Thinking about a new car

[[TW]Fox]

Or just buy something reliable and more economical with the money from the 1.4?

Guy wants to save money. Suggestion: **** £400 a year down the drain.
Are the VAG engines that unreliable?

He seems sufficiently concerned to buy a brand new car, £400 a year is hardly money 'down the drain' if it gives him the peace of mind required to keep his car

 

[Jonnycoupe]

jeez, people are really deluded when it comes to taking £100 off an annual tax and avoiding MOTs to 'save money'

 

[commited]

Your original post shows the exact sort of sums that salesmen push on people, they look more like:

Existing car:
VED: £145
MOT: £30
12000 miles @ 40mpg, £1.30/l: £1770
Depreciation: £1000
Warranty: £400
Total: £3345

New car:
VED: £20
MOT: £0
12000 miles @ 50mpg, £1.36/l: £1480 (this is a generous average based on whats on fuelly)
Depreciation: £3333 (£25k to £15k over 3 years)
Finance of £17k: £498
Total: £5331

New car will cost you about £6k more than keeping your existing car. As you see, your new car would have to do near infinite MPG to actually save you money. I've left out insurance and servicing as they should be similar.

 

[cheechm]

Cheers for all the input. To be honest the cost of the car is an unimportant variable in this for me. I think I should have phrased my question as follows:

"I'm going to be buying a new car. Here is how I currently use my car. The diesel will save me x amount. Is it worth it or should I stick to petrol? Also, please check my figures and tell me if I'm wrong."

Admittedly my depreciation figures were way out, but I'll start having a look at nearly new cars and hopefully buy from someone that has taken the brunt of the depreciation (including the 20% from VAT).

Also, I'm not concerned about reliability and I also realise that I'm far from a point where I need to be concerned about inability to sell due to problems with the car.

 

[Tesla]

Which do you prefer the drive of, petrol or diesel?

 

[AndrewNR]

He seems sufficiently concerned to buy a brand new car, £400 a year is hardly money 'down the drain' if it gives him the peace of mind required to keep his car

I think it is. His car's a 1.4 (albeit a reasonably powerful one) worth 8k.

I don't think spending 5% of the car's value on a warranty each year is good value, or more accounting for depreciation and probably higher premiums for older cars.

 

[[TW]Fox]

I think it is. His car's a 1.4 (albeit a reasonably powerful one) worth 8k.

You are underselling it a tad there, it might be a 1.4 but it's one of the VW 1.4TSI engines which are actually quite troublesome and rather complex.

I don't think spending 5% of the car's value on a warranty each year is good value, or more accounting for depreciation and probably higher premiums for older cars.

The vehicles value is completely irrelevant in any calculation as to the value of having a warranty. The only numbers that matter are expected repair bills + value of peace of mind and whether those two numbers add up to more or less than the premium. It was simply a suggestion based on his comment that it's getting old and could be troublesome.

 

[[TW]Fox]

To be honest the cost of the car is an unimportant variable in this for me.

No it's not. You might well think it is, but it really isn't, and if you've convinced yourself it is then that's the wrong thing to do.

The purchase cost and residual value of the vehicle are absolutely crucial, more important than utter trivialities like road tax and how much an MOT costs. It will be your biggest ownership cost and should NOT in any way be an 'unimportant variable'.

 

[xs2man]

Cheers for all the input. To be honest the cost of the car is an unimportant variable in this for me. I think I should have phrased my question as follows:

"I'm going to be buying a new car. Here is how I currently use my car. The diesel will save me x amount. Is it worth it or should I stick to petrol? Also, please check my figures and tell me if I'm wrong."

Admittedly my depreciation figures were way out, but I'll start having a look at nearly new cars and hopefully buy from someone that has taken the brunt of the depreciation (including the 20% from VAT).

Also, I'm not concerned about reliability and I also realise that I'm far from a point where I need to be concerned about inability to sell due to problems with the car.

Be careful with the nearly new car buying. Depending on how you are going to finance the car, you may be better in a new car as you get better interest rates and discounts.

For example, recently on here someone had mentioned that their friend was chuffed to get a 6 month old Audi A4 Allroad for £XXX. Turns out, he could have had a new one for £XXX + £700 (after all the discounts). And if financing the car through a dealer loan, with PCP for example, you get an interest rate closer to 4-5% on a new car compare to 10% on a used car. Making it cheaper to buy the new one.

Of course, if you are a straight up cash buyer, with the money in the bank, you may well be better off in a nearly new motor. Usually as long as your mortgage is paid.

 

[[TW]Fox]

This is why total cost of ownership is the ONLY number that matters.

Just look at how much each of your choices will cost you to have over your predicted ownership period.

So, that means you come up with one big number thats a product of:

a) Purchase Price
b) Resale value
c) Fuel consumption
d) Servicing costs
e) Tax
f) Interest payments if you chose to finance the vehicle on HP, a PCP or a personal loan
g) Opportunity cost of capital if you choose to use cash

Then divide the big number by your ownership period.

Bingo, the cost per year of a new car on a PCP, a nearly new car with a bank loan, buying a used Porsche 911 instead, keeping the VW, etc etc.

Don't focus on one or two things in that list. They are ALL important.

There is NO point buying a car that does 100mpg but dumps 10k of value over its first year. Just as it isn't neccesarily the end of the world if you buy a car that does 10mpg but bizarrely appreciates by £1k over the year (They exist, but this is just for the sake of argument).

 

[cheechm]

No it's not. You might well think it is, but it really isn't, and if you've convinced yourself it is then that's the wrong thing to do.

The purchase cost and residual value of the vehicle are absolutely crucial, more important than utter trivialities like road tax and how much an MOT costs. It will be your biggest ownership cost and should NOT in any way be an 'unimportant variable'.

I stand by what I say. I don't need to factor in the initial cost. As you've said, it's important to consider residual value. If you look in my first post you'll see that I have (as depreciation). If I buy a car for £15k that I can sell for £10k, or if I buy a car for £50k that I can sell for £45k, it's still only cost me £5k in depreciation. Now of course that isn't to say that initial value of the car is unimportant with regard to depreciation, but for my purposes, I'm buying a car with cash so the initial value will be what it is, with the only cost being depreciation. If I was that bothered I'd get a PCP deal and pay £8k to have the car for 2 years.

a) Purchase Price
b) Resale value
c) Fuel consumption
d) Servicing costs
e) Tax
f) Interest payments if you chose to finance the vehicle on HP, a PCP or a personal loan
g) Opportunity cost of capital if you choose to use cash

Once again, as you know, a) - b) = depreciation, which I've already considered.

 

[xs2man]

That's fair enough. The initial cost is what it is. It's the depreciation that is the real cost.

As I said earlier, around 50% over 3 years / 30k is a pretty much standard figure. So,e will do better, such as German cars, some will do worse, but it will be there or there abouts.

The problem you are going to see is that whether you buy new or nearly new, with a car such as the Golf, the depreciation over the next 3 years or so will be equal to the current value of your current car. So as long as your current car is still worth something in 3 years time (again, likely around 50% of its current value), you will be worse off, with respect to ownership costs, than you are staying put.

Basically there is no point trying to kid yourself, using man math, that swapping to a newer car will save you money. It won't. And is unlikely to even see you close to breaking even. You WILL have to pay for the privilege.

You might need to re-adjust your residual value calculator too. The only way you'll only loose £5k on a £50k car is if you drive it from the dealer to the buyer. My £50k motor is expected to be worth £17,500 after 4 years and 40k.

 

[[TW]Fox]

I stand by what I say. I don't need to factor in the initial cost.

Yes you do.

As you've said, it's important to consider residual value. If you look in my first post you'll see that I have (as depreciation). If I buy a car for £15k that I can sell for £10k, or if I buy a car for £50k that I can sell for £45k, it's still only cost me £5k in depreciation. Now of course that isn't to say that initial value of the car is unimportant with regard to depreciation, but for my purposes, I'm buying a car with cash so the initial value will be what it is, with the only cost being depreciation.

So what you really mean is that you've ALREADY factored in the original cost, not that you don't need to

Also its not true to say that the only cost is depreciation. You have cost of capital as well, which must be calculated from original purchase price and not depreciation.