Depreciation: how much does it affect your car-buying habits
Discussion
Does depreciation come into consideration when you're buying a car or do you just buy what you want, when you want it and sod the consequences? A PH pint for anyone who had the balls to buy something like a Ciroen C6/DS5 or VW Phaeton new, simply because they liked it and wanted one!
I've owned around 12 cars in the last 14 years and lost nearly 29000 pounds in depreciation (over 2000 pounds per year)! I'm not sure if I'm getting any smarter than it either. My first car was a 1995 Vauxhall Astra 1.4, bought for 3700 and sold for 2200 2 years later with another 25k on the clock (only lost 40% of what I paid - not bad). I even managed to lose more (55%) on a 2000 Golf in a year (but it had just failed its MOT expensively)! Last year, I bought a 2001 Jeep Grand Cherokee for $7000 and traded it in for $2500 a year later (and that was without the dealer realising that the transmission was soon to expire). That's a 64% loss, my worse yet!
Inevitably, if you buy new/nearly new, you will lose more money in monetary terms but if I buy new, I tend to keep them longer and in % terms, I seem to have done alright when buying new/nearly new, so maybe I chose more wisely and less impulsively (only owned 3 cars less than a year old though)!
2003 Mazda MX5 - kept for 9 months and 4000 miles (lost 17%), not sure if the new Clio 182 that I was looking at as an alternative would have lost this little!
2008 VW Polo TDI - kept for 2.5 years, 3 free services and 40,000 miles (lost 46%)
2009 Fiat 500 - kept for 3.5 years and 30,000 miles (lost 50%)
I was particularly impressed with the residuals on the Fiat, as 5000 was the trade price (more like 7000 retail) and we got to have a new cheap to run car with warranty for three years and have exactly what we wanted. Not a unique spec by any means but perhaps a bit more unusual: 1.2 Pop in red with red and ivory interior, leather steering wheel with Bluetooth and chrome mirror caps. All in all, if you take out the VAT (15% at the time) and the 2000 pounds scrappage allowance we got for my wife's old Daihatsu that was only worth about 20 quid in reality, then we only lost about 1700 pounds in 3.5 years!
The flipside of depreciation is that you can pick up some quite tasty metal for a fraction of its original price. I thought my 6 year old Impreza WRX Wagon with 60k for 6.5k was a pretty good deal, especially compared to the equivalent aged and mileaged mk4 Golf R32 that I was also considering at 9k! 2.5 years very happy and relatively trouble-free motoring right there!
I was also surprised recently at the depreciation on 1 year old German luxury cars. My parents recently asked me to advise them on what car they should buy next (they normally buy new, budget about 20k) and I thought a nearly new C-Class diesel estate might suit their requirements quite well. You can pick up year old ones with decent spec and just a few thousand miles for about 20k. They must be about 30k new? Why is this? VAT and options? The only trouble is though, you try finding one that isn't white, silver, grey or black with a black interior (all colours that they hate). Is paying an extra 10k for a new one in the exact spec that you want (in their case metallic red or blue with a light interior) worth an extra 10k? I guess it might be if they plan to keep it for 10 years (which they do)!
I've owned around 12 cars in the last 14 years and lost nearly 29000 pounds in depreciation (over 2000 pounds per year)! I'm not sure if I'm getting any smarter than it either. My first car was a 1995 Vauxhall Astra 1.4, bought for 3700 and sold for 2200 2 years later with another 25k on the clock (only lost 40% of what I paid - not bad). I even managed to lose more (55%) on a 2000 Golf in a year (but it had just failed its MOT expensively)! Last year, I bought a 2001 Jeep Grand Cherokee for $7000 and traded it in for $2500 a year later (and that was without the dealer realising that the transmission was soon to expire). That's a 64% loss, my worse yet!
Inevitably, if you buy new/nearly new, you will lose more money in monetary terms but if I buy new, I tend to keep them longer and in % terms, I seem to have done alright when buying new/nearly new, so maybe I chose more wisely and less impulsively (only owned 3 cars less than a year old though)!
2003 Mazda MX5 - kept for 9 months and 4000 miles (lost 17%), not sure if the new Clio 182 that I was looking at as an alternative would have lost this little!
2008 VW Polo TDI - kept for 2.5 years, 3 free services and 40,000 miles (lost 46%)
2009 Fiat 500 - kept for 3.5 years and 30,000 miles (lost 50%)
I was particularly impressed with the residuals on the Fiat, as 5000 was the trade price (more like 7000 retail) and we got to have a new cheap to run car with warranty for three years and have exactly what we wanted. Not a unique spec by any means but perhaps a bit more unusual: 1.2 Pop in red with red and ivory interior, leather steering wheel with Bluetooth and chrome mirror caps. All in all, if you take out the VAT (15% at the time) and the 2000 pounds scrappage allowance we got for my wife's old Daihatsu that was only worth about 20 quid in reality, then we only lost about 1700 pounds in 3.5 years!
The flipside of depreciation is that you can pick up some quite tasty metal for a fraction of its original price. I thought my 6 year old Impreza WRX Wagon with 60k for 6.5k was a pretty good deal, especially compared to the equivalent aged and mileaged mk4 Golf R32 that I was also considering at 9k! 2.5 years very happy and relatively trouble-free motoring right there!
I was also surprised recently at the depreciation on 1 year old German luxury cars. My parents recently asked me to advise them on what car they should buy next (they normally buy new, budget about 20k) and I thought a nearly new C-Class diesel estate might suit their requirements quite well. You can pick up year old ones with decent spec and just a few thousand miles for about 20k. They must be about 30k new? Why is this? VAT and options? The only trouble is though, you try finding one that isn't white, silver, grey or black with a black interior (all colours that they hate). Is paying an extra 10k for a new one in the exact spec that you want (in their case metallic red or blue with a light interior) worth an extra 10k? I guess it might be if they plan to keep it for 10 years (which they do)!
J4CKO said:
I could go and spend twenty grand on a diesel Astra, people do, or I could spend 20 grand on a Noble, Porsche, TVR and god knows what else and lose very little, I do wonder how people on average wage who buy new cars swallow the depreciation,
I don't think they do really. Cars like that are mostly bought on finance/PCP/lease (possibly 0%). To be fair, the three new cars I spoke about in the OP were all bought on finance and cost me between 3000 and 4000 pounds apiece in payments. In fact, when I traded the Fiat, the buyout was about 4000 pounds and I sold it for 5000, so I got some extra money back in my pocket! The MX5 (a 9 month old mk2) was probably my least sensible purchase because the buyout was 750 pound more than what I sold it for (as I said before though, I could have done worse if I had bought something else). In hindsight, I could have bought a decent mk1 MX5 for 3000 pounds though (or even the next car that I bought, an E30 325i Cabriolet), kept the car rather than sell it and still had a relatively low depreciating asset that was worth something at the end of it.The VW and Fiat were on PCP though and I'm pretty sure what I spent in payments was about the same as the depreciation on the car (had I paid cash), if not a bit less! Less painful than losing nearly $6000 of my hard earned in a year on that Jeep!
Finance/PCP/lease seems like a pretty good way to buy a new car, as long as you don't bail out too early i.e your car has depreciated more quickly than you are paying it off. People get themselves into trouble because they either buy a car that is unsuitable for their requirements or one they can't really afford and finance over say 5 years and then when they want to change it after 1-2 years, they have to finance their negative equity and are still paying for their old car on the payment for their new one! If you keep the car until the end or near the end of the agreement (provided the interest rate is reasonable) then you should at least break even or have a deposit on your next car or money in your pocket when you sell!
I recently leased a new Toyota for my wife over 5 years and hopefully we'll be able to afford to "upgrade" it after 4 years. Provided you stick to your mileage allowance, can you get into negative equity on a lease or 0% finance? I could have got a similar size/spec Kia on 0% finance for a similar payment but that would have been over 7 years! I guess I chose the Toyota because I thought it would depreciate less, even though I'm paying 1.99% interest and I didn't really want to keep this car for 7 years!
Edited by white_goodman on Friday 22 August 16:35
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