Save money by deciding on diesel

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When I was looking for a diesel car two and a half years ago there was only a handful to choose from.

Now there are 90 models among the passenger, sports car and SUV classes available as diesels. Of the 20 top-selling cars in 2009 in Australia, eight have diesel models.

Sales of diesel cars have surged, doubling over the past five years.

Total diesel cars and light vans totalled 213,256 or 23 percent of the 937,328 cars sold in Australia in 2009.

This is much more than the 306 hybrid cars sold last year. Why the big take-up? Diesel cars are 30 percent to 35 percent more fuel efficient than petrol, making them cheaper to run.

Take the fuel consumption of a small car, the manual VW Polo. The petrol Polo consumes 7.6 litres of petrol per 100 kilometres but the diesel runs on only five litres of diesel over the same distance. That's 34 percent better.

A bigger car such as the Toyota Prado guzzles 13 litres of petrol every 100 kilometres, while a diesel version can do 100 kilometres on 8.5 litres of fuel. While a diesel car can cost a bit more upfront (not always) over the long term you will save money on fuel costs.

At the time of writing the price of diesel per litre was 3c lower than unleaded petrol. It certainly pays to do your homework before you buy your next car, weighing up the costs of running petrol versus diesel cars.

"Look at your own needs such as how much you drive. Do you need a small car or a family-sized vehicle. What are your driving patterns?" says James Goodwin, communications manager at the Federal Chamber of Automotive Industries (FCAI). A helpful resource is the government-run website greenvehicleguide.com.au

Also look out for the fuel consumption label on all new vehicles sold in Australia. The label on the front windscreen states the fuel used per 100 kilometres and its emissions of carbon dioxide in grams per kilometre.

The new breed of "clean diesel" cars have much lower emissions. "They are not the dirty old truck your grandfather used to drive," says Goodwin. Volvo's new C30 emits 99 grams of CO2 per kilometre.

Passenger vehicles account for 8 percent of Australia's carbon emissions. The good news is that this is coming down - average new vehicle emissions have dropped by 13.4 percent since 2002 from 252 grams of carbon per kilometre to 218 grams in 2009, according to FCAI.

Diesel helps, along with improved engines and transmissions and technologies such as direct injection and cylinder deactivation.

There are plenty of new fuel-efficient cars coming out in the form of hybrids, electric vehicles and alternative fuels.

Unfortunately there are no financial incentives for taking up electric cars in Australia like those being offered by European countries, the US and Japan.

For example, France pays $7171 to car owners of electric vehicles while the US provides a consumption tax deduction of between $US2500 and $US7500, depending on the battery capacity.

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Susan has been a finance journalist for more than 30 years, beginning at the Australian Financial Review before moving to the Sydney Morning Herald. She edited a superannuation magazine, Superfunds, for the Association of Superannuation Funds of Australia, and writes regularly on superannuation and managed funds. She's also author of the best-selling book Women and Money.