With the government shoving its hand in your wallet and rummaging around for anything you have to spare, drastic measures will be needed to ensure we keep our heads above water in 2011. What is sitting on your driveway is a major drain on your resources. It may now be time to consider whether your car is a luxury you cannot afford.

Last year, the cost of running an average family car fell by 3.4% year-on-year, according to AA Ireland. Good news until you consider that the AA estimates that running a small family car for a year still costs more than €11,000. Parking and depreciation take up a chunk of that, and with the hike in petrol prices, getting from A to B is going to be more expensive than ever in 2011.

Ditching your car

Ideally, and this will very much depend on your circumstances, this should be the year that you get rid of your car entirely. If you can live without it, selling it makes financial sense from two perspectives: it will provide a cash injection just as your pay packet starts to feel lighter thanks to this year's tax increases and, more importantly, you will no longer have to meet the hefty cost of keeping it on the road. No more motor tax or insurance, searching for change to cover the parking meter, no NCT checks or subscriptions to breakdown services. From the minute you hand over the keys, you are saving money.

Getting around without a car is going to be more difficult. If you commute to work in your car, consider the TaxSaver scheme. Introduced to encourage use of public transport, the scheme allows you to purchase monthly and annual commuter tickets for bus and rail travel via your employer. The tickets are bought for you by the employer with the cost met either by a deduction in your salary or in lieu of a cash bonus. The benefit is that the ticket is exempt from income tax and PRSI (it is not yet clear whether the exemption will apply to the Universal Social Charge) meaning that you end up with an annual or monthly ticket at up to half price depending on your rate of tax. The employer benefits from a reduction of up to 10.75% in their PRSI obligations.

"Traditionally it has been a challenge to persuade people to leave their cars behind," said Andrew McLindon, spokesman for Bus Eireann. "But when people start totting up the financial cost of driving to work – petrol costs, car parking charges, service and repair costs... Compared to the cost of travelling by bus and rail, particularly if you are getting a discount of between 30% and 51% with TaxSaver, that makes it an attractive proposition."

If you think there will be occasions when you absolutely will need a car, car pooling or sharing may be an option. We are not very good at car pooling in this country but car sharing is starting to make inroads here. Drivers in Dublin and Cork can now sign up for Gocar.ie's car sharing service which allows them to rent a car for a couple of hours starting from €4.75 plus mileage picking it up from a city-centre base. A registration fee of €50 applies, as does a €3 monthly charge. However, you are covered by fully comprehensive insurance (excess €1,000) and fuel is covered in the price. The service is in its infancy in both cities but expansion is planned.

If the car is indispensable

There are, of course, people for whom the car is a necessity. However, that does not mean they should be stuck spending a hefty portion of their disposable income on maintaining the family saloon. If you absolutely have to have a car, give careful consideration to the kind of vehicle you have and whether downsizing for something more economical is an option.

Cars begin losing their value the moment they leave the forecourt, so it is usually best to buy a used car. But there are excellent deals on new cars under the scrappage scheme (see Revenue.ie). Although the government reduced the value of the scheme to €1,250 for this year, the motor industry has responded with discounts worth up to €5,000 including the tax break.

Switching to a smaller, fuel-efficient car will save on running costs, insurance and tax. Fundamentally, the more expensive the car and the bigger the engine, the more it is going to cost you and it is important to pay attention to the little details, says David Hughes, motor insurance specialist with Getcover.ie.

"The more expensive your car and the bigger its engine, the more you are likely to pay, usually. You should really take this into account when buying the car. We would advise that if you've narrowed your search to two to three different cars, ask for a quote from your insurer on all of them. It might help you decide. Although the general rule in insurance is to rate cars by the cubic capacity, you should be sure to get the exact model and year for the car you are considering buying. Sometimes the difference between a large and small insurance premium can be determined by the couple of letters at the end of a make and model of a vehicle or the year of the vehicle," he said.

It is also possible to take direct control of your spending on petrol while still using your car. Fuel-efficient driving techniques are pretty easy to pick up, according to Rory Maughan, driving instructor with Leinster Driving Campus, which runs a two-hour advanced driving course incorporating fuel efficiency techniques.

"Not using your air conditioning can save 20%. Your rear demister can add another 10% to your bill over a tank of fuel. Stopping and starting takes up a lot of fuel because people tend to use extra acceleration to take off: when you are approaching lights you are going to be anticipating them and avoid stopping. It takes less energy to keep something moving than to get it moving from a stationary position. It's about forward planning," he said.