make sure the chassis, engine numbers and reg plate match the ones on the car. Check the number of owners.

Finally, make sure the keys provided work in all of the locks and that there is a spare set. "Try all keys in the ignition and make sure they start the engine," said a spokeswoman for the AA. "Occasionally a 'cut' key is not a 'transponder key' so it won't work in the ignition."

Buy a home in Cabinteely or Cork for cheap heating bills

Househunters who want to save money on heating bills should buy a home in Cabinteely or Cork.

Almost 40pc of homes in Cabinteely, Dublin 18, and one in five homes in Cork have a Building Energy Rating (BER) of A or B, according to the latest statistics from the Central Statistics Office (CSO).

This makes these homes the most energy efficient in the country.

A BER cert shows how energy efficient your home is.

The higher your BER rating, the cheaper it will be to heat your home. The highest rating you can get is an A; the lowest, a G.

Homes built between 2010 and 2014 have a better chance of having cheaper energy bills - almost one in four of these houses have a BER rating of A.

However, buy a home built before 1978 and you're heating bills are likely to be sky-high - one in three properties built before then got a BER rating of F or G.

Dublin house hunters will have a greater chance of paying through the nose in energy bills if they buy homes in areas like Rathmines, Smithfield and Walkinstown. About 31pc of homes in Dublin 7, 28pc of properties in Dublin 12 and 27pc of homes in Dublin 6 had either the worst or second-worst BER rating.

Those in the market for an apartment, meanwhile, will save on energy bills if they buy a mid-floor apartment. Almost one-third of mid-floor apartments have a BER rating of A or B.

The CSO also found that the most energy-efficient homes use wood pellets and chips as fuel, while the least energy-efficient use peat.

Granny flats must pay property tax

Granny flats and houses built on parents' farms are some of the properties which can be difficult to value when it comes to paying the property tax, according to a new book by Chartered Accountants Ireland. The book, Surviving Local Property Tax, also says that homeowners can find it hard to value properties in negative equity and houses modified for disabled people.

This book is worth checking out if you are concerned that you may not have paid enough property tax. For example, if you own a house on your parents' farm and the only way to access that house is through the farmyard, does this lower the market value of your home - and the amount of property tax you should pay as a result? The answer, according to this book, is no. "The fact that a house is only accessible through a farmyard owned by an individual's parents is ignored," states the book.

Meanwhile, if you live in a granny flat attached to a property owned by your child, you must pay the property tax for the granny flat, the book adds.

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