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  • FIRST POST
    • MatthewAinsworth
    • By MatthewAinsworth 30th Jul 17, 1:24 PM
    • 3,056Posts
    • 1,194Thanks
    MatthewAinsworth
    Opportunity cost of newer cars
    • #1
    • 30th Jul 17, 1:24 PM
    Opportunity cost of newer cars 30th Jul 17 at 1:24 PM
    There are budget new cars that on paper look cheaper to run than continuously replacing bangers (which includes higher rate of road tax and cost of transferring insurance)

    However, the reason I put this in savings& investments -
    - the opportunity cost of the cash tied up in the car is significant

    Suppose someone was investing and averaging 9% a year - that's a yearly cost of £90 per £1000

    If the value difference between a new car and a banger was say £7000 (£7500 new £500 old) - that's £630 a year!!!

    It gets bigger with more expensive cars - say it was a 20k car Vs a £500 banger - 19.5*£90= £1755 per year!

    So even if bangers didn't last the whole mot, they're worth it
    And not taking finance too should mean you can stoozie more to free up your emergency pot to invest
Page 4
    • bowlhead99
    • By bowlhead99 5th Aug 17, 8:24 PM
    • 7,697 Posts
    • 14,079 Thanks
    bowlhead99
    I struggle to see how this thread isn't based on a redundant point or dubious figures.
    Originally posted by N1AK
    Welcome to any one of a number of threads by MatthewAinsworth
    • bigadaj
    • By bigadaj 5th Aug 17, 9:28 PM
    • 10,810 Posts
    • 7,126 Thanks
    bigadaj
    Welcome to any one of a number of threads by MatthewAinsworth
    Originally posted by bowlhead99
    ..which some people seem to encourage....
  • jamesd
    Even if you accept that 9% is a reasonable rate of return to use, which I don't, then running bangers would be pointless because you could make so much money from investing other savings or income that saving a couple of grand per year on car costs would be inconsequential.
    Originally posted by N1AK
    9% is a bit low but not too bad. I'm averaging above 12% from P2P lending and it seems likely that I'll be getting above 9% from VCT investing. Also well above 9% from pension investing or saving once the tax gain is considered and spread over a fairly small number of years.
    • MatthewAinsworth
    • By MatthewAinsworth 6th Aug 17, 1:35 PM
    • 3,056 Posts
    • 1,194 Thanks
    MatthewAinsworth
    Indeed 9% isn't unreasonable if you take a long term risk, and you can go higher
    The value of a car may be inconsequential to some but not all, by any means
    • fiisch
    • By fiisch 6th Aug 17, 11:01 PM
    • 267 Posts
    • 139 Thanks
    fiisch
    What if a car is not just a functional object, but something that you're passionate about?

    I am an unashamed slave to PCP's, but I love cars, particularly fast ones. I have around 20% of our monthly income going out to pay for two new cars, but I overlook the opportunity cost as it's something I enjoy.

    Incidentally, I did run a "banger" for 12 months (albeit, a high performance banger), and it cost me a similar amount in maintenance as to the regular PCP of a new high-performance car.

    However, on this go round, given my annual mileage is extremely low (3k / year), looking to keep one as a garage queen, until something faster takes my fancy...
    • MatthewAinsworth
    • By MatthewAinsworth 7th Aug 17, 5:43 AM
    • 3,056 Posts
    • 1,194 Thanks
    MatthewAinsworth
    Depends what value you assign to your passion
    • alwaysready
    • By alwaysready 7th Aug 17, 6:24 AM
    • 14 Posts
    • 3 Thanks
    alwaysready
    Do whatever you want. that way, opportunity cost will be lowered since you love your decision.
    • Apodemus
    • By Apodemus 7th Aug 17, 6:44 AM
    • 972 Posts
    • 795 Thanks
    Apodemus
    Do whatever you want. that way, opportunity cost will be lowered since you love your decision.
    Originally posted by alwaysready
    Eh? No...the opportunity cost remains the same. It may be justifiable, it may be the right decision for the individual in terms of comparing opportunity cost to how they value the joy of ownership, but the opportunity cost does not change.
    • buglawton
    • By buglawton 7th Aug 17, 6:50 AM
    • 7,301 Posts
    • 3,754 Thanks
    buglawton
    Bangernomics discussions never seem to mention the mechanic factor. If you have easy access to an honest, competent and reasonably priced mechanic the bangernomics makes a lot more sense. There's also 'near bangernomics' where you buy a 6 year old vehicle for about 20% of new price yet the car drives as well as a new car and with luck may go for years on just normal servicing.
    • Apodemus
    • By Apodemus 7th Aug 17, 7:10 AM
    • 972 Posts
    • 795 Thanks
    Apodemus
    Bangernomics discussions never seem to mention the mechanic factor. If you have easy access to an honest, competent and reasonably priced mechanic the bangernomics makes a lot more sense. There's also 'near bangernomics' where you buy a 6 year old vehicle for about 20% of new price yet the car drives as well as a new car and with luck may go for years on just normal servicing.
    Originally posted by buglawton
    Yep, that's me. Current car was bought at 7 years old with 35k on the clock, now 14 years old and 230k. Starting to get into that age where I am now keeping an eye out for another in the 5-8 year-old bracket. Means I get comfort and never have more than about £5-7k tied up in a depreciating asset.
    • Malthusian
    • By Malthusian 7th Aug 17, 2:26 PM
    • 3,918 Posts
    • 6,116 Thanks
    Malthusian
    I am an unashamed slave to PCP's
    Originally posted by fiisch
    I'd not heard that version of the acronym and I thought you were talking about something completely different at first.
    • qwert yuiop
    • By qwert yuiop 5th Jan 18, 6:00 PM
    • 2,231 Posts
    • 1,335 Thanks
    qwert yuiop
    I heard once in America someone with a campervan put it into cruise control on the motorway and went out the back of it to make himself a cup of tea. He crashed unfortunately, but successfully sued the caravan maker for not providing a warning that you can't leave the drivers seat while driving
    Originally posted by MatthewAinsworth
    I don’t believe that. Everyone knows Americans don’t drink tea.
    “What means that trump?” Timon of Athens by William Shakespeare
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