When buying a new car, consider how much you will lose in depreciation - the biggest single cost in running a new car, says the Consumers' Association (CA).

This has always been a problem in the UK car market, mainly because a huge proportion of new car sales are to fleet buyers, such as companies and rental firms, which buy at discounts and can afford to sell a few years later at low prices. CA's advice is: 'Avoid buying new models that depreciate quickly and never pay full list price for a car.'

Some cars lose more than two-thirds of their list price within three years, according to CA in the June issue of Which? magazine. The Citroën Xantia 2.0iSX, costing around £17,000 new, would be worth around £5,000 after three years.

CA found that on average, superminis (such as the VW Polo, Toyota Yaris, Ford Fiesta and Fiat Punto) would retain slightly more of their initial value than other cars.

CA, using the motor industry forecaster CAP, evaluated cars to find out which were likely to retain their value best over the next three years. In the large family group the BMW 3 Series (318i SE four-door) leads the way, retaining 56 per cent of its value, followed by the Audi A4 (1.8 SE four-door) and the Mercedes C Class (200 Classic four-door).

In the small family group, the Audi A3 (1.6 SE five-door) would retain 55 per cent of its value after three years, followed by the VW Golf (1.6 SE five-door ) and the Mercedes A Class (160 Classic five-door).

In the supermini group the VW Polo (1.4 E three-door) would sell for 55 per cent of its value after three years, and it was followed by the Toyota Yaris (1.0 GS three-door) and the VW Lupo (1.0 E three-door).

In each of the categories, Citroëns were at or near the bottom of the league tables. It is probably worth considering an internet-based service, which may import from Europe. These include the Consumers' Association's carbusters.com, Direct Lines's jamjar.com, one swoop.com and virgincars.com. Standards of service are variable, however, and buyers should check delivery times and whether warranties from the Continent extend to the standard three-year guarantees given by UK retailers.

When shopping for a second-hand car, www.autotrader.co.uk, the internet site of The Observer's sister publication Auto Trader, allows you to compare prices of the models you are interested in.

Fuel economy is becoming an increasingly important factor for car buyers. The Government regularly surveys cars for fuel economy and publishes its top 10 lists (see table) at www.detr.gov. uk. The AA's website theaa.com includes a list of motoring costs for a variety of different cars.

Financing your car

ACCORDING to internet finance operation E-Loan, (www.E-Loan.com/UK) motorists borrow an average of £6,800 to fund the purchase of a car.

A survey by rate-tracking service Moneyfacts at the beginning of this month showed that the more competitive rates for £5,000 loans over three years ranged from 9.2 per cent (APR) at Northern Rock to 10.9 per cent at Alliance & Leicester. For car loans, which may include special deals such as a free AA car buyer inspection, they ranged from 9.9 per cent at the Woolwich to 15.9 per cent at Lloyds TSB.

Cutting running costs

Fuel-saving measures won't necessarily cut your petrol bill dramatically, but it is worth knowing the factors behind petrol consumption.

The AA calculates that a trip from London to Exeter costing £15 to £20 with normal driving is likely to cost an extra £5 or more if you use your car in the least efficient way. Driving too fast, or too slow, has an impact. Speeding at 80-85 mph increases fuel costs by 25 pence or more for every 10 miles. Every minute idling in a traffic jam costs a small car driver nearly 1.5p and double for a larger car.

Here are five more ways to cut petrol consumption.

• Roof racks, even when empty, cut a car's fuel economy by at least 10 per cent and when loaded high can reduce it by 30 per cent.

• Keeping windows and sun roofs open will add £1 to a journey's cost. Try air vents before opening windows.

• Air conditioning eats petrol at a rate of between 5 and 7 per cent more than normal. Don't use it all the time.

• Put a sunscreen inside the windscreen.

• Under-inflated tyres and the weight of passengers will also reduce efficiency by one mile per gallon. If carrying extra passengers or heavy luggage, adjust the tyre pressure to compensate.

Replacing your car for a newer one won't necessarily cut your petrol bills, unless you choose a much more fuel-efficient model. Roger Higman, at Friends of the Earth, explains: 'Older cars are dirtier than new cars but not necessarily less fuel efficient.'

When garages actually have petrol, costs vary so it may be worth shopping around. A new website, petrolbusters.com, gives quotes for the cheapest petrol prices in postcodes throughout the country. A search by Cash for prices within three miles of a central London postcode showed it would have been possible to cut costs by around 7 per cent for unleaded petrol, from 83.9p a litre, the highest quote, to 77.9 from the cheapest provider, a Sainsbury's service station. The UK average is 80.4p per litre for unleaded petrol.

Surveys by the CA have shown that charges for servicing can vary by 100 per cent among dealers appointed by one manufacturer. A major service will on average be 50 per cent more expensive at an appointed dealership than at an independent. But be aware that if you do not go to an approved garage you are likely to invalidate a warranty on a new car, or one bought second-hand from an approved dealer.

Car insurance

The AA's insurance premium index shows that the cost of insuring a car has increased by nearly £200 on average in the last six years. The AA says: 'When it comes to renewing their comprehensive insurance, car drivers can expect bills to be up by nearly £100 since last year.

Since July 1994, the average premium has risen by £194, from £367 to £561, an increase of nearly 53 per cent.'

Despite the general rise, the AA says it may be possible to save as much as 30 per cent on a renewal premium by shopping around. Peoples Choice (tel 0800 11 22 33, www.peopleschoice. co.uk), claims to have saved up to £1,000 on annual premiums.

Internet insurance sites to try include insure.co.uk; egg.com; tesco.com/ finance; theaa.com; autobytel.co.uk; norwichunion. co.uk/; carsource.co.uk/ and carquote.co.uk.

Additional research by Natalie Sutton