Car Depreciation

forgotmyname

Iceweasel wrote: »

I'll sell it after 5 years I imagine but how will I calculate the depreciation - using the list price? Or the price I paid for it?

You manipulate whichever figure best suits your needs

Dont forget that adding £40 worth of fuel and washing it will instantly make it worth at least £500 more.

Iceweasel

forgotmyname wrote: »

You manipulate whichever figure best suits your needs

Dont forget that adding £40 worth of fuel and washing it will instantly make it worth at least £500 more.

You got it in one - that was my whole point - although a bit tongue in cheek.

I was hoping to convey the point that depreciation figures are pretty meaningless if you only look at the full list price.

Very few people are paying full price these days, and certainly not fleet buyers, so they don't suffer anything like the private buyer.

Some folks recommend buying nearly new to avoid the huge depreciation - so I was looking at one year old cars that had dropped 10K from the list price - but if you can get a brand new one with over 8K off - why buy nearly new.

almillar

How's this for a very simple one - buy a £5k 5 year old car every 5 years. You'll end up trading in a 10 year old car against a £5k 5 year old car. Unless you do big mileage, and if you choose wisely, you'll have very reliable motoring, and a 'new' 'better' (higher spec) car every 5 years. If finances allow (and you'll be saving instead of taking a loan - £83.33 per month!) then you can put more in at purchase time. That doesn't even allow for the trade-in price!

Herzlos

Assume it'll lose about half of it's value every 3 years until it gets to the point of being a banger.

DKLS

Some models depreciation curve is like going off a cliff, like my mates 6 series he bought brand new with lots of options ticked, 4 years later he received a rather large kick in the nuts when he traded in.

forgotmyname

almillar wrote: »

How's this for a very simple one - buy a £5k 5 year old car every 5 years. You'll end up trading in a 10 year old car against a £5k 5 year old car. Unless you do big mileage, and if you choose wisely, you'll have very reliable motoring, and a 'new' 'better' (higher spec) car every 5 years. If finances allow (and you'll be saving instead of taking a loan - £83.33 per month!) then you can put more in at purchase time. That doesn't even allow for the trade-in price!

Or buy a high mileage 130k ish 5 year old car for just over £2k and sell its 5+ years later for £800? And repeat?

Maybe I struck lucky on that one?

Richard53

Some years ago now, but one of the magazines did exactly this calculation. There are a ton of variables, so nothing is set in stone, but the rule of thumb they suggested was 'buy at two years, sell at five'. You get the reliability and 'niceness' (or prestige, or whatever floats your boat) of a newish car, but someone else has stood the massive depreciation of the first 24 months. You have a year of manufacturer's warranty, and then you sell before age-related problems start to appear. Only a very general rule, but it seems to make sense.


I suppose it's a balance between losing value (some, but not too much) and reliability (not perfect, but not too bad).


Seems like Iceweasel had it about right.

Hintza

Richard53 wrote: »

'buy at two years, sell at five'.

And for those looking for cheaper buy at 5/6 (only after all the big items have been replaced) and run for another 5 years plus.

Hintza

Iceweasel wrote: »

...but if you can get a brand new one with over 8K off - why buy nearly new.

My MIL gave me the job of suggesting a new car to meet her needs and a budget, which I did with due diligence.

Then off her own bat she goes out and spends £5-£7k over budget on a VW Tiguan that the dealer was using as a demonstrator.

I never had the courage to tell her I could have sourced a brand new one £2k cheaper albeit with a 6-8 week build time.

scaredofdebt

Wangeye08 wrote: »

Hi all,

Has anyone seen a depreciation vs age graph or similar?
Just trying to work out the most cost effective age to buy a new car at. I know there's many other factors, but this is a good jumping off point for looking!

I've set up a website to track this type of information but I need hundreds of people using it over a period of time and so far there are only a couple of people using it.

It's important to me as I do a lot of miles and have an extremely tight budget and motoring is one of my biggest costs.

I wonder if it's worth buying nearly new as although the depreciation is relatively high vs a banger, the running costs including repairs will be lower and may offset the depreciation. Of course this will vary dramatically on make/model and driving style and mileage etc.