Changing cars... Every 3 years or much longer?

I think cars depreciate most in their first few years?

personally I don't see the point in relpacing a car till it's costing as much to repair per year as a new one would cost.

You would be better to buy a 3 year old car and drive it till it falls apart.

vikingaero wrote: »

For instance if you are an oncall engineer or district nurse then it may not be wise to venture to close to the realms of bangernomics if you are expected to jump into your car at a moments notice and expect it to be 100% uber reliable or if something happens and you need to take time off to repair the vehicle

People say this, but if a car is well maintained there's no reason it should not be somewhat reliable. My 14 year old banger has never broken down in the year and half owned, but I've heard of people with nearly new cars breaking down.

Suppose on the whole chances are a banger will be more prone to breaking down, but I would argue much of the reason for this is because people can't be bothered getting simple things like oil and cam belt changes done and ensuring the coolant system is tip-top and checking levels regularly.

Suppose I've been lucky so far and the breakdown is around the corner perhaps?

For sometime now I've been developing a spreadsheet which works out total cost of ownership / use for a car over a given period of time, as an average monthly expense. It is the best way to track what a car really costs in my opinion. It also shows you how the total outgoings change with age of car.
Sometimes the results can be suprising.
I draw a few conclusions from doing this excercise with a variety of cars:

1. Bangeromics - the usually 6 or 7 year old car that has more or less stopped depreciating is the cheapest. So long as you are not hit by an big repair bill this is hands down the cheapest way to have the use of any car.

2. As a rule buying brand new is the most expensive way to have the use of a car - there is one exception to this rule and a caveat.
The exception to the rule is the Mini, it retains an eye watering "up to" 69% of it's value at 3 years old. This means that year 4 depreciation is not much different to the average of the first 3 years, but the other expenses go up in year 4 (MOT, extended warranty / risk of repairs, later more expensive services) making it the most expensive year of this cars life. Paying that kind of money for an out of waranty Mini is nuts if you can raise the cash for a new one, the new one is cheaper in the long run.
The caveat is you get a big repair bill in year 4 out of warranty, on a car that depreciates slow enough you would have been better off with a new one.

3. After these extremes the waters muddy a bit. Do I keep a car past 3 years old or not? Well it really depends on how fast, i.e. how steep the depreciation slope is. If the depreciation slope is shallow enough year 4 could still be more expensive like the Mini. What is generally the case, if you get a car that holds at least 43%-44% of value at 36 months old it is just about cheaper to sell it and buy an up to 6 month old, 20% off list price car and run that until 36 months old. It is because the average monthly depreciation months 3-6 to 36 is not much more than year 4 (months 37 to 48) but the other running costs have gone up (MOT etc. as above) making year 4, usually 5 and sometimes 6 more or about the same as 6 to 36 months.
Ford's do not fall into this category, most of them (inc. Focus) retain around 33% to 39% at 36 months old. Buy these cars as 2+ year olds and then keep them as long as possible. Alternatively lease them, because the lease costs is usually less than the cost of depreciation over the first 36 months, unless you get a big enough discount - like say 20% AND 0% credit. The lease companies get big discounts on some cars like this. I've found it works for Ford and Vauxhalls, not checked every manufacturer.
When I do calculations like this I include the "cost of cash in car", that's the interest you loose on that money not invested, or the interest charges you incurr because you are not paying off some of the mortgage. The fact that this still results in nearly new cars coming out cheaper per month than 3 year olds for those cars with strong residuals is a bit of an eye opener.

So if you want to change cars every 3 years and avoid it costing more than it needs to, find cars with strong residuals, buy at 3 to 6 months old, sell before 36 months old and repeat the process. I'm thinking mostly German cars, off the top of my head, Skoda, BMW, Audi, some VW's, Nissan X Trail and Quashqai, Mecedes and others.
Alternatively by older cars, those cars with strong residuals need to be 6 or 7+ years old to become really cheap, weaker residual cars and 4 years old+ is old enough.

The last conclusion I come to with this, is that no 36 month old car is worth greater than about 42% of it's original list price, despite what the market will pay, because if you can raise the extra funding the 3-6 to 36 month old is about the same or cheaper.

For a lot less per month than a new Focus you could drive a 7 to 10 year old BMW 5 series petrol. There are examples around that are near showroom condition 80,000 to 120,000 miles and will probably go on for another 10 years, and you might like it enough to keep it that long.

anewman wrote: »

People say this, but if a car is well maintained there's no reason it should not be somewhat reliable. My 14 year old banger has never broken down in the year and half owned, but I've heard of people with nearly new cars breaking down.

I've run a 1991 BMW for the last 3 years, racking up around 25K per year with no breakdowns.