car deprecation in an instant

tali

makes for sobering reading for those trying to keep up with the jones'
"THOUSANDS of motorists will pick up a new car with the first of the 07 number plates tomorrow - and its value will plummet by up to £7,000 as soon as they drive it off the forecourt.

In some cases, a car will be worth 44 per cent less than it had been just minutes earlier if the owner wanted to sell it again - and, surprisingly, many do.
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The day of the number plate change is one of the biggest of the year for new car sales to private buyers. But a consumer test with 20 of the biggest-selling models in the UK discovered a massive gap between the price paid on the forecourt and the value only a few miles later.

The motoring magazine Auto Express rang dealers in three parts of the country for each of the 20 models, claiming to be an owner who had made a terrible mistake.

The "owners" said they had bought the car less than a week earlier and had only driven a few miles in it, but due to a "change in circumstance" needed to sell it again and wanted to see what they could get for it.

The results shocked the researchers. The biggest price gap - £6,985 - was on a BMW 3 series, which costs just under £25,000 new but which dealers would buy back for only £18,000.

The biggest proportional loss was on a Ford Ka, whose slump in value from £7,395 to only £4,167 in a matter of days represented a 44 per cent drop.

The car which held its value the most, in percentage terms, was the £10,750 Honda Jazz, which fell in value by 15 per cent to £9,100 after a few days - still a £1,650 loss for an owner.

Researchers based their figures on the original list price of the car and an average of the three quotes from dealers to buy it back when it was a week old with 50 miles on the clock.

In the course of their investigations, the researchers discovered many of the 60 franchised dealers they rang had experienced dozens of similar cases themselves.

They ranged from a man who bought his wife a manual car for her birthday and then discovering her licence covered her to drive only automatics, to people whose businesses had collapsed the following day.

Sometimes the purchase had been an impulse buy and the owners later realised they had made a terrible mistake.

The depreciation problem is partly caused by the fact that dealers are so desperate to hit new-car sales targets that they bring in more models than they need and pre-register them to make the figures.

Jeff Patterson, of the car-price "bible" Glass's Guide, said: "The simple fact is manufacturers produce more units than they can ever sell.

"These cars have to go somewhere when they leave the factory gates, and the only option is to pre-register some of them. Technically, they are no longer new, but the fact they only have delivery miles on the clock and are very cheap pushes down the value of every other used car."

Car dealers are supposed to declare all pre-registrations so the public can see how true sales figures are, but it is believed the industry has found legal loopholes to get round declaring these.

Mr Patterson said: "These vehicles only have to be reported if they are sold on within three months. One way the industry gets round disclosing the true amount of vehicles that are pre-registered is to just hold on to them until this period has expired."

Mat Watson, the features editor of Auto Express, said: "Hundreds of thousands of people will be visiting their car dealer tomorrow to buy a brand new 07-plated vehicle, unaware of the huge sums of money they will lose the moment they drive it off the forecourt.

"On some models, like the Ford Ka, these can be mind bogglingly high.

"But even those which have only just been released, such as the new Vauxhall Corsa, also devalue by a surprisingly large amount."

This article: http://news.scotsman.com/uk.cfm?id=312682007

Last updated: 28-Feb-07 00:10 GMT

peterg1965

What's new? It has always been thus. If you buy a new car you should be aware of the pitfalls and in any case who will buy a car and want to sell it a few weeks later? ....... unless they are complete 'plonkers'!

It is also very difficult to value a car that is just a few weeks old. It may be true that a Ford Ka that loses 44% of its value after ten days but it would probably still be worth 55% of its new cost 6 months later. The key to buying a new car is to negotiate the biggest discount possible (by shopping around) and go into the deal with eyes wide open!

DavidHM

Thing is, the Ka might list at £7,200 but it's not hard to find a base spec one for £5k. So you're actually walking away £900 down - which isn't exactly a huge profit margin. My local Ford dealer is trying it on at £5k for an 04-plate Ka with 1,650 miles (I've no idea how long they've had it though...)

Similarly, the £25k 3-Series can be bought at a discount for £22k or so I'd have thought - but £18k on that seems a bit mean. (Although given that the dealer would probably let it go at £21,000 or so, £19,500 would be more than reasonable).

Matt_Nixon

I hear the best time to buy a car is near the end of this month, I am looking for a nearly new Mazda 3 Sport, will start my trawl at the beginning of next week.

aj3001

Ok OK, who told you to post this? Did you do it becuase I am picking up my brand new car tomorrow?

Quinny_2

If you want a brand new car,then you are best to wait a few weeks,when the dealers have too much stock on their hands,and need to shift it to meet their figures.

People only buy and have a new car on the first day of the new reg,as a sort of oneupmanship,and therefore must have more money than sense if they can afford the depreciation that comes with it.

Ken.

aj3001

Its only money that would otherwise be wasted on alcohol...

DavidHM

To be honest Ken, there might be some dealers who are pushed to their quarterly targets but others will have an eye on how much they sell throughout the quarter.

Some dealers might be targetted on what they sell, rather than register, in a particular period and their quarter could have ended yesterday. Broker prices don't usually vary that much in relation to quarter end either.

That said, the very best deals might be available at the bitter end of the quarter or month, but there is simply no guarantee of that. My mate is picking up his brand new Clio right now; he ordered in December, between Christmas and New Year, and it's been in stock for three weeks.

The price he got on it, with extras, was as better than the first owner broker prices (though not quite as cheap as the pre-registered ones).

peterg1965

I brought my new BMW at the end of last September. On the day I picked my car up their were many cars be 'pre-registered' by the dealer. I asked the salesman, a friend, why they were doing this and he explained that the manufacturers bonuses were very big and they had to register enough cars to get it. The size of the bonus made it worth their while to come up with very competitive deals at that time of the year. The deal (discount) I got on my 320d M Sport Touring reflected the urgency of the dealer to register cars.

It may also be worth saying that for some reason the cars with registrations which begin with '0'. ie 06 or 07, are more popular with the car buying public than ones that have the mid year '5', ie 56 or 57. Dont ask me why but if you can wait getting a better deal at the end of September, vice end of March, it may be worth it.

trets77

i,ve lost count of the number of famous people interviewed in The SundayTimes money section who answered the following question thus.

Q: What has been your worst financial decsion decision???

A: the BMW i purchased from a dealer that lost a huge sum in deprication in a few short years.

if you can afford one good luck to you , but the dealerships live it up on your money. i saw them on their open day at Leicester race course.

OrangeProse

That's how I got into a lot of my debt, buying new cars every couple of years.

Learnt my lesson now, though. I have a 1994 BMW 520i, for which I paid £600 almost two years ago. It's sailed through 2 MOTs without needing any work doing, and if I drive it carefully it'll do 38 to the gallon. I don't really use it at the moment, as I work from home, but when I was working full time I was doing 20,000 miles p.a. in it. I service it myself three times a year without difficulty (and I'm no mechanic).

The only really expensive thing is the tyres.

I don't think there's any way to have a car and not lose something on it. The trick seems to be to minimize what you lose.