Frugal Motoring – Should I buy a Petrol?

In Frugal Motoring I discuss how to cheaply purchase cars, the pros and cons for various purchasing methods (straight up cash, loan, PCP, lease), diesel vs petrol vs hybrid vs electric, ongoing political/ government motoring related machinations and how to keep your car running. Here we’ll look at the pros and cons of Petrol cars.

The efficiency question

Up until Diesel-gate and the associated NOx emissions concerns, diesels were considered the environmentally-friendly option, the motoring posterboy for efficiency. As I’ve previously discussed, this was highly politically motivated. In artificial testing conditions used for published measurements diesel engines get better MPG, but petrols were never that far behind, and they’ve closed the gap. The ’91 Honda Civic VTEC-E would see 59mpg (1). The lean-burn 4A/7A-FE 1.8 petrol engines in turn of the century Toyota’s, favorite of mini-cabbers, would realistically see 45mpg in daily use, and up to 60 on a run (2). And then turbos became a thing. Mmmm… boost.

 

Turbos not only increase power, but increase efficiency by increasing the stoichiometric ratio (the ratio of fuel/ air) so there is more oxygen available for complete combustion. Manufacturers moved away from 2+ litre engines, towards 1-1.8 litre forced induction (turbo-d and supercharged) engines in larger cars, and even dinkier 0.5-1.5 litre engines in small cars. With improved engine design and compound induction systems these engines produced the same power (bhp) as the older, bigger, dirtier engines (though commonly less torque). Manufacturers have also lopped off chambers and used harmonic balancers to return to the heady thrills of the 3-cylinder thrum. Fiat have even gone back to a 2-cylinder screamer (3). Marvellous. The most efficient petrol cars at the moment are 1l superminis, offering up to 80mpg (4).

There have been issues with this progression. As mentioned these small petrols lack torque, and as such probably aren’t as fuel efficient in the real-world as on a bench test. Revving required for that 1.2 engine to lug your six-up Peugeot 3008 soft-roader off to Asda for the weekly shop (5). These engines are more complex, lighter weight and with tighter tolerances. To keep the engine in the peak powerband manufacturers are using six, seven or eight-ratio semi-automatic gearboxes. These are necessarily more complex. There are concerns about durability of both engines and gearboxes (6).

A couple of conservative manufacturers (Mazda, Toyota) haven’t taken the turbo route. The lean-burn concept, where over-stoichiometric fuel/air ratios are used to ensure maximum combustion, has continued to be developed. Mazda (in the SkyActiv-G) pushing compression ratios up into the diesel cycle range to produce highly efficient engines (7). NOx is also kept to a minimum due to lower combustion temperatures (they say).

Ultimately, diesels remain more efficient than petrols. Diesel is about 15% more energy dense by volume than petrol, and can be up to 40% more efficient in application (8). Using a worked example; a Ford Focus the 1.5TDCi runs 74.3mpg, whilst the 1.0 petrol will see 60.1mpg (9). At current average fuel prices of 128.9p for petrol and 137.1p for diesel over an average 10,000 miles a diesel driver would spend £838.86/year on fuel (10). The petrol driver will spend £975.03. As always, do your own sums.

Headline figures

We’ve seen that you’ll save money filling up, but what about purchase cost, tax and servicing. Diesel cars are generally more expensive new than their petrol counterpart. The worked example table below taken from a Which? article demonstrates the maths (11):

Petrol

You’re paying more up front, and in some cases that front-loaded cost is not recouped over a five-year period. This is less of an issue for the frugal folks buying a car and running it for 20 years, or avoiding PCP, sticking to a bangernomics budget. Some of your initial outlay is also recouped at sale. Residuals for diesels have historically been higher, usually at least £500-£2500 more depending on the age of the vehicle (9, 12). This, in my opinion, is due to the increased fuel economy (offering a greater % saving at lower price points) and a perception of greater reliability (earned through very good historic reliability in the old direct injection, non common rail lumps). Modern common rail diesels fitted with dual-mass flywheels (DMFs), EGR valves and all manner of other devices may continue with the former, but will struggle with the latter. Watch out for rattly DMFs and leaky injectors. I wanted but didn’t buy a diesel version of my last car because it was £3000 for the diesel, and £2000 for the petrol. Once you get into super-bangernomics <£500 territory I would argue you will struggle to find a diesel that isn’t on it’s last legs.

Tax changes

One of the reasons I believe residuals are going to equalise is incoming tax changes. As of April 2018 new tax changes came into effect, complication the law, and penalising diesel ownership. The full implications of these tax changes are detailed elsewhere, but essentially VED (car tax) continues to be calculated based on g/CO2/km, however the cost has gone up for each class, and by more for diesels (13, 14). The tax changes also cut the tax break on hybrids. Much was made of what is essentially a tax on diesels being successful. The end result is fewer people are buying diesels, and more are opting for small petrol cars (15, 16, 17).  Despite new car sales falling, registrations of new petrol cars is increasing. Petrols are more attractive at the moment.

Diesel cars continued to anchor the sector's performance, with year-on-year demand down by more than a fifth

The bell tolls

They’re all getting banned anyway (18).

Current targets are for no new diesel or petrol car sales by 2040. MPs are pushing for it to be 2032. You can bet the classic car community will push for there still to be a place on the UK’s roads for fuel-burners, but I’m sure the UK Gov will find a way to tax the daylights out of it and make it a pursuit for the wealthy.

TL:DR

The petrol cars available today are a far cry from 10 years ago. Tax-changes and engine developments have made them as attractive a financial proposition as diesels. Efficiency will depend on your type of driving; if you’re a red-light racer or a relaxed pootler; if you do more stop-start town driving (where little petrols come into their own) or long runs (better for bigger sloggers).

Broadly, petrols are better for:

  • smaller lighter cars
  • shorter journeys
  • stop-start city traffic
  • anyone doing <10,000 miles/year

As usual do your own sums, but in the wait for cheap electric cars a petrol is worth considering.

References:

  1. https://en.wikipedia.org/wiki/Lean-burn
  2. https://www.motoringresearch.com/car-reviews/retro-road-test/toyota-carina-e-retro-road-test/
  3. https://en.wikipedia.org/wiki/Fiat_TwinAir_engine
  4. https://www.nextgreencar.com/most-economical-petrol-cars/
  5. https://www.driving.co.uk/car-clinic/top-10-petrol-cars-to-buy-instead-of-a-diesel/
  6. https://www.designnews.com/electronics-test/are-small-displacement-turbo-engines-reliable-long-term/210258542158513
  7. https://www.topgear.com/car-news/future-tech/can-mazda-save-petrol-engine
  8. https://www.acea.be/news/article/differences-between-diesel-and-petrol
  9. https://www.rac.co.uk/drive/advice/buying-and-selling-guides/petrol-or-diesel/
  10. https://www.racfoundation.org/data/uk-pump-prices-over-time
  11. https://www.which.co.uk/reviews/new-and-used-cars/article/petrol-vs-diesel-cars-which-is-better
  12. https://www.autoexpress.co.uk/car-news/95329/petrol-or-diesel-which-should-you-pick-for-your-next-car
  13. https://www.whatcar.com/advice/buying/car-tax-changes-in-2018-%E2%80%93-what-do-i-need-to-know/n1153
  14. https://www.autoexpress.co.uk/car-news/102928/new-diesel-car-tax-rules-april-2018-changes-explained
  15. https://www.motortrader.com/motor-trader-news/automotive-news/april-tax-increases-turn-motorists-off-buying-diesel-cars-12-11-2018
  16. https://www.bbc.co.uk/news/business-43655703
  17. https://www.thisismoney.co.uk/money/cars/article-6353925/New-car-market-falls-2-9.html
  18. https://bit.ly/2Kshfa3

 

 

 

 

 

 

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The Full English Accompaniment – Diversification is sustainability stupid

Dear Readers,

A bit of a late Full English Accompaniment this week, as I’m working so typing away at posts in between seeing patients. MrsShrink and I have been for a holiday, a break from IT and a pause for reflection. I’ve finally been reading Tim Hale’s Smarter Investing (1), and this has prompted me to make some changes to my blogging process. One of the key points in the early chapters of the book is to turn down the volume; that most media reports, opinions and news about the market are confusing senseless noise and to make smarter investments you need to tune out the static. In a conscious effort to decrease my own contribution to that noise I’m going to reduce the quantity of my posts, and aim to  maintain a high quality. This means that the Full English will become an as-and-when type affair, for thoughts that aren’t significant enough to warrant a full Musing on… post. I’ll still aggregate other posts I’m reading each time, and other categories will continue at their current frequency. For now…

What’s piqued my interest this week?

Part of our recent holiday was spent in an AirBnB on a rural farm. Coming from a country background I was to be found discussing the owners business strategy and farming approach. Their (relatively) small acreage struggled under intensive farming methods to produce a profitable crop; the soil would need continuous improvement for arable, the setting meant high winds were common with minimal cover and they lacked the scale required to make cattle or similar sustainable. To make ends meet they had diversified. The farm now had a small sheep herd, a deer herd and a small number of hardy cattle. The owners had also converted farm buildings to cottages and flats for AirBnB, and worked a part time job for the local government. For many small farmers this is the only way to survive. Big farms in areas of poor fertility also struggle to find profits, as this fantastic comment piece in the Guardian outlines (2). As consumers, diversification of our food intake is healthier too. In agriculture, just as in finance, diversification brings sustainable profits.
Have a great week,

 

The Shrink

 

Side OrdersOther News

Opinion/ blogs:

What I’m reading:

Smarter Investing by Tim Hale – essential reading

Religio Medici by Sir Thomas Browne – the theological and psychological reflections of a C17th doctor. This is turning out to be real heavy-going.

Enchiridion by Epictetus – Bedside reading for a bad day

 

References:

  1. https://www.amazon.co.uk/Smarter-Investing-Simpler-Decisions-Financial/dp/0273785370/
  2. https://www.theguardian.com/commentisfree/2018/aug/25/veganism-intensively-farmed-meat-dairy-soya-maize
  3. https://www.telegraph.co.uk/business/2018/08/18/interest-rise-leaves-first-time-buyers-facing-extra-mortgage/
  4. https://www.theguardian.com/money/2018/aug/20/no-deal-brexit-personal-finance-what-does-it-mean
  5. https://www.newsweek.com/donald-trump-says-windmills-are-bird-killers-he-tries-revive-coal-industry-1079910
  6. https://www.bbc.co.uk/news/business-45244761
  7. https://www.theguardian.com/environment/2018/aug/23/europe-to-ban-halogen-lightbulbs
  8. https://www.independent.co.uk/environment/scotland-floating-turbine-tidal-power-record-sr2000-scotrenewables-ofgem-a8503221.html
  9. https://www.theguardian.com/society/2018/aug/19/governments-care-isa-plan-dismissed-by-sarah-wollaston-tory-health-committee-chair
  10. https://www.bbc.co.uk/news/health-45354846
  11. https://www.fool.co.uk/investing/2018/08/20/a-ftse-100-dividend-stock-that-should-pay-you-for-the-rest-of-your-life/
  12. https://www.physicianonfire.com/early-retirement-doesnt-suck/
  13. http://awealthofcommonsense.com/2018/08/a-short-history-of-emerging-market-corrections-bear-markets/
  14. http://awealthofcommonsense.com/2018/08/buying-emerging-markets-after-a-disaster/
  15. http://www.thisismoney.co.uk/money/investing/article-6078749/Top-income-investments-trusts-revealed-British-American-tops-table.html
  16. http://www.thisismoney.co.uk/news/article-6092439/Half-Britains-bank-branches-closed-five-years.html
  17. https://theescapeartist.me/2015/03/02/the-aggregation-of-marginal-gains/
  18. https://theescapeartist.me/2018/08/28/to-defeat-your-enemy-you-must-first-know-your-enemy-part-2/
  19. https://www.ukvalueinvestor.com/2018/08/ted-baker-dividend-growth-stock.html/
  20. https://www.ukvalueinvestor.com/2018/08/sage-dividend-growth-stock.html/
  21. https://deliberatelivinguk.wordpress.com/2018/08/29/why-you-should-calculate-imputed-rent/
  22. https://youngfiguy.com/when-cash-was-king/
  23. https://youngfiguy.com/insolvency-and-carillion/
  24. https://youngfiguy.com/was-carillion-like-a-ponzi-scheme/
  25. http://quietlysaving.co.uk/2018/09/02/august-2018-plus-other-updates/
  26. http://monevator.com/weekend-reading-automatic-for-the-people/
  27. https://firevlondon.com/2018/08/20/overdiversity/
  28. https://firevlondon.com/2018/08/13/recalibrating-my-portfolio/