As new car sales plunge, car clubs are being touted as the ideal way to save money on running a car. Their cars are cheap, hassle-free and, because a single one can meet the needs of many drivers, kinder to the environment say fans. But are they always the best option?
In return for an annual membership fee and an hourly rental cost, car clubs claim to give you access to a car near your home which you can use whenever you like for as long as you like. But without the hassle or cost of maintaining a car yourself. Car keys are kept in the cars and your membership card will unlock the one you book, so you don’t even have to worry about losing them. And the benefits of a ‘pay as you go’ car service are certainly proving appealing – membership at City Car Club rose 93% last year, while its rival Streetcar‘s membership doubled to over 50,000 in 2008.
But think carefully before you sign up. If you only use a car occasionally for short local journeys, then a car club might be for you. Car clubs usually charge an annual fee of around £50 and then an hourly rate starting from £4 on average. You get the first few miles of petrol free, but after that you will have to pay extra – 23p a mile with Streetcar after the initial 30 miles.
So if you use a car once a week for three hours and don’t travel more than 30 miles, a car would cost you £675.70 a year with Streetcar. Compare that with the AA’s estimate that a new car worth up to £10,000 costs £2,333 to run a year and you are looking at a big saving. But if you only need to do one trip a week there are even cheaper options available.
Car clubs: borrowing or hiring makes sense for short journeys
If you know someone who has a car, ask if you can borrow it. Norwich Union offers short-term car insurance lasting from one to 28 days, which costs around £10.50 a day. Even with petrol costs, this is a lot cheaper than the car club if you only need a car occasionally. For example, whenever I visit my parents I take the train, then borrow my mum’s car for a day to visit other relatives. It’s much cheaper than hiring a car for the trip or taking a club car, even when you factor in the odd thank you gift.
Another option is to rent a car, if you need one for longer than a few hours or for a long journey. If you booked a car for a day from Streetcar and travelled 100 miles it would cost £65.60. Whereas you could hire a car for a Saturday at short notice from Budget for £31.61. Even with the cost of petrol added in (around £16 according to the AA) this is a much cheaper option.
As for people who need a car more frequently, car club costs quickly start adding up. If you use a car twice a week for a few hours and short journeys and need it for ten full days a year travelling 100 miles each time, Streetcar would cost £1,937.90. That still saves you £804 compared to owning a brand new one (based on the cost of running a car of a similar value for a year, plus petrol according to the AA. However, factor in the much lower depreciation on a second hand car – new cars lose around half their value in the first three years alone – and owning a car actually becomes the cheaper bet if you can cope with the maintenance hassles that might come with it.
Car clubs: cars are not all about cost
Numbers aside, the sheer convenience and pleasure of owning a car is not to be underestimated. After all, if a decision to travel was just about money, then everyone who could would take public transport. Unless you live in relatively central parts of a big city such as London, there may not be a car club car ‘just around the corner’ leaving you to either collect it and drive it home, or lug all your bags/children to the car each time you want to use it.
Plus, if you have small children, you will have to provide and fit your own car seats each time you use the car. And children will have to be on their best behaviour or you’ll have to add in time to clean up the car into your booking period – there are fines for leaving cars dirty.
Car clubs: the car you booked may not even be there
Another headache is whether you’ll be able to get the car at the time you want it. The car clubs are adding more and more cars to their fleets so there is more booking availability, but that doesn’t guarantee the person who had the car before you will return it on time. After all, sticking to a short time slot, with the heavy traffic in cities, isn’t always easy. Streetcar gives compensation (£20-£40) if a car is returned late and will try to find you an alternative car if the one you booked isn’t there. City Car Club will also try to find another car or arrange alternative travel for you. All fine, but not much consolation if you have children or bags with you or need to be somewhere by a certain time.
If you live outside of a major city then a car club isn’t an option for you as they are only available in major cities. But given that the savings are not always that impressive anyway I’d consider the alternatives. If you drive regularly buy a reliable second-hand car. If you only need a car occasionally, rent or borrow one
• This article is taken from our weekly MoneyWeek Saver email.
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• Merryn Somerset Webb is away