Most tax efficient and lowest annual cost to own a new or nearly new car in retirement?

GazzaBloom

Not sure if this is the right place for this topic but it is part of retirement planning so here goes...

I am retiring at the end of the year and have tentatively put a lump sum of tax free drawdown cash in our plan to purchase a new or probably nearly new car in new tax year from April 2026. I am considering getting an EV but not absolutely set on it yet.

Ideally, we should get a car new or up to say 18 months old and run it for say 7-8 years and look to change it then.

Expected mileage is retirement is expected to be a lot lower than current with the work commute of 65 miles a day round trip. So, let's say 5,000-10,000 for arguments sake.

So, the decision point is 19 months away yet but in the meantime I am musing on all the different options to fund a vehicle from DC pension drawdown.

I am not sure what the most tax and cost efficient way for total annual costs are but there are a few ways to go as I see it:

1) Cash purchase - requires a crystallisation of a fairly large lump to be able to buy with tax free drawdown. Subject to depreciation, maintenance costs, new tyres, insurance etc.

2) Personal lease - Interesting, especially with an EV from say Octopus EV, as they offer a reduced charging tariff on your home electricity and it's a all in deal with a predictable lower annual cost and no repair bills but you are carless in say 4 years unless you renew the deal with a new car.

3) PCP finance - Yuck - paying interest when we are debt free turns my stomach, been there done that got the T-shirt, never again!

Cars are a costly, spendy, pain in the ar*se, money pit whether you are working or retired but a necessity living in a rural area.

Pay less and buy older used cars but expect to pay out for repairs/maintenance items, Pay more and buy nearly new and get some peace of mind with warranty for a coupe of years and hopefully higher reliability/less wear or maintenance items. Lease and never own and have a fixed regular monthly payment...forever!

What do you do for a car in retirement and is there any analysis you are aware of for the best total cost of ownership?

lookbook

I would go with Octopus deal.

Keep_pedalling

I would be looking at something like an ex demonstrator. I was looking at changing my EV out this year after the warrantee ended, and have seen lots of EVs just a few months old with very low milage on them at significantly lower prices the a factory order would be. 

With your plan to run it for 7 to 8 years, the 7 year warrantees from Kia and MG should be worth considering. 

westv

Would you consider petrol? That will be a lot cheaper than an EV.

GazzaBloom

westv said:

Would you consider petrol? That will be a lot cheaper than an EV.

Yes sure, I am not locked in and will definitely consider another cycle of an ICE car. 

Depreciation and remaining residual resale value after the 7-8 years is more of a concern with an EV.

cfw1994

We bought our Kona EV outright with cash: now 5yrs in, the running costs are pretty small (we manage about 3p/mile plus insurance - the latter takes some seeking out nowadays, but that can be true for all cars).

50k miles now, still feels like new, & when I get in my old XC60, the Kona makes it feel like driving a dinosaur.  That said, the Volvo seats are SUPER comfy, & it is a reliable load lugger for us (that one is now 10 years old, owned from new!).

I do sometimes wonder if we should have considered some form of lease - they are computers on wheels - but like you, we are happy to keep it for a good few years, so felt buying outright was okay 🤷‍♂️

in summery: I’m not sure if the right answer for you, but owning it outright felt the correct thing for us!

GazzaBloom

Keep_pedalling said:

I would be looking at something like an ex demonstrator. I was looking at changing my EV out this year after the warrantee ended, and have seen lots of EVs just a few months old with very low milage on them at significantly lower prices the a factory order would be. 

With your plan to run it for 7 to 8 years, the 7 year warrantees from Kia and MG should be worth considering. 

The Kia EVs are quite swish 

MikeJXE

In relation to your last question

I was faced with that 5 years ago and decided on a 3 year old Jaguar XE approved used, 22,000 on the clock. £16,000

The best car I have ever owned most being top of the range Fords

Despite service intervals at 20,000 miles I have it serviced every year (£300 ish)

I now do about 5000 miles per year, I have owned it since December 2019 

My milage now stands at 45,000 miles.

My total cost of repairs are £130 on an ABS sensor 

I have logged every litre of fuel and has cost an average of 10p per mile 

Road tax is £30, insurance with maximum no claims is £800 ish, high due to my age 83 years

I will keep this car, it is probably my last and a dream to drive in absolute luxury 

WBAC are quoting £9,000

GazzaBloom

cfw1994 said:

We bought our Kona EV outright with cash: now 5yrs in, the running costs are pretty small (we manage about 3p/mile plus insurance - the latter takes some seeking out nowadays, but that can be true for all cars).

50k miles now, still feels like new, & when I get in my old XC60, the Kona makes it feel like driving a dinosaur.  That said, the Volvo seats are SUPER comfy, & it is a reliable load lugger for us (that one is now 10 years old, owned from new!).

I do sometimes wonder if we should have considered some form of lease - they are computers on wheels - but like you, we are happy to keep it for a good few years, so felt buying outright was okay 🤷‍♂️

in summery: I’m not sure if the right answer for you, but owning it outright felt the correct thing for us!

Nice one, 50K miles and 5 years with an EV is a decent amount of time to evaluate your decision.

GazzaBloom

MikeJXE said:

In relation to your last question

I was faced with that 5 years ago and decided on a 3 year old Jaguar XE approved used, 22,000 on the clock. £16,000

The best car I have ever owned most being top of the range Fords

Despite service intervals at 20,000 miles I have it serviced every year (£300 ish)

I now do about 5000 miles per year, I have owned it since December 2019 

My milage now stands at 45,000 miles.

My total cost of repairs are £130 on an ABS sensor 

I have logged every litre of fuel and has cost an average of 10p per mile 

Road tax is £30, insurance with maximum no claims is £800 ish, high due to my age 83 years

I will keep this car, it is probably my last and a dream to drive in absolute luxury 

WBAC are quoting £9,000

Sounds good

fatbelly

Depreciation is the killer. Buy something that won't depreciate

https://www.autotrader.co.uk/car-details/202408022467358