View 3 images in this gallery.

If you want to save money on your next car - don't buy a brand new one!

The best way to get a 12 reg for the smallest amount of money is to shop around the dealerships for an ex-demonstrator or hire car that has come back to the dealership after a six-month tour of duty on a car hire firm's fleet. Contrary to popular belief, most drivers of hire cars do not drive them at warp speed, run them into the ground or bounce them off every kerb and bumper they can find. Manufacturer warranties still apply to these cars and, depending on the car maker, you could have up to seven years remaining.

Remember: as soon as a new car leaves the showroom it starts depreciating, so it is vital that you choose wisely in the first place and make sure you get value for your purchase - read as many reviews as possible before you buy. Choosing a vehicle that not only meets but exceeds your needs is vital. The cheapest car isn't always the best proposition, but there are loads of sub-€20,000 cars that deliver great value.

Size matters when you want to save cash. Small cars cost less to buy new and are cheaper to run and insure, plus they depreciate at a less-than-alarming rate when compared to their larger siblings. Traditionally, 'City' cars are the smallest cars you can buy, although Renault, with its new Twizy quadra-cycle, is about to change this. Most City cars cost in and around €9,000-€13,000 and use tiny three- or even two-cylinder petrol engines. They tend to lack refinement, often sounding like demented sewing machines when driven hard! This had made them suitable only for using on short distances, but now cars like VW up! (Skoda Citigo/SEAT Mii), FIAT Panda and KIA's Picanto demonstrate how far along small cars have come.

Not only will modern City cars deliver excellent fuel consumption, but they can also be used on country runs at motorway speeds without fuss. Safety has improved massively, too, but of course in a collision with a larger vehicle the laws of physics still apply. VW's up! has set the bar in this class particularly high; it features a five-star NCAP score and, of course, the excellent full auto-brake system that prevents low speed collisions.

If a City car is simply too small, the next car size up could suit. Superminis, even with lots of extras fitted, all fall into the sub-€20,000 grouping. Traditional favourites like the Fiesta, Polo and Yaris are under huge pressure from cars like the KIA Rio and Hyundai i20 that prove Korean car-making has caught up with the Europeans and Japanese. Superminis tend to offer seating for five whereas most City cars only have seat belts for four. The next jump from Supermini to 'Compact family car' can only be justified when passenger sizes demand it, but to specify a Golf or Focus to a decent level you'll find yourself quickly in the mid-€20,000 range.

Money is very hard to come by these days and the car companies know this, so innovative finance deals are being made more and more tempting. Leasing should be an option too (where you never own the car - you just rent it). For very little outlay you can disregard depreciation and reasonable wear and tear as it is factored into the monthly fee you pay.

When buying a new car the only question you must answer is: how much is it costing you to get into it? Remember: if you are trading in your old car you will be carrying out two transactions, namely selling your car and buying the new one, so there is a chance for the salesperson to nobble you twice. Be vigilant-but- realistic about your car's true value!

If you have a car that works and you regularly service it don't be tempted to change it for 'change' sake - even after reading our often-glowing new car reviews!

Michael Sheridan