How to choose between petrol and diesel when buying a new car

The diesel car is becoming a firm favourite with British drivers.

Ten years ago about one in five new cars bought was a diesel. Last month the figure was 53.9%.

Why the big shift? With the price of fuel seemingly rising by the day, many of us believe that filling up on diesel instead of unleaded petrol will save us money.

But will it? Here’s what to consider if you’re in the market for a new car.

Why diesel cars are more expensive to buy

If you are looking to buy a new car, the diesel version will usually cost you more than the petrol one. There are a few reasons behind this, say motor manufacturers.

The main one is that the engines have to be stronger, because diesel explodes more violently than petrol in the engine cylinders. This makes the engines heavier, so things like engine mounts and suspension need to be stronger and more expensive too.

Throw in things like turbochargers and emission control systems, and the difference between petrol and diesel models can easily run to over £1,000 for most cars.

So what about the fuel? Well, it’s more expensive too. Once upon a time, diesel was actually cheaper than petrol (as you can see on the chart below). Today it’s about 7p per litre more expensive than petrol.

I’ll admit, I struggle to see why the gap is so big. Diesel needs less refining than petrol and uses less crude oil, although the move to low sulphur diesel fuels has added some complexity and cost to the refining process.

Fuel duty cannot explain the difference either. Both diesel and petrol are subject to the same duty of 57.95p per litre. Could it be something to do with a shortage of diesel refining capacity in the UK?

Petrol and diesel prices

Whatever the case, on the upside, diesel cars do more miles per gallon, have lower road tax costs (due to lower emissions – they’re ‘greener’) and hold their value better than petrol cars.

So is our enthusiasm for diesel cars justified or misplaced? It depends…

Diesel or petrol? Here’s how to decide

I’ve taken three different types of car. A Fiat 500 (small), a VW Golf (medium) and a Ford Mondeo (large). I’ve then estimated the annual running costs for comparable petrol and diesel versions, based on buying a brand new car and holding it for three years.

There is no right way to do this. Some calculations are open to different interpretations (for example, residual values at different mileage rates). But the methodology has been applied consistently to each car.

Here’s how I’ve worked out the costs: by far the biggest cost in running a car is depreciation – the loss in value each year. I’ve taken the list price of the car (most sensible buyers don’t pay this) and taken away its estimated value after three years (source: Whatcar.com), then divided by three to get an average annual cost. (Note depreciation is usually highest in the first year of ownership)

Vehicle Excise Duty (VED) costs are pretty straightforward (the data comes from the DVLA) although some cars have zero tax costs in the first year. Typical insurance costs have been taken from motoring websites.

Servicing costs are interesting. It has been claimed by some that diesels cost more to service. I’m not sure this is true. Having consulted my brother-in-law mechanic who has his own garage, he points out that some diesel filters are changed more frequently, but that diesel cars don’t have spark plugs which cost more to replace. It is therefore assumed that there is no difference in servicing costs.

Finally, we come to fuel costs. I’ve taken UK average petrol and diesel prices from petrolprices.com. The prices per litres are then multiplied by 4.545 to get the cost per gallon.

A key area of controversy is fuel efficiency – how many miles do you get for each gallon of fuel or mpg? Car manufacturers give official mpg figures but most of these bear no resemblance to reality, because the figures are based on controlled rather than actual driving conditions.

While trawling the internet, I found a site (www.honestjohn.co.uk/realmpg/) which compiles data on what mpg levels drivers actually achieve for each make of car. I have used these estimates instead.

So let’s have a look at the results.

Fiat 500: Petrol is better than diesel

Fiat 500 petrol vs diesel Diesel Petrol
Engine size 1.3 1.2
Cost £13,760 £11,360
% value retained after 3 yrs 41% 43%
Value after three years £5,641.60 £4,884.80
Annual depreciation first 3 yrs £2,706 £2,158
Tax band B C
VED cost per year £20 £30
Typical Insurance £501 £338
Average mpg* 59.3 49.6
Fuel price per litre 145.6 138.6
Fuel price per gallon 661.752 629.937
Mileage per year 10,000 10,000
Fuel used (gallons) 168.63 201.61
Fuel cost £1,116 £1,270
Total running costs Diesel Petrol
Depreciation £2,706 £2,158
Tax £20 £30
Insurance £501 £338
Fuel  £1,116 £1,270
Servicing £175 £175
Annual running cost £4,518 £3,971

The high initial cost of the diesel and as a result, the depreciation, means that running the 1.2 litre petrol version for 10,000 miles per year is much cheaper. It is still much cheaper at 15,000 miles per year.

VW Golf Match: Diesel is better than petrol

VW Golf petrol vs diesel Diesel Petrol
Engine size 2.0 1.4
Cost £21,105 £19,115
% value retained after 3 yrs 45% 40%
Value after 3 yrs £9,497.25 £7,646.00
Annual depreciation first 3 yrs £3,869 £3,823
Tax band D F
VED cost per year £63 £130
Typical insurance £618 £545
Average mpg* 53.7 42.7
Fuel price per litre 145.6 138.6
Fuel price per gallon 661.8 629.9
Mileage per year 10,000 10,000
Fuel Used (gallons) 186.22 234.19
Fuel cost £1,232 £1,475
Total running costs: Diesel Petrol
Depreciation £3,869 £3,823
Tax £63 £130
Insurance £618 £545
Fuel  £1,232 £1,475
Servicing £175 £175
Annual running cost £5,958 £6,148

Here I’ve compared the 2.0 TDI with the frugal 1.4 TSI. At 10,000 miles per year, the diesel costs £190 less to run than the petrol. At 15,000 miles, the diesel is £311 per year cheaper.

Ford Mondeo 2.0 Zetec: High mileage is needed to justify the diesel

Ford Mondeo petrol vs diesel Diesel Petrol
Engine size 2.0 2.0
Cost £20,895 £19,095
% value retained after 3 yrs 37% 36%
Value after 3 yrs £7,731.15 £6,874.20
Annual depreciation first 3 yrs £4,388 £4,074
Tax band E I
VED cost per year £115 £245
Typical insurance £580 £338
Average mpg* 45.1 33
Fuel price per litre 145.6 138.6
Fuel price per gallon 661.8 629.9
Mileage per year 10,000 10,000
Fuel used (gallons) 221.73 303.03
Fuel cost £1,467 £1,909
Total running costs Diesel Petrol
Depreciation £4,388 £4,074
Tax £115 £245
Insurance £580 £338
Fuel  £1,467 £1,909
Servicing £175 £175
Annual running cost £6,725 £6,741

At 10,000 miles per year there is little to choose between the petrol and diesel versions. At 15,000 miles per year, the diesel version is £236 per year cheaper.

So what does this all mean?

The difference between the petrol and the diesel prices means that the benefits of owning a diesel are not as clear-cut as they used to be. Arguably, it’s probably not something to spend a lot of time agonising about before you buy.

You need to drive a lot of miles to make big cost savings. How and where you drive (motorways or around town) also makes a big difference. Different makes and types of cars (big or small) are also important. Any further increase in the spread between petrol and diesel prices is going to make the buying decision even more marginal.

The other thing that is very clear is: don’t buy a brand new car. The depreciation rates are horrendous. A three-year-old car is going to save you a lot of money, regardless of its fuel type.

That just leaves us to workout why the price of diesel fuel is much more than petrol. Being a diesel car owner and a bit of a cynic, I can’t help feeling that something doesn’t stack up here.

24 Responses

  1. 15/03/2012, Supermarine Blues wrote

    Diesel has a far slower burn rate than petrol; hence the narrow power band.

    It’s the higher compression ratio required for spark plug-free detonation to occur, which requires the engine’s extra bottom-end strength.

    You’ve also neglected to factor in that high-pressure Diesel pumps and injectors are far more fragile than the reliable old smokers – the repair bills can be horrific. The jury’s still out on DI turbo petrol engines, which may be just as delicate.

  2. 16/03/2012, Nick wrote

    Diesel has become just as complex to produce, requiring more energy during refining to meet ‘zero sulphur’ and other current fuel specification requirements. The UK and the rest of the EU is short of diesel, partly because of the advantageous tax treatment of diesel in most EU countries, coupled with the focus on reducing tailpipe CO2 emissions. Imports are coming from Russia, Middle East and India to meet the shortfall so essentially we are competing against their demand. The financial analysis doesn’t take into account that this diesel growth is making it more difficult to meet air quality targets in some urban areas.

  3. 16/03/2012, Rob wrote

    There is another factor to consider on current diesels. The DPF or Diesel Particulate Filter. If you do a lot of short journeys this can and will clog up necessitating expensive visits to the garage. If you do mostly motorway or longer journeys at higher speed then no problem.
    Of course this device also adds yet more to the manufacturing cost.

  4. 16/03/2012, Maurice wrote

    Another reason to own diesel is that it is legal and much safer to store than petrol (2 gallons only) so when the World economy collapses and there is no fuel in the UK, “preppers” can have a safe legal hidden supply to keep them mobile.

  5. 16/03/2012, Barkingmad wrote

    What the article shows is that for most cars there is little to choose and it depends how many miles you do etc. What is missed is which do you prefer to drive – I have had many petrol cars and the last few have been diesel – the diesel are generally easier / better to drive – but again it depends on the car and style of driving etc.

    For most people / cars it’s the depreciation not the fuel you want to be most concerned with. What I don’t quite see if why should the insurance be more expensive for all the diesels in the examples above?

  6. 16/03/2012, Barkingmad wrote

    I am also cynical about the price of diesel – it was cheaper than petrol but now it’s becoming more popular (and less gallons are required for the same number of miles) it becomes more expensive.

    You can’t help but feel it has worked out well for the oil companies as otherwise their revenue / profits may have declined as more people switched to diesel. You can’t even blame the government as they get the same duty per gallon (but with diesel that’s less gallons).

  7. 16/03/2012, will wrote

    C’mon, it’s a no-brainer and always has been!
    It’s all about ripping the maximum amount of profit out of the long suffering consumer.

    Notice how the other “get the most out of the mugs”,tactic has crept into the equasion in recent years, ie = just before the budget,the fuel companies cynically hike the prices up as much as they can, so that after the budget price increase they can (temporarily) lop a couple of pence off again,to get us thinking “oh how lucky we are”.

    Yeah, we’re the mugs, and they stick it to us time,after time,after time!!!

  8. 16/03/2012, Barkingmad wrote

    I suppose one thing is the more petrol / diesel goes up – the sooner electric cars will become viable.

  9. 16/03/2012, Aldo wrote

    However, diesel is also dearer in the USA where not many cars use it yet; don’t know if there’s a shortage of refining capacity here, shouldn’t think so.

  10. 16/03/2012, Barkingmad wrote

    It’s not as if diesel is ‘new’ so can’t imagine there would be a shortage of refining capacity – would be interesting to see the profit BP make on a gallon of each…

  11. 16/03/2012, jackyoc wrote

    I was told that short journeys will shorten the life of the battery on a diesel because it needs a stronger charge than on petrol cars – so I have to do unnecessarily long runs in order to keep the battery properly charged, thus negating the saving I make both on fuel and the environment.

  12. 16/03/2012, swissteve wrote

    We live in Switzerland and had problems this winter starting our diesel here and there (at -20C). OK its not a new car and the battery is a few winters old, but we never have such a problem with our petrol car. Swiss diesel has additives to make it easier to start at such temparatures, but nevertheless there was a difference! Also in Switzerland particle filters on all new diesels ar e mandatory to prevent cancer producing P10 particles. This is a big problem around Zurich where the air tends to stagnate over the lake and produce smog/ozone. So dont come to Zurich if you want fresh air – go up to the mountains.

  13. 16/03/2012, Mr B wrote

    I think Diesel MPG figures are more sensitive to the type of driving. I’m driving quite a big diesel lump, on an 8 mile each way commute. The engine only gets warm half way in the summer and not at all in the winter. (Which might be swiss steve’s problem, i.e. short commute and big power required to start).
    Drinks fuel on the daily commute, but great on long distance…

  14. 16/03/2012, Cow wrote

    Supermarine Blues is right: common rail injectors can easily be £350 + VAT a pop and some cars have a reputation for getting through them at indecent rates. Doubtless all part of a conspiracy. Jackyoc has got it wrong – yes, diesels need more of a kick to get started, but invest £15 in a multimeter and check the battery voltage periodically – you could be in for a surprise. Anything north of 12.6 volts will be OK. If necessary, spend £30 on a battery charger which will also provide a beneficial float charge if used say once a month for a few hours. Check whether you need to disconnect the battery when using the charger and be sure to have your radio code handy before doing so.

  15. 17/03/2012, DrotarSK wrote

    It is not possible to produce only patrol or only diesel from crude oil.
    There must be some portion of diesel and patrol.
    I think there is more demand for diesel than for patrol in recent years, people choosing personal cars with diesel more than 5-10yrs ago and thus patrol is surplussed.
    Also as it’s been said today’s diesel is different than that from 5-10yrs (more expensive to produce due to more strict environmental laws).

  16. 17/03/2012, Michael wrote

    The reason for relatively high diesel prices is partly demand, as suggested above, but really it’s the GLOBAL supply/demand balances for the two products. Diesel demand has been rising, driven mainly by economic growth and rising commercial transport needs, but also dieselization of the European car fleet. Petrol demand has been falling in key areas. Global demand for diesel now exceeds petrol demand. Refinery capacity, especially in the US and Europe, has historically maximized petrol yield and now there is surplus petrol production capacity, while diesel capacity, impacted by new specifications, is much tighter. Tight supply/demand for diesel and slack balances for petrol equal higher prices for diesel. This trend is likely to persist. Blaming the oil companies is one for the conspiracy theorists – if refining is so profitable, why are refineries closing?

  17. 19/03/2012, alex wrote

    @10, the retail margin at the pump is about 5 pence per litre, that’s gross margin so before paying staff wages, site costs, tax etc. It’s considerably less proftable than refining or exploration.

    So who does make so much money out of £1.40 a litre, well about 60 pence is fuel duty and about 25 pence is VAT, after the Governments 85 pence, the remaining 65 pence is the cost of the oil … about 45 pence, then the remianing bit is refining, transporation and the retailers 5 pence.

  18. 19/03/2012, Chris 3 wrote

    I currently run a diesel. However, petrol engines can be converted to LPG more easily than diesel ones. If you’re fuel bill is beginning to hurt then look seriously at the cost of converting to LPG.

    http://boostlpg.co.uk/

  19. 21/03/2012, Noneleft wrote

    Petrol best all round:
    Diesels = particulates, air quality issues in built up areas, aggravates asthma, major carcinogen. People die. CO2 irrelevant.
    Econ/perform.: Consider both together for level playing field, petrol wins. Modern diesel with equal perform. achieve the same cost per mile as equiv. petrol (track tested with state of art BMW 530d and 530i).
    Driving pleasure: Diesel = low end torque, narrow rev range, constant up shifting. Petrol accel. progressively over a wide rev range with nice power curve as revs increase. That’s why diesels were intended for commercial and agricultural use. Utilitarian and unrefined as a road driving experience. In BMW example, similar straight line performance but with track corners/braking/accelerating diesel did not keep up due to ltd power band characteristics inherent to diesel.
    Weight distrib.: Diesels = iron blocks, worse handling due to front heavy weighting. Petrols use modern light weight alloys.

  20. 22/03/2012, Snowcat wrote

    I’ve been driving high performance diesel for 3 years and would not go back to petrol now. Engine really trorquey, brilliant acceleration. My current game is to maintain 49mpg on 40min commute to work – mixture of A road and country lanes. But with a heavy right foot it will fall to 35mpg or less. I avoided depreciation by buying at 15 months old.

  21. 18/07/2012, G Maclean wrote

    diy is difficult on deisels certainly Subarus as ecu reset by franchise is required for DPF maintenance . Servicing cost is thus high . £ 200-300 for oil change . diy £20 oil and filter plus 30 minutes

  22. 10/09/2012, Dexter Wallfish wrote

    A litre of diesel has about 7% more energy in it than a litre of petrol. So per megajoule (which is what matters) diesel is cheaper than petrol.

    Greener? Only if you believe in all that man made CO2 driven global warming crap. And even then those of us dying from particulate poisoning would beg to differ.

    Now off on my push bike for the 15 mile round trip to the supermarket. Fuel cost – meat and two veg – rising all the time.

  23. 11/09/2012, Charles M-B wrote

    I recently had to replace the fuel pump on my diesel at a cost of £2500; luckily I went to a SAAB Specialist and got a second hand one for £600 fitted…
    When Diesels go wrong they really go wrong, they are a lot more fragile in this area and are much more expensive to repair

  24. 14/01/2013, Jussy Jones wrote

    I think a diesel engine is more powerful compared to petrol when traveling long distances. I don’t have one yet but i enjoy the power uphill with my friend’s 1.9Tdi polo.. wow

Commenting on this article closed

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