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)!
k that. "YOLO" etc.)I have half an eye on depreciation but I mainly buy what I want.
To me lifes too short to worry too much about a few grand, I just think of it as the cost of having the experience. I don't really go on holiday much, I've had a couple of great ones and they can cost a couple of grand for a week, If I loose a few grand a year on enjoying a car then I'm ok with it.
That said I don't have lots of money to burn, I'm not in a position to waste money just because I fancy a change after a few months, I tend to keep my cars for minimum 12 months. I'm certainly not in a position to go out and buy a brand new off the wall car with massive depreciation, even if I was I don't think I would buy one, I'd look to get a used one after someone else has taken the main brunt of depreciation.
To me lifes too short to worry too much about a few grand, I just think of it as the cost of having the experience. I don't really go on holiday much, I've had a couple of great ones and they can cost a couple of grand for a week, If I loose a few grand a year on enjoying a car then I'm ok with it.
That said I don't have lots of money to burn, I'm not in a position to waste money just because I fancy a change after a few months, I tend to keep my cars for minimum 12 months. I'm certainly not in a position to go out and buy a brand new off the wall car with massive depreciation, even if I was I don't think I would buy one, I'd look to get a used one after someone else has taken the main brunt of depreciation.
Yeah, definitely nowadays, buy the right car at the right point in its life and you can end up owning it for a couple of years for nothing.
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 would rather spend more on fuel, tax and insurance, in face, insurance is not really an issue now, £274 for my 350Z, the tax is £500 and the odd bit of maintenance I do myself, fuel economy is horrendous but I don't do many miles, it still seems to be worth more than I paid for it a year ago. My 944 I made £250 on, spent a few quid on bits and quite a bit of time but it cost very little to own for two years.
The more I spend on depreciation, the less I have to spend next time.
Might change my mind in a few years when the kids are supporting themselves.
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 would rather spend more on fuel, tax and insurance, in face, insurance is not really an issue now, £274 for my 350Z, the tax is £500 and the odd bit of maintenance I do myself, fuel economy is horrendous but I don't do many miles, it still seems to be worth more than I paid for it a year ago. My 944 I made £250 on, spent a few quid on bits and quite a bit of time but it cost very little to own for two years.
The more I spend on depreciation, the less I have to spend next time.
Might change my mind in a few years when the kids are supporting themselves.
Quite a lot for me, when I'm paying cash for a car I treat it as an asset and want to be able to get a decent chunk back at resale. This can be achieved with a bit of savvy buying/ selling and getting the timing right. Find I loose far more money on running costs which can't really be avoided!
When I was younger I bought new / nearly new and paid the price at trade in time.
Then I had a stream of company cars.
Now I tend to buy at an age / price point (approx 20% of new value) that it really makes no odds. Some I'll lose a bit, some I'll actually gain a bit.
So yes, depreciation does impact my car-buying habits - I'm a huge fan of it as it gets me into some fantastic petrol barges without stumping up £50k myself!
Then I had a stream of company cars.
Now I tend to buy at an age / price point (approx 20% of new value) that it really makes no odds. Some I'll lose a bit, some I'll actually gain a bit.
So yes, depreciation does impact my car-buying habits - I'm a huge fan of it as it gets me into some fantastic petrol barges without stumping up £50k myself!
It depends on how you look at it...
I'm considering buying a new Range Rover Evoque, but all I'm really looking at is that its X amount per month for Y years and then I change it for something else at X amount for Y years. As long as I'm happy with that monthly payment I'm not too bothered about what the car is "worth" as technically you're never actually paying for the full amount. On the flip side I don't need to worry about MOTs or (hopefully) costly issues. Will I lose out over second hand? Maybe? I don't know or really care, but RR Evoques residual values are pretty damn good as second hand ones are selling for £34k (for now.....) when it's only £44k new...it's far easier to get PCP than a loan, and a loan may end up far more per month than a PCP new car anyway.
Cheaper older car then yes I'd be a bit more careful and buy something that'll hopefully sell for similar money. But my experience of second hand cars isn't that great lately, a few years back it was far easier to buy and sell for similar money, but now I find it really difficult and at this time in my life I hate worrying about "is my car going to break and how much will it cost?".
I'm considering buying a new Range Rover Evoque, but all I'm really looking at is that its X amount per month for Y years and then I change it for something else at X amount for Y years. As long as I'm happy with that monthly payment I'm not too bothered about what the car is "worth" as technically you're never actually paying for the full amount. On the flip side I don't need to worry about MOTs or (hopefully) costly issues. Will I lose out over second hand? Maybe? I don't know or really care, but RR Evoques residual values are pretty damn good as second hand ones are selling for £34k (for now.....) when it's only £44k new...it's far easier to get PCP than a loan, and a loan may end up far more per month than a PCP new car anyway.
Cheaper older car then yes I'd be a bit more careful and buy something that'll hopefully sell for similar money. But my experience of second hand cars isn't that great lately, a few years back it was far easier to buy and sell for similar money, but now I find it really difficult and at this time in my life I hate worrying about "is my car going to break and how much will it cost?".
I always bear it in mind when looking, unless I am looking at the bottom end of the market.
I have bought MINIs quite a lot as the residuals are pretty good. Our first we lost appro £1k per annum over si years which is pretty good, latest Clubman I am losing about £2k per annum but I expect that to flatten.
Biggest loss was a Smart Roadster which I needed to sell early because I was banned from driving (medical condition) which I lost £2.5k pa.
Recent purchase of motorhome was definitely depreciation driven. We wanted to try a motorhome, but not potentially lose thousands in a short space of time. Hence we paid the VW tax and bought a T25 which hopefully has lost nothing in 2.5 years.
Mike
I have bought MINIs quite a lot as the residuals are pretty good. Our first we lost appro £1k per annum over si years which is pretty good, latest Clubman I am losing about £2k per annum but I expect that to flatten.
Biggest loss was a Smart Roadster which I needed to sell early because I was banned from driving (medical condition) which I lost £2.5k pa.
Recent purchase of motorhome was definitely depreciation driven. We wanted to try a motorhome, but not potentially lose thousands in a short space of time. Hence we paid the VW tax and bought a T25 which hopefully has lost nothing in 2.5 years.
Mike
Makes all the difference to me, but usually means I can be in much nicer cars that I first thought, so not really what you were asking.
Best buy was a 535d sport touring, 6 months old, driven for 40k miles and 2 years and cost me £280 a month in depreciation.
Not bad for a car that listed at £54,000.
M3 CSL, paid £31k for it and sold it 18 months later for £32500.
2 year old A6 3.2fsi Quattro Avant, listed for £52k and only had 13k miles on it. Was offered to me through Audi finance for £12k, when they were £24k on every forecourt in the UK. It was Jan 2009 though. But sold that 2 years later with 50k more miles on it far a fair bit more.
It plays a part for sure, but I have also bought things I know will hemorrhage money too, but couldn't resist.
Best buy was a 535d sport touring, 6 months old, driven for 40k miles and 2 years and cost me £280 a month in depreciation.
Not bad for a car that listed at £54,000.
M3 CSL, paid £31k for it and sold it 18 months later for £32500.
2 year old A6 3.2fsi Quattro Avant, listed for £52k and only had 13k miles on it. Was offered to me through Audi finance for £12k, when they were £24k on every forecourt in the UK. It was Jan 2009 though. But sold that 2 years later with 50k more miles on it far a fair bit more.
It plays a part for sure, but I have also bought things I know will hemorrhage money too, but couldn't resist.
Mr E said:
I'd suggest 2k a year in depreciation is more than acceptable.
I've just bought something that I suspect cost the previous owner a pound a mile.
In 26 years of motoring, I've averaged about £400 a year in depreciation. But then I buy cheap cars, and keep them too long. I've just bought something that I suspect cost the previous owner a pound a mile.
I don't look at likely depreciation when I buy, more payback. Last car I bought for me, was a serious calculation. I was giving an old cavalier back to my wife and I'd been achieving 30 mpg on a run. I figured I could buy a newer cavalier or mk4 astra (which quite frankly seems the same car to me) for about £1000, or I could invest £5K (3K more than I've ever paid for any car - and that was an MG Metro Turbo that I lost £50 in depreciation in 18 months) in a big diesel and get 55 Mpg. I did the calcs. It said I'd pay for a Honda accord in 2 years compared to my single alternative. I've had it 3 years and have calculated that it took 2.5 years to payback compare to a cavalier.
So rather than think about depreciation, I think "when will the car be FREE"
When I help my wife make car buying decisions, we just look at what she wants, what money she has and buy the best compromise. The cavalier was replaced with a 2001 Mini for no other reason than it was yellow and had a black roof.
On the other hand I won't let her sell her MX5 as she told me it would be a good investment, and I know it'll be 20 years before it's worth what we paid. I did offer to buy it off her at it's current value, but as we have joint accounts, it's a silly conversation.
I don't care.
Well, I do, and I have a good idea of what I'm going in to, but I'd never buy something I didn't want because it had better residual values than a car I did want.
It's rarely than issue because it often takes me a while to get to like new cars so it's not often I want to actually buy a new car. Historically I've mostly bought the car I liked but older and spent the money running it instead.
Better residual values tends to suggest wide appeal. That generally suggests it wouldn't be the car for me anyway.
Well, I do, and I have a good idea of what I'm going in to, but I'd never buy something I didn't want because it had better residual values than a car I did want.
It's rarely than issue because it often takes me a while to get to like new cars so it's not often I want to actually buy a new car. Historically I've mostly bought the car I liked but older and spent the money running it instead.
Better residual values tends to suggest wide appeal. That generally suggests it wouldn't be the car for me anyway.
It's just another running cost for me, no more or less important than any other.
However, I run the vast majority of my cars into the ground meaning that the rate of depreciation isn't really important after I've bought it - I just care about the total depreciation (ie purchase price minus value when I scrap it or break it for parts) and how long it'll last; thus I view depreciation as largely a good thing because I never buy new. The exception to that is the Elise; at the time, I would never have spent that much on a car which would depreciate in the normal way.
However, I run the vast majority of my cars into the ground meaning that the rate of depreciation isn't really important after I've bought it - I just care about the total depreciation (ie purchase price minus value when I scrap it or break it for parts) and how long it'll last; thus I view depreciation as largely a good thing because I never buy new. The exception to that is the Elise; at the time, I would never have spent that much on a car which would depreciate in the normal way.
Edited by kambites on Friday 22 August 08:28
No. Otherwise I wouldn't buy any!
Seriously though, when I bought the current Mondeo I did a diesel vs petrol calculation, ignoring servicing costs because I do it myself, the petrol was the same cost of 3 years & 40k. Both had a residual value of £0, because it's a Mondeo, diesel or petrol it will be close to worthless at 6 years old!
Seriously though, when I bought the current Mondeo I did a diesel vs petrol calculation, ignoring servicing costs because I do it myself, the petrol was the same cost of 3 years & 40k. Both had a residual value of £0, because it's a Mondeo, diesel or petrol it will be close to worthless at 6 years old!
Running through the list of cars that I've owned over the last 20 years I am almost certainly running negative depreciation.
I'm not terribly good at getting the last £ when selling but I always buy very well, to the point that the seller will be paying for a large part of my potential depreciation or profit. I also tend to buy at the weak points in the market when most buyers are out of the market.
I'm not terribly good at getting the last £ when selling but I always buy very well, to the point that the seller will be paying for a large part of my potential depreciation or profit. I also tend to buy at the weak points in the market when most buyers are out of the market.
Not really.
I've had 3 brand new cars (and lots of second hand ones). The First, a mini cooper S one of the first I paid cash for so I wasn't paying monthly and getting stung at the end so it was 'cheap' motoring. Cost about £2k a year.
A Porsche Cayman was a bit harder to swallow, probably cost me £9k a year in depreciation but I knew what I was getting into and I could afford it.
I still have my 3rd, an Octavia VRS it was paid for 2 years ago. I'll probably run it until it becomes unreliable every year I keep it the P.A. costs go down.
On the other hand I made money on two classic Porsches I have owned.
I've had 3 brand new cars (and lots of second hand ones). The First, a mini cooper S one of the first I paid cash for so I wasn't paying monthly and getting stung at the end so it was 'cheap' motoring. Cost about £2k a year.
A Porsche Cayman was a bit harder to swallow, probably cost me £9k a year in depreciation but I knew what I was getting into and I could afford it.
I still have my 3rd, an Octavia VRS it was paid for 2 years ago. I'll probably run it until it becomes unreliable every year I keep it the P.A. costs go down.
On the other hand I made money on two classic Porsches I have owned.
Gassing Station | General Gassing | Top of Page | What's New | My Stuff