Opportunity cost of newer cars

scaredofdebt

I've actually built a website to monitor costs of cars as I recently have been running bangers in the belief they are cheaper, but it isn't really that simple.

My last "banger" cost £1,360 and lasted me just over 2 years, I do 25-30k miles per annum so that kind of mileage isn't really suited to bangers as I run diesels for the fuel savings but they can be very expensive to fix. The last car was returning 64 MPG (mainly motorway miles) but the turbo went and there was also a possible injector that needed replacing, so I got rid.

Factoring in ALL costs the car had cost 16p per mile which is extremely good value but at my mileage that worked out at £331.60 a month.

Repairs accounted for 2.6p a mile, so about £60 a month.

I did some sums and thought perhaps a newer car might be better, one that had better MPG and would cost less to repair and tax.

So my current car was bought for £5k with 44k on the clock (4 year old) and a claimed 80+ MPG, no tax.

Now early indications (had the car 4 months) are that the 80 MPG figure is pure fantasy, but I am still doing a respectable 72 MPG which is saving me around £50 a month and so far no repairs (other than brake pads) so saving another £35 a month. No tax and cheaper insurance saves a further £20 a month, so overall with the finance the "nearly new" car is costing me about £20 a month more than the old one.

But I do have a fairly shiny car that I feel is reliable and that is hard to put a value on, plus the car should be worth something when the finance ends so I can sell/part ex it and that will bring down the cost, I am assuming 100% depreciation in my figures.

So don't assume bangers are always cheaper, especially if you do highish miles.

If anyone wants to use my website PM me as I need some people to test it, includes MOT/Tax/Insurance and Service reminders so qutie useful and of course free of charge.

System

Scaredofdebt - running costs are one thing and I too found newer cars competitive on that front, but opportunity cost needs to be factored in if you invest, the more aggressively you invest the higher the opportunity cost

Although if you feel it's worth it despite the opportunity cost it's your right to make that decision, I think it depends on circumstances

aldershot

The governments new discount rate for insurance lump sum payments is minus 0.75%. How do the numbers stack up using negative real returns?

G_M

Malthusian wrote: »

It is pretty rare for bangers to explode, usually they just grind to a halt,

Mine tend to explode.

Then someone told me they need aprick before you start.

greatkingrat

If you take this argument to its logical conclusion, you will never buy anything, because you can always invest the money instead and get a better return. Then you end up as a miser living on cold baked beans while having £100k in the bank!

System

I find where I live you can expect to be vandalised or rear ended at least once a year, my first car was broken into and another time the wing mirrors of every car in the street kicked in, and someone pulling out at a roundabout got the side of me, my second also had wing mirror kicked in, has been keyed once, tyres slashed at work and rear ended twice - once in traffic and once parked up.

I've also driven past a couple of parked up cars whichd been hit &run by something

bowlhead99

Sounds like it could make sense for you to "invest" in changing your surroundings rather than putting more money into long term market investments and comparing them to cars. Knowing that people in the area don't care about you or your stuff, or actively resent it, is not very nice. Getting to the end of your life with a bigger pot of cash to leave your offspring isn't any more of a win than having them grow up in a lower-crime environment.

And yet in other threads you mention that once you've paid off a wedding or this or that there isn't much more you need to spend money on...

Malthusian

MatthewAinsworth wrote: »

I find where I live you can expect to be vandalised or rear ended at least once a year, my first car was broken into and another time the wing mirrors of every car in the street kicked in, and someone pulling out at a roundabout got the side of me, my second also had wing mirror kicked in, has been keyed once, tyres slashed at work and rear ended twice - once in traffic and once parked up.

Dizzee_Rascal,_Hard_Back wrote:

And another thing, buy your house before you buy your car
Don't tell no one where you are, even better if you're far
Everybody knows you're gangsta and that Porsche looks great
But do you really want it sittin on that council estate?

Buying an expensive car and leaving it parked on the street (on any estate, let alone a bad one) is just idiocy.

It's like "investing" in gold and then leaving it on your garden wall.

cloud_dog

I like things to be simple, and do not believe you can easily quantify the 'opportunity cost' for/against a new car.

Surely, you can simply equate the loss or opportunity cost of buying a new car (I personally would never buy new; nearly new, yes) against the loss of additional running costs of a banger.

I have surprised myself by responding to this thread because as someone else said, if you are constantly considering the effects of purchasing something you'll never do it.

atush

MatthewAinsworth wrote: »

I find where I live you can expect to be vandalised or rear ended at least once a year, my first car was broken into and another time the wing mirrors of every car in the street kicked in, and someone pulling out at a roundabout got the side of me, my second also had wing mirror kicked in, has been keyed once, tyres slashed at work and rear ended twice - once in traffic and once parked up.

I've also driven past a couple of parked up cars whichd been hit &run by something

Sounds to me like you need to move?