Economics of new car -v-old
Discussion
It is often said that the cheapest car is the one you currently own... but is that true?
My current Audi A3 is now just over 4 years old. It costs me £302 per month on a bank loan, which has another 18 months to run (although I could pay this off soon). The car is worth about £5k more than I owe - and I'd be likely to keep it for another year or so.
It's unclear to me whether it's cheaper to keep my current car or get a newer one. Given that I'm unlikely to keep the car longer than the period of the bank loan, I can't see how it's cheaper to keep it for any longer? I'm thinking that it would cost the same per month to buy a newer car (albeit with a full loan again), but without the hassle of cambelt replacement and other costs as my current car passes the 5-year mark?
I've also assumed that the A3 will depreciate roughly in line with the remainder of the loan - i.e. that it will be worth about £5k more than the loan for the next 18 months.
Any thoughts?
My current Audi A3 is now just over 4 years old. It costs me £302 per month on a bank loan, which has another 18 months to run (although I could pay this off soon). The car is worth about £5k more than I owe - and I'd be likely to keep it for another year or so.
It's unclear to me whether it's cheaper to keep my current car or get a newer one. Given that I'm unlikely to keep the car longer than the period of the bank loan, I can't see how it's cheaper to keep it for any longer? I'm thinking that it would cost the same per month to buy a newer car (albeit with a full loan again), but without the hassle of cambelt replacement and other costs as my current car passes the 5-year mark?
I've also assumed that the A3 will depreciate roughly in line with the remainder of the loan - i.e. that it will be worth about £5k more than the loan for the next 18 months.
Any thoughts?
Mileage will effect the result. For high mileage the newer car is preferable, lower mileage an older car will be cheaper as you will have minimal "standing depreciation" and repairs and maintenance will not be so high. After 4 yrs the depreciation curve flattens out so you would not be losing much annually on depreciation on the Audi anymore.
The depreciation on a new car in the first few years would buy an awful lot of repairs to an older car, so if you you are not doing high miles the older car would work out cheaper I would think. (I am ignoring any tax effects that you may enjoy with a lease of a business vehicle)
The depreciation on a new car in the first few years would buy an awful lot of repairs to an older car, so if you you are not doing high miles the older car would work out cheaper I would think. (I am ignoring any tax effects that you may enjoy with a lease of a business vehicle)
Basil Hume said:
It's unclear to me whether it's cheaper to keep my current car or get a newer one. Given that I'm unlikely to keep the car longer than the period of the bank loan, I can't see how it's cheaper to keep it for any longer?
Why not keep the car after the loan is paid off? The amount you are not paying on the loan would easily cover the running costs.Basil Hume said:
It is often said that the cheapest car is the one you currently own... but is that true? ...
Given that I'm unlikely to keep the car longer than the period of the bank loan, I can't see how it's cheaper to keep it for any longer?
Erm, that's exactly where you seem to have misunderstood the rule (I'm trying to be really polite here). It's cheaper if you keep the car longer, that's the rule - no more monthly payments, no more paying interest. Of course it's not cheaper if you're going to replace it anyway.Given that I'm unlikely to keep the car longer than the period of the bank loan, I can't see how it's cheaper to keep it for any longer?
Cotty said:
Basil Hume said:
It's unclear to me whether it's cheaper to keep my current car or get a newer one. Given that I'm unlikely to keep the car longer than the period of the bank loan, I can't see how it's cheaper to keep it for any longer?
Why not keep the car after the loan is paid off? The amount you are not paying on the loan would easily cover the running costs.it is only cheaper to change if you are downsizing substantially or expecting big bills.
the truth is many folk try to justify buying a newer car on economic grounds ... but it almost never makes sense. If you fancy a new motor and can afford one then why not have a change ? It is up to you.
the truth is many folk try to justify buying a newer car on economic grounds ... but it almost never makes sense. If you fancy a new motor and can afford one then why not have a change ? It is up to you.
deaglecat said:
it is only cheaper to change if you are downsizing substantially or expecting big bills.
the truth is many folk try to justify buying a newer car on economic grounds ... but it almost never makes sense. If you fancy a new motor and can afford one then why not have a change ? It is up to you.
+1the truth is many folk try to justify buying a newer car on economic grounds ... but it almost never makes sense. If you fancy a new motor and can afford one then why not have a change ? It is up to you.
Friends spent £13,000 on a Seat Ibiza Ecomotive to replace their Ford Ka. Justification was they'd save money on tax and fuel.
Except they then decided they'd keep the Ka as a second car, so the tax bit becomes irrelevant, and they use the Ka for short journeys because they want to keep the mileage down on the Ibiza and the lack of sound deadening and tiny diesel engine makes it horrible around town.
Genius!
If you want a new car just buy a new car, don't try and justify it by buying some horrible ecobox
Edited by Thorburn on Friday 17th December 22:58
It's all about what you buy it for and what you sell it for over a period of time.
Let's say you never buy a car over £6k and strict rule is it has to be older than three years your not going to really lose much per year in depn plus at the end of the day you only have 6k to lose in the first place.
If cambelt change costs worry you then in future why not buy a car with a cam chain problem solved.
Or always buy a car which has just had it done then sell it needing it changed if that's a concern to you so in your circumstance that would be 4-5 years. Now I'd say most people if it's your only car and a daily driver for commuting you may well be getting itchy feet unless of course you have a special car ie AC cobra 427 - however cannot see many using that as a daily.
A sensilbe approach is if you buy a pre reg or year old car run it until you want a change say 4years you should then pass that onto your wife who would have a banger on it's last legs. Then you buy another for yourself pre reg or year old or comp car andkeep that for 4-5 years at which point as a family you may decide to run your wifes car for a few more years as such you make do in yours. So once she wants to change or again last legs so car forcing her to change she gets yours and you get a new one.
Doing it this way your keeping a car for min 9 years within the family and the depn will be very acceptable over that time frame plus your wife will have a car with known history and looked after from new vs buying a 5-6year old car on the used Market.
Of course if your have kids too then rather than your wife scrapping her car she could give it to one of them or another family member
Let's say you never buy a car over £6k and strict rule is it has to be older than three years your not going to really lose much per year in depn plus at the end of the day you only have 6k to lose in the first place.
If cambelt change costs worry you then in future why not buy a car with a cam chain problem solved.
Or always buy a car which has just had it done then sell it needing it changed if that's a concern to you so in your circumstance that would be 4-5 years. Now I'd say most people if it's your only car and a daily driver for commuting you may well be getting itchy feet unless of course you have a special car ie AC cobra 427 - however cannot see many using that as a daily.
A sensilbe approach is if you buy a pre reg or year old car run it until you want a change say 4years you should then pass that onto your wife who would have a banger on it's last legs. Then you buy another for yourself pre reg or year old or comp car andkeep that for 4-5 years at which point as a family you may decide to run your wifes car for a few more years as such you make do in yours. So once she wants to change or again last legs so car forcing her to change she gets yours and you get a new one.
Doing it this way your keeping a car for min 9 years within the family and the depn will be very acceptable over that time frame plus your wife will have a car with known history and looked after from new vs buying a 5-6year old car on the used Market.
Of course if your have kids too then rather than your wife scrapping her car she could give it to one of them or another family member
Thorburn said:
deaglecat said:
it is only cheaper to change if you are downsizing substantially or expecting big bills.
the truth is many folk try to justify buying a newer car on economic grounds ... but it almost never makes sense. If you fancy a new motor and can afford one then why not have a change ? It is up to you.
+1the truth is many folk try to justify buying a newer car on economic grounds ... but it almost never makes sense. If you fancy a new motor and can afford one then why not have a change ? It is up to you.
It's pretty much impossible to save money by buying a new car.
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