Buying options - Best way to avoid depreciation over 2/3 years

[derektrotter]

Hi All

I had purchased a W211 E220 approved used less then a year ago, spent money to ensure it was maintained perfectly (changed ATF etc), unfortunately its now been written off due to a non fault accident, really liked the car, the whole experience has put me off buying another nice car , I'd normally buy the car at 5 years old and sell after 3 years or so to minimize depreciation.

The car was 7 years old but in perfect condition, I'd estimated depreciation at £1k - £1500 a year which is not much due to the age of the vehicle, wasnt too worried about the repair costs as research showed it was very reliable.

I am now considering leasing or PCP, main end goal is to have minimum depreciation/running costs over the period (2 or 3 years), apart from leasing something like a A class is there any other options I can look at? I've never financed a vehicle so i'm not sure what the options are.

I've looked at leasing and it looks like even a A class would work out more expensive over the full 2/3 year term compared to a older E class for example, I'm only looking at the total costs over the 2 years for now.

e.g. with the cheapest A class I looked at (9+23 8k Miles p/a, £1921.11 initial payment) and it was £6447 over 2 years which is much more then the better specced W211 I had even considering depreciation, in reality A class would cost even more as I do 10-12k miles PA.. not sure if PCP on older cars is any better (e.g. PCP a 3 year old car and hand back at 5)? I'm guessing not as if I have cash to buy outright it would not beat that.

I'm not bothered about driving around in a new car but liked the idea of not worrying about depreciation, repair bills etc with the above option, biggest headache for me when buying a car is making sure I do not get a lemon hence have always purchased approved used from dealers and the associated 1 year warranty, at the moment buying 5 years old and selling at 8 or so looks like the cheapest option.

Advice would be appreciated

 

[nick mercedes]

Buy your old car back from the insurance company, mend it, end up with car and money left over.

 

[derektrotter]

Damage is extensive, would not be able to get it repaired, would be cheaper to buy a new car in this case.

 

[wywywywy]

I think buying a new car like that will always always always cost more.

But there are a few potential advantages in terms of costs, that must not be overlooked -
- Warranty (free for 3 years)
- Tax (included with PCP etc)
- MOT (not for new cars)
- Fuel (usually use less on newer designs)
- Insurance (cheaper because of better safety/security)
- Service (service pack can be bought with new car, and it requires less frequent)

 

[190]

Buying at 5 years old is still a good plan. You can find a car in really nice condition and it will already have depreciated by 60 - 65 %.

Being a little OCD I've kept depreciation records of every car I've owned since 1973 and the cars bought new and sold soonest are of course the worst. 23% per for a new Triumph Acclaim in 1982 kept for only 15 months compared with 4% for the 190e after 21 years.

 

[derektrotter]

A former colleague had mentioned some finance deal where he had a 3 year old car, over 2 years he gave it back and he only lost £3k overall over the 2 years (GFV?) which was not bad for the car he had, not sure how he did that though.

 

[Rory]

The car was 7 years old but in perfect condition, I'd estimated depreciation at £1k - £1500 a year which is not much due to the age of the vehicle, wasnt too worried about the repair costs as research showed it was very reliable.

That depreciation figure sounds low - if you bought at 6yrs old as Approved used from a dealer, surely you're going to lose more than £1-£1.5K? Plus your repair and maintenance costs.

If you underestimate that figure then it makes other comparisons look worse.

not sure if PCP on older cars is any better (e.g. PCP a 3 year old car and hand back at 5)?

PCP is possible but doesn't usually work so well on cars that aren't new as it generally relies on subsidised deposits and APRs from the manufacturer.


I don't know what the clever answer is - I got a cracking deal on my car at 5mths old (third off the new price) but it's still probably depreciated at £2K/yr average over the 10yrs I've had it.

Our other cars (generally cheaper) I tend to buy new and keep for 5-7 years. Not long ago I sold a lovely Mitsubishi Colt we'd bought new for £7.5K and I got £1.1K for it. £6400 in 7 years doesn't seem bad, but that's 85% of its value.

One thing I would say is that new cars terrify me now - we just got a new VW Tiguan. Got a very good deal as Tiguan is about to be replaced, but its engine is brand-new and is extremely complicated due to all the emissions stuff we've been hearing about. I'd resolved to dump it at 3yrs old but may well be stuck with it now as its price is likely to be affected. I could have leased one and really wish I'd done that now!

 

[Rory]

A former colleague had mentioned some finance deal where he had a 3 year old car, over 2 years he gave it back and he only lost £3k overall over the 2 years (GFV?) which was not bad for the car he had, not sure how he did that though.

I find lot's of people say stuff like that but they're generally talking rubbish.

Maybe he p/x'd his original car, or put a big deposit in? People tend to ignore these things.

Like the £200/mth VW Touareg lease deal that someone mentioned on Pistonheads - turns out the initial deposit is £12000 and now he's insisting that the dealer paid it. It's just not true.

 

[derektrotter]

Hmm, maybe I am being optimistic on the depreciation of my car, £1500 per year depreciation was calculated on 50% loss of value of the W211 over 3 years, repairs is a unknown, for the W211 I was not worried but the newer cars seem like a much higher risk.

I agree, the newer cars worry me too hence what got me interested in leasing, some of these newer cars without the warranty could cost a lot to run when something goes wrong.

My previous Accord (purchased at 2 years old and sold after using for 5/6 years) cost me £190 a month in depreciation, no repair costs, just routine servicing which a lease car would have too.

Don't really realize monthly depreciation cost until you do the sums as I brought it outright hence no monthly payments, I did however put a lot of miles on it so was the best option at the time, now I only do 10-12k miles.

Maybe I should get a few quotes and see what the overall cost is over 2/3 years on the different deals.

 

[Shooter560]

PCP on older cars is not an issue at all, find a local Asset Finance company and they can find you deals on anything and almost any age too, normally Asset Finance companies like to do PCP's on cars that at the end of term are 7 years or less in age.

Dealers will almost always only offer PCP on new cars are they make more on these in terms of kick backs from the finance companies.

I have never bought via PCP a car thats new, most I've had have been pre-registered with sub 100 miles on the clock, full factory warranty and back up but they have lost the big hit in depreciation that you get just by driving off their forecourt.

You can save big money just by doing this, and the biggest savings are days after the new reg plates comes out, as almost all dealers will have old plates that are sat on the lot. I did this 2 years ago on a new Range Rover for my wife, well a pre-registered one (a week earlier), 6 miles on the clock and the dealer took £20k off the new price. I'll take a older car anyday to make a saving like that

 

[derektrotter]

PCP on older cars is not an issue at all, find a local Asset Finance company and they can find you deals on anything and almost any age too, normally Asset Finance companies like to do PCP's on cars that at the end of term are 7 years or less in age.

Dealers will almost always only offer PCP on new cars are they make more on these in terms of kick backs from the finance companies.

I have never bought via PCP a car thats new, most I've had have been pre-registered with sub 100 miles on the clock, full factory warranty and back up but they have lost the big hit in depreciation that you get just by driving off their forecourt.

You can save big money just by doing this, and the biggest savings are days after the new reg plates comes out, as almost all dealers will have old plates that are sat on the lot. I did this 2 years ago on a new Range Rover for my wife, well a pre-registered one (a week earlier), 6 miles on the clock and the dealer took £20k off the new price. I'll take a older car anyday to make a saving like that

Out of interest what was your monthly depreciation figure by the time you handed the car back? my aim is to find the best car and finance deal that costs me on average £200 a month over the term i've had it, my friend has an E class which he purchased outright (cash) at 2 years old, he's going to sell in a couple of years and he estimates that his figure will be around £250 a month assuming he sells privately and gets what he thinks it'll be worth, his feeling is that will be the cheapest way to do it.
I liked the sound of certain finance deals as they give you a guaranteed value that you know you'll get at the end, but I guess the value may be lower then what you'd get for the car when you sold it anyway!

 

[LTD]

If you consider that a car is an item that you purchase to use, maintain and enjoy rather than some form of asset then you should stop looking at any depreciation figures.

Have you looked at your CD and DVD collection recently ? What cost you £10-£15 per item is now worthless in real terms. Do you factor in depreciation to that ?

How many times have you worn those £100 trainers ? Your suits ? That expensive silk tie that you wore once and got a bad grease stain on ?

... don't start me on trying to equate depreciation on a £5k holiday in a luxury hotel for two weeks

If you worry about depreciation then buy an old car, do as little as possible to keep it safe and scrap it when it finally breaks. That's called 'bangeromics'.

Put your money in the bank and take a taxi or bus and hire a car when a long journey in a car is wanted. That's the cheapest option for many.

If you like a nice, new or newish, car then pay for the bloody thing and stop fretting about the on-cost.

Don't buy a luxury motor and complain about the spend.

 

[Shooter560]

Out of interest what was your monthly depreciation figure by the time you handed the car back? my aim is to find the best car and finance deal that costs me on average £200 a month over the term i've had it, my friend has an E class which he purchased outright (cash) at 2 years old, he's going to sell in a couple of years and he estimates that his figure will be around £250 a month assuming he sells privately and gets what he thinks it'll be worth, his feeling is that will be the cheapest way to do it.
I liked the sound of certain finance deals as they give you a guaranteed value that you know you'll get at the end, but I guess the value may be lower then what you'd get for the car when you sold it anyway!

Sorry never bothered to think about depreciation, not something that takes my mind. Rather I look at initial cost, monthly payments and service costs. Final sale price doesn't come in to it, its a car, get from A to B with some comfort and safety for my wife and kids.

I run an old ML270 as 1000 mile road trips once a month to scotland and up the hills for my photography hobby in the snow means I end up denting it somewhere along the line so its old and I don't lose sleep if I crease the wing or something, but even then its all down to buying price, running costs and thats it.

Don't over think it, if the price is right, makes you happy and can afford the monthly costs thats all you need to think about, what price do you put on happiness??

 

[derektrotter]

I agree with the above within reason, I've got a end goal and just working out the best way to go about it with the multiple options available, e.g. If I get a similar result at the end but one option is much better financially it doesn't make sense to waste money.

At the moment leaning towards just spending 14-17k cash on another used e class, will sell it after 4 years, will probably be less spent over the 4 year term then all these finance deals, yes I may sound tight to some but I'm relatively young and would rather put any money saved towards my house deposit so it's a balance for me, if leasing or another finance option gave me a better result (lease brand new car for example) for the same money over the 4 year term I would have chosen that but doesn't look like its possible.

 

[bolide]

it doesn't make sense to waste money...

At the moment leaning towards just spending 14-17k cash on another used e class

I see your problem right there. Spending £17k on a car that is depreciating like falling girders IS a waste of money

I'd buy a Mercedes 190E for £500 and drive that. Depreciation - zero. If you're worried about reliability, buy two 190Es and use the one that's working best

The only way to avoid car depreciation is to buy classics, or buy bangers. The 190E is both, so it has to be a winner

Otherwise, join a car club and use a car when you need one

Nick Froome

 

[Gene]

Shooter560 beautifully put.
It's a depreciating asset. You can minimise it, but it's still depreciation.

 

[TheFoX]

The only way you'll beat depreciation is if you buy for the long term. Most people will buy a car that they will exchange within 3 years, and this is where the biggest loss is made. For each year you keep hold of the car, the less the depreciation becomes.

Car ownership is never a simple formula. You have to factor in purchase and maintenance costs, including fuel, tax and insurance, over a period of years. Which is better? A number of car changes over a ten year period or maintaining one single car for the same duration?

Depreciation, while a measure of worth against age and use, is also artificially inflated by greed. The same car being sold by a dealer can easily be thousands of pounds different to it's trade in worth. Sometimes, the car can easily be tens of thousands different between retail and trade in.

A few years back, I wanted to trade in an Astra VXR, and was told that the Glass trade in was around £13,000. Unfortunately, the dealer said he would only offer me £10,000, even though trade in was £13,000, and the vehicle I was looking to buy was £20,000.

A year later, I parted exchanged the VXR for a ComboVan, and got £11,000, and another years use. The lesson here is that you WILL get stung with a part exchange, but there are degrees of greed, and some people are just more greedy than others.

When trading in my C220, I shopped around. Two main dealers offered me £9,500 and a car supermarket offered me £10,000. A smaller dealer offered me £11,000 which, after negotiation, was bumped up to £11,500.

The golden rule to remember is that you are dealing with salespeople who are on commission, and they'd rather lose a customer than see their commission diminish to nothing. They are more than happy to cut their nose off to spite their face than to lose face to a pushy customer. Remember that when they say the bottom line is X, they are still making a healthy profit for the dealer, and a healthy commission for the salesperson, and don't believe any salesperson who tells you that they are salaried.

 

[derektrotter]

The only way you'll beat depreciation is if you buy for the long term. Most people will buy a car that they will exchange within 3 years, and this is where the biggest loss is made. For each year you keep hold of the car, the less the depreciation becomes.

Car ownership is never a simple formula. You have to factor in purchase and maintenance costs, including fuel, tax and insurance, over a period of years. Which is better? A number of car changes over a ten year period or maintaining one single car for the same duration?

Depreciation, while a measure of worth against age and use, is also artificially inflated by greed. The same car being sold by a dealer can easily be thousands of pounds different to it's trade in worth. Sometimes, the car can easily be tens of thousands different between retail and trade in.

A few years back, I wanted to trade in an Astra VXR, and was told that the Glass trade in was around £13,000. Unfortunately, the dealer said he would only offer me £10,000, even though trade in was £13,000, and the vehicle I was looking to buy was £20,000.

A year later, I parted exchanged the VXR for a ComboVan, and got £11,000, and another years use. The lesson here is that you WILL get stung with a part exchange, but there are degrees of greed, and some people are just more greedy than others.

When trading in my C220, I shopped around. Two main dealers offered me £9,500 and a car supermarket offered me £10,000. A smaller dealer offered me £11,000 which, after negotiation, was bumped up to £11,500.

The golden rule to remember is that you are dealing with salespeople who are on commission, and they'd rather lose a customer than see their commission diminish to nothing. They are more than happy to cut their nose off to spite their face than to lose face to a pushy customer. Remember that when they say the bottom line is X, they are still making a healthy profit for the dealer, and a healthy commission for the salesperson, and don't believe any salesperson who tells you that they are salaried.

I agree with all the points, its very true.

To the person who thinks its a waste of money buying a car above a certain value it depends, if I spent 14k on a 2011 E Class for example (which is what i'm leaning towards), sold it in 3 years for £6.5k (how do you even accurately predict depreciation?), thats £208 a month its cost me assuming its reliable, if however it ends up costing me £350 a month then I would have been better off leasing as would have had a newer car for the same price, hence this thread trying to find out how others experiences have been.

The earlier figure I would be happy with as to me (and I realize this is personal) that would have been good value and I would have got enjoyment out of the car for the amount I spent, I generally change cars every 4-5 years as the advancements in technology (refinement, fuel economy, gadgets etc) make a big enough leap to be worth buying a newer car, in my opinion anyway

 

[Done]

I have a small business and looked into a three year deal, worked out at £300 per month or £14,000 inc expenses over the term with nothing to show at the end of it, I bought a 61 plate C200 for £10,000 and know I will have a car with some value in it that I should be able to sell, I'm not bothered by "newness", I view depreciation as someone else's loss and my gain.