But the good news is offset by a real-terms dip in earnings that has pushed wages back to 2002 levels adjusting for inflation, it added.
Petrol forecourt prices averaged 129.46p a litre in mid-March. A year ago petrol averaged 138.42p a litre.
Diesel prices are at their lowest since July 2012, averaging 136.59p a litre in mid-March, with wholesale price reductions pointing to a further 1p to 2p-a-litre fall shortly. A year ago diesel averaged 145.24p a litre.
Chancellor George Osborne announced in his Budget this week another fuel duty freeze. In contrast, the AA said 11 EU countries have increased or are due to increase their fuel duty this year, including France, Holland, Italy and Sweden.
The AA also pointed to a small increase in the number of UK petrol stations after years of decline