Adapted from Mark Wilson, This is Money
23 August 2008
With brand new vehicles losing up to 20% of their value the moment they’re driven away, could buying ‘used’ cars the smartest option?
Here are a few points to consider when buying a new car:
Why do people like new cars?
You get the choice of choosing to build the car exactly how you want it, and you can boast about having the latest registration plate and style.
Will a new car save you money?
You’ll get a full warranty and unlike used cars, shouldn’t have to worry about reliability. Essential car parts like brakes, tires and batteries shouldn’t need replacing for a long time.
You won’t have to worry about MOT checks for the first three years of ownership.
You may also get ‘lemon law’ protection, entitling to a brand new car or at least a full refund if your car turns out to be defective - a ‘lemon’.
Another perk might be a roadside assistance program. Packages will last at least one year and some will extend to the life of the manufacturer’s warramty. Roadside assistance packages may also provide you with a temporary vehicle if your car is being repaired.
How new cars lose you money
The number one disadvantage is that the value of your new car will only fall from the moment you leave the dealership. Depreciation is the single biggest killer of buyers’ finance and it only becomes fully apparent when it’s time to sell. There is now an increasing trend towards more cost effective new car purchasing options. Buying online and effectively cutting out the dealer can save thousands off the UK retail price.
Buyers purchasing their new car with a credit, or finance, agreement have the option of GAP (guaranteed asset protection) insurance. This pays you the difference between what you owe on the vehicle and what an insurance company says its worth in the event of it being stolen or totalled.
Buy a New Car Online are pleased to announce they can now provide Return To Invoice GAP insurance for a fraction of the price that a main stream UK dealer will charge. Our price is just £249 for a full 3 years cover, find out more at www.buyanewcaronline.co.uk/insurance so should the worse happen within the 1st 3 years of ownership, then you will have the peace of mind that you will be able to replace your car new for old.
The best and the worst cars in depreciation
A study in 2007 carried out by Parker’s Car Guides found the Mini Cooper, costing from £12,000, to be the car with the slowest depreciation rate. Parker’s says the Mini hangs on to its value so well because of its looks, driveability and servicing deals. The car lost £1,388 in a year, which works out at a loss of £27 a week only.
Other top performers financially are the Citroen C1, the Suzuki Swift hatchback, the Peugeot 107 and the Toyota Aygo. These are all small cars and reflects the trend towards demand for more efficient vehicles.
The Parker’s report found that sports and luxury brands were the worst cars for losing value, with the Mercedes Benz SL Class losing £35,642 of value in one year. Other bad performers financially included the BMW 6 and 7 series, plus the Audi A8.
As a rule, cars with good reliability (most reliable cars: 2008 | 2007 hold value better than those that are less so, as do those that are cheap to run (Parker’s Top Ten cheapest cars to run).
Recent car tax changes, which penalise gas guzzlers, has heavily impacted on the second-hand values of 4×4s and people carriers.