By Sarah Toyne BBC News Online consumer affairs reporter

Should you buy new or secondhand? Should you buy an old banger or splash out on a flash Mercedes?

What are the best buys?*

Fiat Seicento (city) Citroen Saxo (supermini) VW Golf (small) Volvo S/V40 Series (family) Land Rover (MPV) Alfa Romeo 156 (compact executive) Volvo V70 Series (executive) BMW 7 Series (luxury) *By category. Slowest depreciation over three years

BBC News Online has obtained a copy of a new report by the Centre for Economics and Business Research, an economic think tank, for Alliance & Leicester, which aims to identify which are the "best buy" cars.

The report aims to help consumers with one of the biggest considerations when buying a car - how much it will depreciate in value, and how rapidly.

In turn, this decision impacts on whether consumers should buy new or secondhand, and when they should sell.

Family cars

Ditching the sporty number for a safe family car may not be a matter of choice for most parents, but mid-priced "family" cars are the worst at keeping their value, according to the report.

For example, a Vauxhall Vectra costing �13,138 to buy, lost �5,013 in value after one year, and three years later it cost just �5,669.

However, a BMW 3 Series costing �18,415 depreciated by a very small amount in year one - dropping only �206 over 12 months.

One year old

How well the car retains its value should determine when best to buy and sell.

This BMW 3 Series retains its value well within the first year, but the car's value dropped to �11,303 in year three.

In this case, it would be better to buy the car new and sell in the first year.

According to the report consumers should hold off buying the Fiat Seicento and Citroen Saxo until they are one year old.

For example, a Fiat Seicento which cost �6,288 depreciated in value rapidly during the first year.

After year one it would cost only �4,475 and �3,971 in year three.

However, its value decreased much less sharply between the first year and third year.

Other models, including the Ford Fiesta, Vauxhall Corsa and the Audi A6, are best bought around three years old according to the report.

For example, a Ford Fiesta costs �8,971 to buy new, but it would have depreciated in value to �6,227 after the first year.

It then lost another �2,137 between the first and third year.

When should I sell?

In most cases it is best to keep a car bought new for at least three years.

How much value does the car lose after one year?

Compact executive: 12.6% MPV: 16.1% Luxury: 16.7% Executive: 20.6% City: 22% Small: 24.5% Supermini: 25.2% Family: 35.4% Average 21.6%

However, there are some models, as different from each other as the Mercedes S Class or the Daewoo Matiz, where replacing after one year costs relatively little.

Volvo and Mercedes depreciate least, according to the report, which means whether buyers purchase these cars either new or after a couple of years is of less consequence to a car's value.

Italian or German?

German cars are often marketed for their technological superiority and reliability, but the two Italian cars were best in their class at keeping their value.

The Fiat Seicento was the best buy "city" car and Alfa Romeo's 156 was the best buy "compact executive".

How much value is lost after three years?

City: 39.8% Supermini: 48.4% Small: 47.6% Family: 52.6% MPV: 39.4% Compact executive: 39% Executive: 39.7% Luxury: 43.3%

Alliance & Leicester will release details of the survey on its Smartermotoring.com website later on Tuesday.

There are some other sources online if you need to check prices.

Parkers, Autotrader, WhatCar?, Exchange & Mart and Autolocate all have online editions, with price guides and valuation tools.

Prices should get cheaper once the block exemption for car dealers on EU competition rules has been abolished.

It will also mean that other outlets can sell cars, such as supermarkets and banks - at competitive prices.

Not technical

It is important to ensure that if you are buying a secondhand car, you get it checked out.

If you can't get a friend or relative to check the car, you should get a mechnic to have a good look at it.

Both the AA and RAC offer vehicle inspections services.

You pay a fee and one of their mechanics will come and check the vehicle before you buy.

What about car safety?

One of the main considerations is the safety of the car.

Euroncap.com, is an independent crash tester for new cars, funded by the UK, Swedish, French and German governments among others.

If you are buying an older car, Crashtest.com carries information about the safety of a range of models.

Another consideration if you are purchasing a car is to take into consideration the Treasury's campaign to encourage "green" driving.

You can now save up to �60 on your car tax by choosing an environmentally friendly car.

Car tax is no longer measured on engine and model size, but CO2 emissions.

Similarly, other measures aimed at taxing the three million company drivers into using more environment-friendly cars, will mean that those cars will be taxed according to CO2 emissions from April 2002.