Why buy a car if you can rent by the hour?

Fuel prices have once again breached the ?1 per litre mark, spreading more gloom among drivers.

Even without rocketing fuel prices, the costs associated with owning a car can be breathtaking. A car worth up to ?12,000 can cost drivers as much as ?1,965 a year without it even leaving the driveway, according to the AA. Depreciation, car insurance premiums, breakdown cover and road tax all take their toll. Add on servicing and maintenance costs and it is clear that for some people, owning a car is quickly becoming an unaffordable luxury.

One alternative, for those living in a city in particular, is to join a car club. The number of car-club members in the UK has leapt from 36,383 in December 2007 to 74,095 at the end of May this year. National transport charity Carplus estimates that anyone who drives less than 6,000 miles per year could save up to ?3,500 by switching to a car club. "People are really considering the true cost of owning a car and that's why they are coming to us more and more," says Brett Akker, co-founder of Streetcar.

Five big players are currently in the car club market; Streetcar, Zipcar, City Car Club, Connect by Hertz and WhizzGo. These clubs work by giving drivers access to pay-as-you-go vehicles which can be picked up from designated bays and rented by the hour, week or even month.

Car clubs charge an annual membership fee, which ranges between ?25 and ?60. Members are then sent a special smartcard and PIN which can be used to access the cars. Bookings can be made online or by phone months in advance or even minutes before driving off. Rates range from ?3.95 to ?5.99 an hour and from ?29 to ?49.99 per day. All the car clubs include a number of free miles each time you book but Zipcar is the most generous with 60 free miles per day and a charge of 23p per extra mile thereafter. Many clubs cover the London congestion charge too. "For people who live in the right places, there's an awful lot going for them," says Andrew Howard, the head of road safety at the AA.

Another selling point is that a car club offers drivers the convenience of being able to pick up a car at short notice. "As the network is growing, particularly in London, where growth has been quite phenomenal, there is a whole choice of cars around you," says Antonia Roberts, a co-director of Carplus. Some clubs even offer vans.

But there are downsides. Car clubs will never be as flexible as owning a car, and booking does take time. And drivers are not guaranteed that a car will be available when they need it. More importantly, the financial benefit of using a car club will depend on level of usage and location. Clubs are unlikely to be viable for anyone who needs to commute to work, or use a car frequently. People outside big cities wanting access to a car club are likely to find either that none is available, or that they must travel a long way to find a parking bay.

Drivers should also watch out for extra charges, including penalties for returning cars late. Fines apply if cars are left in a mess so no pets are allowed and smoking is banned. Although membership comes with breakdown cover and insurance, the excess is usually around ?500.

Drive time 'I don't have to worry about maintenance'

Geoff Howell, 34, an investment banker, and his wife, Fiona, 33, an image consultant, live in London and joined the car club Streetcar five and a half years ago.

"A friend came across it by sheer luck and I was looking to buy a new car, and weighing up the option of leasing when they suggested Streetcar," says Geoff.

The couple drive once a week on average for errands and say that after some quick calculations they realised that using a car club would be a much cheaper option than buying. Streetcar charges between ?3.95 and ?5.95 an hour for hire, depending on the type of vehicle.

"I don't have to worry about maintenance costs, cleaning and storing the car, or covering the potential cost of things going wrong with it," Geoff says. It's also a relief not to have to worry about the car being stolen or damaged by a vandal, he adds.

The onset of recession has made him even more confident that car clubs are the way to go. "I think it's fantastic – the cars are so readily available, well located, and I don't have to try to budget for the cost of running a car."

Even the arrival of their new son six months ago didn't tempt them into buying a car as Streetcar now provides car seats for babies. "I can't see any negatives. It is getting more popular, but that just means you sometimes have to book ahead to avoid disappointment," he says.