What happened to depreciation?

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facade
facade Posts: 7,030 Forumite
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in Motoring
Still thinking about a "newer" car.

AFAIK, depreciation is over 20% per year, so if I assume 20%, then a 3 year old car should be around half the undiscounted price of a brand new one, but they are nearer 75% at the dealers!

Seems better value to go brand new, and push for nearer a 10% "incentive" off the RRP.

What am I missing?
I want to go back to The Olden Days, when every single thing that I can think of was better.....

(except air quality and Medical Science ;))

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  • motorguy
    motorguy Posts: 22,473 Forumite
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    facade wrote: »
    Still thinking about a "newer" car.

    AFAIK, depreciation is over 20% per year, so if I assume 20%, then a 3 year old car should be around half the undiscounted price of a brand new one, but they are nearer 75% at the dealers!

    Seems better value to go brand new, and push for nearer a 10% "incentive" off the RRP.

    What am I missing?

    Well what we're missing is info on the car? ;)

    Typically depreciation runs at around 50% every three years as a rough rule of thumb. Bear in mind though that this will be based on the trade in price after three years, not the retail price that a dealer might be asking for the car at three years old on his forecourt.

    Also, it will vary depending on car / demand (hence if you can tell us the make and model....)
  • wgl2014
    wgl2014 Posts: 1,144 Forumite
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    I found it helpful to use some of the online sites like Carwow or Drivethedeal to get a proper new car price rather than the rrp.
    We ended up going for a lease deal in the end but was getting quotes for around 20% off a variety of different cars.
  • facade
    facade Posts: 7,030 Forumite
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    Ah, silly me!

    A 3 year old car is worth 50% of the original OTR price if you have one to sell, but you can't buy one for that, unless you know someone who is going to trade one in and pay them a bit on top.

    Looks like Drive the Deal and a new one then, best save up a bit more...
    I want to go back to The Olden Days, when every single thing that I can think of was better.....

    (except air quality and Medical Science ;))
  • tonyh66
    tonyh66 Posts: 1,736 Forumite
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    depreciation isn't linear, your 20% per year would make a 5 yr old worth zero...
  • reeac
    reeac Posts: 1,430 Forumite
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    tonyh66 wrote: »
    depreciation isn't linear, your 20% per year would make a 5 yr old worth zero...
    I think that he means 20 percent per year with the calculation done each year based on the depreciated price i.e. exponential decrease.
    The half price at 3 years old seems pretty close as a general rule. I just bought a 2 year old Lexus with 6,600 miles on the clock for 60 percent of the current new price.
  • Herzlos
    Herzlos Posts: 14,688 Forumite
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    Yup, 20% Vs the previous year, so it'll drop in magnitude over time.
    year 1: 80% of new price
    year 2: 64%
    year 3: 51%
    year 4: 41%
    year 5: 33%

    and so on until its worth £50.
  • Comms69
    Comms69 Posts: 14,229 Forumite
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    Herzlos wrote: »
    Yup, 20% Vs the previous year, so it'll drop in magnitude over time.
    year 1: 80% of new price
    year 2: 64%
    year 3: 51%
    year 4: 41%
    year 5: 33%

    and so on until its worth £50.
    When you fill the tank with water and take it to the scrapyard.
  • System
    System Posts: 178,094 Community Admin
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    facade wrote: »
    A 3 year old car is worth 50% of the original OTR price if you have one to sell, but you can't buy one for that, unless you know someone who is going to trade one in and pay them a bit on top.

    I paid £8500 for a 2 year old Mondeo worth £24k new a few years ago because they depreciate quite fast due to being popular hire and fleet cars.
  • motorguy
    motorguy Posts: 22,473 Forumite
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    Tarambor wrote: »
    I paid £8500 for a 2 year old Mondeo worth £24k new a few years ago because they depreciate quite fast due to being popular hire and fleet cars.

    That implies someone would / did pay £24K for it in the first place.
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