Are cars good value?

thezappa

thezappa

thezappa

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Been thinking about a new car lately, not new new just new to me but have looked at brand new cars as well noticing that through model changes, more noticeable between VAG models (probably given the size of the group), much of the equipment is very similar with sometimes only small tweaks to appearance and function.

Bare with me I am getting there.

So it got me thinking about the amount of work that goes in to one and I wondered how good value cars are.
Second hand cars are different of course as they vary a lot more in price and depreciation etc.
So what do people think, are cars good value? Some better than others?
Is a Dacia better value than a Rolls Royce or a koenigsegg (not great examples).
 
From new then cars are terrible value. Perhaps if you are buying a more prestigious brand then the depreciation will not hurt so bad. Buying cars is always a sure fire way to burn through money.
 
Whilst they take a hammering in residual value, in a general sense I think cars are fantastic value for money, when you consider the sort of engineering and development that goes into them.
 
Well, the mark up on Prestiege brands is far higher than the bottom end. However generally, economies of scale come into effect. I'm sure the profit margin of a Dacia is pretty small - however they sell enough to make it viable.
 
Kenai said:
Whilst they take a hammering in residual value, in a general sense I think cars are fantastic value for money, when you consider the sort of engineering and development that goes into them.
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Well that’s what got me thinking, all the measuring and making parts must take…I don’t know how long, years of development?
 
New cars, no.

Used cars can be if you pick the right one. My current daily (2013 gt86) costs me something like £2 a day not including fuel and since I got it over a year ago, it's lost less than 1k in depreciation. Why would I want to go and spend £100s a month on something boring and then another 4 figures when I eventually get rid of it :p
 
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I think the manufacturers have gone ott making parts with a finite lifespan, plastic housings and rocker covers etc.

For this reason I'd say they're now worse value for money than 20 years ago because no matter how carefully you maintain a modern car all sorts of things will start going wrong once over 100k.

I'm aware that avoiding over engineering components is part of keeping production costs down and has been since Henry Ford went poking around scrapyards examining wrecked cars, but nowadays it's almost as if manufacturers think once a car is 5 yrs old at 50k it's a banger.
 
Newer cars are more than just changes in equipment, a fair portion of the increased cost is down to the reduced wear-and-tear compared to older models. So a newer Mk isn't just about the facelift etc, people buy them because they want improved reliability, warranty etc compared to an older car (same reason as cars with identical spec are priced differently based on age).

In summation - new cars probably aren't good value if you always go out and buy brand new cars because you want the latest tech, with the possible exception of hopping around between whatever bargain lease deals are available at the time you are looking.
 
cars at any stage are a cost, not just the capital cost but the running costs too.

the value comes in how much perceived value you put in the freedom that owning a car brings you compared to public transport/walking.

however as peices of engineering it's an interesting one, generally whilst a lot of capital cost does get sunk into R&D you have to remember that each new model is an evolution, with lessons learned from the previous model and industry as a whole being taken into account.

plus the scale of the industry is vast, absolutely vast, for example if you take just the tyre valve- well there's not just a company that makes those, there's an entire industry, there are companies who's sole business is to make cast engine components like the block/head, another company just does plastic moulding for bumpers etc etc.

for the most part the only things car factories actually make is the chassis, the rest is all shipped in as components from all over.
 
adolf hamster said:
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That’s what I’m getting at.
People say cars are money pits when new and that they may be in same cases but in terms of the thousands of pounds worth of work of designing and production behind them. I appreciate there are company’s that exist to make only the plastic for the dashboard etc but considering how long it takes from designing a completely new car and making it how much profit can there be between that and the sticker price.
 
You can use data to analyse this question. FCA put out a presentation in 2014 which showed just how capital intensive the auto industry is and that the margins are very small. The aim of the presentation was to demonstrate how important industry consolidation is in the current environment, and will become more important in the future.

Have a read of this: https://www.autonews.com/Assets/pdf/presentations/SM_Fire_investor_presentation.pdf

You'll see that EBIT margins (i.e. profitability) in the auto industry are lower than aerospace, buidling materials, chemicals, consumer products, packaging, pharmaceuticals and telecoms. Especially in the mainstream sector.

You'll also see that the industry firms reinvest their entire company value in R&D every 4 years. This compares with 20 years in other industries.

There's some other interesting data that you may find of interest.

Anyway, to answer the OP's question: cars are actually very good value when you consider what goes into them.
 
thezappa said:
That’s what I’m getting at.
People say cars are money pits when new and that they may be in same cases but in terms of the thousands of pounds worth of work of designing and production behind them. I appreciate there are company’s that exist to make only the plastic for the dashboard etc but considering how long it takes from designing a completely new car and making it how much profit can there be between that and the sticker price.
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Old cars are money pits. As in, every month something else needs fixing. Or, you can get lucky and have very little go wrong.

New cars are more of a predictable expense. You don't expect a new car to have anything go wrong - and servicing and consumables need to be done at predictable intervals.
 
HangTime said:
Newer cars are more than just changes in equipment, a fair portion of the increased cost is down to the reduced wear-and-tear compared to older models. So a newer Mk isn't just about the facelift etc, people buy them because they want improved reliability, warranty etc compared to an older car (same reason as cars with identical spec are priced differently based on age).

In summation - new cars probably aren't good value if you always go out and buy brand new cars because you want the latest tech, with the possible exception of hopping around between whatever bargain lease deals are available at the time you are looking.
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Parts like that have always worn out. Some parts are designed to wear so that more expensive parts don't though, since there's always a weak point.

What has dropped in quality is interiors. All the plastics are as soft as butter now since they all need to be recycled/recyclable materials. Also paint became extremely soft since they moved away from being oil based.

Some old cars are very reliable though. Most of them being Japanese. Look at the Supras, Skylines, S2000 for example.
 
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Depends how you measure value.

Seems silly to measure it on input costs - an over-engineered paperweight offers no extra utility to a polished rock.

Better to assess based on benefit to the individual and advantage over any substitutes.

Once you're beyond basic utility, from a basic car, you're going to lose value in practical terms. But then you're comparing the value from the extra cost of the premium car against other luxuries you might spend your cash on.
 
Bug One said:
Old cars are money pits. As in, every month something else needs fixing. Or, you can get lucky and have very little go wrong.

New cars are more of a predictable expense. You don't expect a new car to have anything go wrong - and servicing and consumables need to be done at predictable intervals.
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+1
 
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