Car deprecation and personal loan - is this how people do it?

Mobeer

I prefer a simpler calculation:

(cost now - trade in at 4 years old) / 48 months

That doesn't include fuel, insurance, servicing etc but gives me an idea of how much the car purchase alone costs. I don't consider interest - I want to save up before the purchase, and interest on (non-risky) savings is really low.

So £32k to buy, £12.8k to trade in at 4 years old, means £400/month.

Stubod

..10 year old car for £13k...wow, the published average "life" of a car is about 8 - 12 years!!

...unless you are talking about something "classic"?

...and an "expensive" old car is more likely to cost big sums to maintain...IMHO

MARKMAKAVELI

Stubod, how important is mileage when looking at the life of a car? If it had 70k on the clock for example and I'd do probably add say 20k over 3yrs maximum. 

Stubod

MARKMAKAVELI said:

Stubod, how important is mileage when looking at the life of a car? If it had 70k on the clock for example and I'd do probably add say 20k over 3yrs maximum. 

..everybody fixates on mileage, ( and there seems to be a particular psychological barrier for most people as the mileage gets up towards 100k), but I am not sure that mileage by itself is that key?

A low mileage / underused, "under-serviced" car could be just as problematic as higher mileage one that has been well looked after?

I would suggest the type of journey / type of owner / service history etc. all come into play.

I purchased an ex company car Pug 405 with 100k miles after 3 years. The chap who owned it was " 1 careful owner" and fairly fastidious, so I knew the car and the owner, and it had full service history and it had mainly been used for "long" journeys. (ie against something with lesser miles that may have done nothing but lots of short journeys).

I kept it for about 5 years (with no mechanical problems), and took the mileage up to 160k then sold to a mate who had it for another few years and it finally expired, (ie beyond economic repair) with about 225k on the clock.

The problem with buying a 10 year old car you won't really know if it's been looked after or not? It may have been well looked after, it may well have had several really careful owners, or 1 owner that thrashed it!?

Another thing to bear in mind is the relative complexity of modern cars, particularly those items that are "electro mechanical" and are more likely to fail with age, (and be extremely costly to fix).The more "expensive" the car, the more likely it is to have lots of gadgets that will increase the risk of something going wrong at some point. 

motorguy

Stubod said:

..10 year old car for £13k...wow, the published average "life" of a car is about 8 - 12 years!!

...unless you are talking about something "classic"?

...and an "expensive" old car is more likely to cost big sums to maintain...IMHO

Depends on the car but £13K for a 10 year old car might be buying you a 3 series BMW, albeit one with a bit of spec and performance (something like, say, a 335i M Sport)
Shouldnt really cost much more than a regular 3 series to maintain either and will hold its value relatively well.

Two of my BMWs are 15 years old and have many more years left in them.  Granted, ones worth just around £3k and the other around £10k.

motorguy

Stubod said:

The problem with buying a 10 year old car you won't really know if it's been looked after or not? It may have been well looked after, it may well have had several really careful owners, or 1 owner that thrashed it!?

Another thing to bear in mind is the relative complexity of modern cars, particularly those items that are "electro mechanical" and are more likely to fail with age, (and be extremely costly to fix).The more "expensive" the car, the more likely it is to have lots of gadgets that will increase the risk of something going wrong at some point. 

It should be quite easy to mitigate the risk of that by checking the maintenance history of the car with the owner.  A car at that price and age combo should be being well maintained and that should be reflected in the maintenance history.  A long ownership tenure and an enthusiast owner is always a good starting point.

My 2006 BMW is worth around £10,000 or so, but came with a full maintenance history from new (a file full of receipts), and the owner had had it 4 years and kept it in a carpeted garage - something i have maintained since (all bar the carpet in the garage!)

Many independents about also specialising in particular brands.   A 10 year old but relatively expensive car neednt be expensive to repair or particularly costly to fix either.  Back to my 335i example previously, theres not that much difference in the supporting mechanicals and electrics of it compared to a common or garden 320d, but i'd have a lot more faith in the longevity of an unstressed six cylinder petrol compared to a 4 pot diesel half strangled by a DPF and EGR valve.

motorguy

MARKMAKAVELI said:

Stubod, how important is mileage when looking at the life of a car? If it had 70k on the clock for example and I'd do probably add say 20k over 3yrs maximum. 

Its important relative to value, but as long as a car has been well maintained it shouldnt be an issue.

My 2006 330i has 110,000 miles on it but looks and drives like a car half its miles and age.  It had been well maintained in its time and i keep on top of maintenance also.  

motorguy

Totally missing the point that. that person still has a asset on their drive, compared to them that have just handed their loaned car back and lost £Y in their monthly payments..
And now can not afford another car due to lost job.

Ah, that old chestnut - someone who leases / PCPs a car has no cash reserves at all, will lose their job and will get their comeuppance for living above their station in life.

fred246

I have had 2 cars that I have taken from almost brand new to 17 years old. They both were more reliable in the second half than the first half of my ownership. One of them broke down in the first week. You just end up with a pattern of replacing batteries, exhausts, brake pads & discs etc. I check the fluids and tyres regularly as any owner should do. I service them myself but if garages service them properly then my cars wouldn't be any different from anyone else's. My current car passed 100,000 8 years ago. I thought it wouldn't go on much longer, but as it turns out passing 100,000 meant nothing. Maybe I have just been lucky but I do question the belief that cars always become more unreliable the older they are.

Supersonos

MARKMAKAVELI said:

I'm curious as to how people afford the more prestigious cars (aside from the people who live in rollover credit card debt). I leased my realistic dream car for a few years and whilst I loved it, I'm not sure if I'd do it again.

I didn't have a car for a couple of years as I lived in Central London and didn't need one, so I just saved hard, then bought a prestigious car outright when I moved.

Ever since I've put £200-500 per month into a savings account to cover depreciation and allow me to buy a different car as and when I choose.  Slowly, the value of the car I can afford has increased (I take delivery of a new £65k car in April).  If I worked out how much I've saved by not financing cars over the last 13 years, I'd imagine it's significant.

I find it interesting that everyone assumes my car is on finance/PCP and asks how much it is a month rather than how much it cost - it's clearly very much the norm, but I personally find it quite baffling to spend so much (initial payment plus monthy payments) on something you hand back after a few years only to start all over again.