Car depreciation?
Discussion
How much do SUVs depreciate?
I’ve researched lots before posting and have found online calculators but they don’t cater for the models I’m looking at.
From what I understand a rule of thumb is 50% every 3 years but I’m not sure if this is just from new or for any car?
Looking at price curves it seems the gradients calm down at about 2-3years.
I’m toying with the idea of car leasing for the first time, which is just basically just paying for the depreciation and you then give the car back. Then I thought hang on what if I just buy new and sell it in 3 years... I’m not sure. Leasing is annoying because any extras you add you seem to have to pay for in your lease term but if I was to buy the car then sell it in 3 years some of that extra value would be paid back presumably.
The options I’m looking at are: Jaguar... buy for around 80k with options I ‘need’ sell in 3 years for.. what? 40k? And is this what garage would pay or would I have to go private? (I do low miles, about 5k a year) Or lease it and that will cost me a bit more maybe 45k over three years but then I suppose I won’t have to pay for services and maintenance ?
Either that or just get a 2-3 year old x5m or land rover svr for 65ish. If I put 15k mileage onto that car and sell it in three years and sell at 50% that will only be a loss of about £32.5k so a fair bit cheaper. Even with £1000 a year for repairs it’s quids in.
But yeah I don’t know. The different cars there might depreciate at different rates. And maybe I’m underestimating the cost of repairs of a 3 year old fast SUV.
Any thoughts or advice would be appreciated!
I’ve researched lots before posting and have found online calculators but they don’t cater for the models I’m looking at.
From what I understand a rule of thumb is 50% every 3 years but I’m not sure if this is just from new or for any car?
Looking at price curves it seems the gradients calm down at about 2-3years.
I’m toying with the idea of car leasing for the first time, which is just basically just paying for the depreciation and you then give the car back. Then I thought hang on what if I just buy new and sell it in 3 years... I’m not sure. Leasing is annoying because any extras you add you seem to have to pay for in your lease term but if I was to buy the car then sell it in 3 years some of that extra value would be paid back presumably.
The options I’m looking at are: Jaguar... buy for around 80k with options I ‘need’ sell in 3 years for.. what? 40k? And is this what garage would pay or would I have to go private? (I do low miles, about 5k a year) Or lease it and that will cost me a bit more maybe 45k over three years but then I suppose I won’t have to pay for services and maintenance ?
Either that or just get a 2-3 year old x5m or land rover svr for 65ish. If I put 15k mileage onto that car and sell it in three years and sell at 50% that will only be a loss of about £32.5k so a fair bit cheaper. Even with £1000 a year for repairs it’s quids in.
But yeah I don’t know. The different cars there might depreciate at different rates. And maybe I’m underestimating the cost of repairs of a 3 year old fast SUV.
Any thoughts or advice would be appreciated!
If you are doing such a small mileage per year just get the car you like most and keep it. I know it is the fashion for some to have a new car every three years but it’s not obligatory.
In three years’ time, on your figures, your car will have covered slightly more than the average one year mileage. It should still be in excellent condition ( and possibly still under warranty) If you keep the car then depreciation doesn’t hit in the same way.
If you buy an 80k 4x4 then say it is worth 40k in three years so you use that towards a new 80k 4x4 - in six years you’ve lost £80k. If you bought the 4x4 and kept it then in six years you’ve “only” lost 55/60k. This increases every time you replace the car with a new one in three years
In three years’ time, on your figures, your car will have covered slightly more than the average one year mileage. It should still be in excellent condition ( and possibly still under warranty) If you keep the car then depreciation doesn’t hit in the same way.
If you buy an 80k 4x4 then say it is worth 40k in three years so you use that towards a new 80k 4x4 - in six years you’ve lost £80k. If you bought the 4x4 and kept it then in six years you’ve “only” lost 55/60k. This increases every time you replace the car with a new one in three years
New to 2/3/4 year values are easy, look at GMV values on a PCP.
Second hand values are more difficult, because RRP and model designations change over time, but you can look at historical prices (remember to look at trade-in values, not forecourt selling values, for the residual). Or get some second hand PCP finance quotes (try magnitude online), though it’s likely the GMV will be slightly low (as a safety margin for the finance house).
One thing I do know is that a Jaguar 4x4 will depreciate far more than a Range Rover. Have a look at the other side of the dealership.
Second hand values are more difficult, because RRP and model designations change over time, but you can look at historical prices (remember to look at trade-in values, not forecourt selling values, for the residual). Or get some second hand PCP finance quotes (try magnitude online), though it’s likely the GMV will be slightly low (as a safety margin for the finance house).
One thing I do know is that a Jaguar 4x4 will depreciate far more than a Range Rover. Have a look at the other side of the dealership.
Edited by syl on Sunday 3rd March 09:34
JLR official used come with a 2 year warranty that can be extended further so with your mileage I'd be looking at 2 year old cars with the right options and above average mileage. After 2/3 years of 5K a year the mileage will likely be below average and you'll have limited depreciation as much as possible whilst still having a fully warranted latest model car with everything you want fitted?
As above though I'd definitely be looking at the LR half of the dealership. Not only will depreciation be better but they are just nicer cars IME.
As above though I'd definitely be looking at the LR half of the dealership. Not only will depreciation be better but they are just nicer cars IME.
Thanks everyone.
LR has sadly been ruled out independently by my wife and my accountant who both said it’s a “footballer’s car” whatever that means (mor money than sense I guess) and utterly too big and ridiculous for a built up area. I agree the lr sport does look massive and that’s the only one I’d be after.
LR has sadly been ruled out independently by my wife and my accountant who both said it’s a “footballer’s car” whatever that means (mor money than sense I guess) and utterly too big and ridiculous for a built up area. I agree the lr sport does look massive and that’s the only one I’d be after.
syl said:
New to 2/3/4 year values are easy, look at GMV values on a PCP.
Second hand values are more difficult, because RRP and model designations change over time, but you can look at historical prices (remember to look at trade-in values, not forecourt selling values, for the residual). Or get some second hand PCP finance quotes (try magnitude online), though it’s likely the GMV will be slightly low (as a safety margin for the finance house).
One thing I do know is that a Jaguar 4x4 will depreciate far more than a Range Rover. Have a look at the other side of the dealership.
Thanks yeah I've done the PCP thing, that's quite helpful. Second hand values are more difficult, because RRP and model designations change over time, but you can look at historical prices (remember to look at trade-in values, not forecourt selling values, for the residual). Or get some second hand PCP finance quotes (try magnitude online), though it’s likely the GMV will be slightly low (as a safety margin for the finance house).
One thing I do know is that a Jaguar 4x4 will depreciate far more than a Range Rover. Have a look at the other side of the dealership.
Edited by syl on Sunday 3rd March 09:34
So if I buy a car at 82k Jag say after 3 years the final payment if I want to keep it will be £42K on a PCP.
So how do I interpret this with regard to buying with cash? The likelihood is that if I just buy with cash they will buy it off me in 3 yrs for around £42K? Or that's what they would sell for but would buy off me at £5K less or something?
SimpleSam said:
So how do I interpret this with regard to buying with cash? The likelihood is that if I just buy with cash they will buy it off me in 3 yrs for around £42K? Or that's what they would sell for but would buy off me at £5K less or something?
Closer to the former than the latter. Usually pcp deals are structured so there's a tiny bit of equity left at the end (amount owed on finance vs what car is worth). You could probably safely assume it'd be worth in the region of 42k, maybe a bit more but there's no guarantee with used car values. Market for big SUVs "could" crash and your car "could" be worth less than originally predicted. This is the safety net (and biggest benefit) of PCP, you're protected if your car is worth less then the predicted future value (regulation means they have to call this the "optional final payment" now and not the "guaranteed future value") then you can exercise your right to just simply not buy the car.
Wow, that's quite surprising then, but also reassuring.
That means less than 50% depreciation in 3 years, which is pretty good if that's the price a garage is paying me! Then surely I'd be able to sell for more privately? Because garages will always pay a few thousand less than the going private rate surely, or they would make no profit.
That means less than 50% depreciation in 3 years, which is pretty good if that's the price a garage is paying me! Then surely I'd be able to sell for more privately? Because garages will always pay a few thousand less than the going private rate surely, or they would make no profit.
SimpleSam said:
Wow, that's quite surprising then, but also reassuring.
That means less than 50% depreciation in 3 years, which is pretty good if that's the price a garage is paying me! Then surely I'd be able to sell for more privately? Because garages will always pay a few thousand less than the going private rate surely, or they would make no profit.
That's the expected depreciation, and the amount the finance company will take from you if you keep the car after 3 years, or you can just hand it back. if you buy without finance you are taking the chance of the market staying in line with the finance company's prediction. If the car is worth more than the final payment at the end of the agreement you can sell it or trade it in at market value, but if it is worth less than the final payment you can simply hand it back, which some of us think is an option worth having.That means less than 50% depreciation in 3 years, which is pretty good if that's the price a garage is paying me! Then surely I'd be able to sell for more privately? Because garages will always pay a few thousand less than the going private rate surely, or they would make no profit.
Yeah thanks. There's no way I'd buy with finance as they'd basically be charging me £10k to borrow the money for 3 years - rip off!
For me it's purely an exercise to figure out what the likely depreciation will be.
Of course nobody has a crystal ball, but if when the PCP purchase figure at 3 years is £42k that means they are likely to (if the market doesn't change) pay that much for a similar car in 3 years time then that's all I need to know.
If however it's an inflated figure but in practice they'd pay lower for a similar car at that age then it's not that useful an indicator for me.
For me it's purely an exercise to figure out what the likely depreciation will be.
Of course nobody has a crystal ball, but if when the PCP purchase figure at 3 years is £42k that means they are likely to (if the market doesn't change) pay that much for a similar car in 3 years time then that's all I need to know.
If however it's an inflated figure but in practice they'd pay lower for a similar car at that age then it's not that useful an indicator for me.
Gassing Station | Car Buying | Top of Page | What's New | My Stuff