Price versus cost
Discussion
From comments that fly around whenever cars and prices are mentioned I think that there are many on here who don’t understand the difference between price and cost. “I wouldn’t pay £35k for that” they write…”because you could buy X instead for £35k”, seemingly without thinking that the purchase price of a car is its current value, not its cost.
The real cost is the amount of money you spend/lose during your ownership of said car, which is usually going to be:
- depreciation/loss in value
- maintenance / service items eg tyres
- repairs
- insurance
- fuel
- taxes
- interest on money borrowed (or foregone investment income if you pay in cash)
- fines!
Two cars that “cost” £35k to buy will often have very different actual costs over their life.
In general new cars cost the most as you tend to lose 40-50% of their value over the first three years. Beyond a certain age cars stop losing value, but of course the maintenance and repair costs can increase a lot. Swings and roundabouts.
Actually it is possible to own and drive for free. Certainly my best friend has made money on his cars by buying very well (and at the right time). It is a bit galling as he has owned some very nice cars (eg 964 RS, GT4, 991.2 GT3)
I managed it just once when I bought a 40 year old 911. Had it a couple of years and sold it for £5k more than I bought it (which covered some repairs and maintenance I had done). However if I wanted to buy it back today I think I would have to pay another £50k on top of what I sold it for. Of course that is the exception, not the norm.
Anyone else made money on their cars when looking at the whole period they have owned cars (I mean as private individuals not dealers)?
The real cost is the amount of money you spend/lose during your ownership of said car, which is usually going to be:
- depreciation/loss in value
- maintenance / service items eg tyres
- repairs
- insurance
- fuel
- taxes
- interest on money borrowed (or foregone investment income if you pay in cash)
- fines!
Two cars that “cost” £35k to buy will often have very different actual costs over their life.
In general new cars cost the most as you tend to lose 40-50% of their value over the first three years. Beyond a certain age cars stop losing value, but of course the maintenance and repair costs can increase a lot. Swings and roundabouts.
Actually it is possible to own and drive for free. Certainly my best friend has made money on his cars by buying very well (and at the right time). It is a bit galling as he has owned some very nice cars (eg 964 RS, GT4, 991.2 GT3)
I managed it just once when I bought a 40 year old 911. Had it a couple of years and sold it for £5k more than I bought it (which covered some repairs and maintenance I had done). However if I wanted to buy it back today I think I would have to pay another £50k on top of what I sold it for. Of course that is the exception, not the norm.
Anyone else made money on their cars when looking at the whole period they have owned cars (I mean as private individuals not dealers)?
Not so far, no.
Best I hope for is selling a car for the same amount I bought it for a couple of years prior. But that car would likely cost me £2k a year running costs.
Buying cars as investments and actually making money is rather difficult. Not many do it, and it normally has a very high price to play.
Best I hope for is selling a car for the same amount I bought it for a couple of years prior. But that car would likely cost me £2k a year running costs.
Buying cars as investments and actually making money is rather difficult. Not many do it, and it normally has a very high price to play.
I had an MR2 for just over a year which I bought for £2.5k and sold for £3k. But I did put new tyres and brakes on it so just about broke even.
Not sure you can end up in profit on a car you'll actually use. During the Covid madness it was possible with desirable cars having such long waiting lists.
Depreciation is probably the biggest factor to consider unless you go for an older car. But maintenance costs are anyone's guess which is where it becomes hard to predict. The sweet spot for me is to buy around 3 years old saving a big chunk of Depreciation and still hopefully having good reliability.
Not sure you can end up in profit on a car you'll actually use. During the Covid madness it was possible with desirable cars having such long waiting lists.
Depreciation is probably the biggest factor to consider unless you go for an older car. But maintenance costs are anyone's guess which is where it becomes hard to predict. The sweet spot for me is to buy around 3 years old saving a big chunk of Depreciation and still hopefully having good reliability.
I've managed to lose money on a 3.8 'flat floor' E Type, 328 GTS, F355, 993 bought and sold at various points over the years.
The qualitative value is missing from your equation... its the experiences and joy they bring that its all about and you can't put a price on that.
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The qualitative value is missing from your equation... its the experiences and joy they bring that its all about and you can't put a price on that.
I've had a few cars where I've made small amounts of profit.
I bought a Hyundai Getz as a stopgap car, the owner had to sell it as he'd bought a new car and only had 2 parking spaces, for his and his wifes' cars, bought for a bargain £250, sold 2 months later for £450!
Another one was a one owner 13 year old Volvo V70 with a folder full of receipts of every penny spent on it, including the original purchase receipt, the owner had bought a new 520d and had been offered peanuts by BMW for it, paid £890 for it, kept it 10 months, only bought a headlight wiper and a new MOT during my ownership and sold it for £1500. A great car with the most comfortable seats ever and an amazing stereo, it was also a 2.0 Turbo petrol and surprised a few people with its acceleration (in a straight line...).
I also bought an 03 MG ZS 2.5 V6 for £650 as the trader just wanted his money back on it as a part ex and was worth significantly less than his selection of stock.
Had it 12 months and only needed a new washer bottle and pump - previous owner had recently spent £1500 on a major service and cambelt change. Sold for £999.
The days pre Covid of cars under £1k....
I bought a Hyundai Getz as a stopgap car, the owner had to sell it as he'd bought a new car and only had 2 parking spaces, for his and his wifes' cars, bought for a bargain £250, sold 2 months later for £450!
Another one was a one owner 13 year old Volvo V70 with a folder full of receipts of every penny spent on it, including the original purchase receipt, the owner had bought a new 520d and had been offered peanuts by BMW for it, paid £890 for it, kept it 10 months, only bought a headlight wiper and a new MOT during my ownership and sold it for £1500. A great car with the most comfortable seats ever and an amazing stereo, it was also a 2.0 Turbo petrol and surprised a few people with its acceleration (in a straight line...).
I also bought an 03 MG ZS 2.5 V6 for £650 as the trader just wanted his money back on it as a part ex and was worth significantly less than his selection of stock.
Had it 12 months and only needed a new washer bottle and pump - previous owner had recently spent £1500 on a major service and cambelt change. Sold for £999.
The days pre Covid of cars under £1k....
I have made money on a couple of cars over the years, ironically both have been low or mid spec Fiesta's. One was an early diesel box of bombs I bought for £450 and sold for £500, pretty decent return. The other was a 2006 zetec, bought for £700 and sold for £1200, covid fuelled that profit.
I have only bought 1 new car and it was with a mind to keep it for as long as I can. I bought my WRX new in 2006 for a little over £16,000, which sounds cheap as chips in todays market. I have owned it for 19 years, it is well looked after and maintained so would be at the higher end of the current market value, maybe 7 to 8k. So I am at a 50% loss on value alone.
In terms of what the car has "cost", I have spent many thousands over the years on maintenance, some modifications, and general upkeep. I would say I am in for around 10 to 12 grand in these types of costs, so all in, maybe £28,000 overall spend over 19 years, take back 7k current value and that puts me £21,000 down over 19 years, so £1,100 ownership costs per year with depreciation, this does not include fuel, insurance and taxes of course, those are pretty standard across the board.
I think that is pretty reasonable given the amount I could have lost per year changing cars regularly or using PCP or lease options. There is also the added bonus that they are becoming more rare, and good examples are climbing in value. My hope is, one day, I will break even, that would leave me pretty happy overall, only time will tell....
I have only bought 1 new car and it was with a mind to keep it for as long as I can. I bought my WRX new in 2006 for a little over £16,000, which sounds cheap as chips in todays market. I have owned it for 19 years, it is well looked after and maintained so would be at the higher end of the current market value, maybe 7 to 8k. So I am at a 50% loss on value alone.
In terms of what the car has "cost", I have spent many thousands over the years on maintenance, some modifications, and general upkeep. I would say I am in for around 10 to 12 grand in these types of costs, so all in, maybe £28,000 overall spend over 19 years, take back 7k current value and that puts me £21,000 down over 19 years, so £1,100 ownership costs per year with depreciation, this does not include fuel, insurance and taxes of course, those are pretty standard across the board.
I think that is pretty reasonable given the amount I could have lost per year changing cars regularly or using PCP or lease options. There is also the added bonus that they are becoming more rare, and good examples are climbing in value. My hope is, one day, I will break even, that would leave me pretty happy overall, only time will tell....
Edited by Evil.soup on Wednesday 19th March 09:56
Skeptisk said:
The real cost is the amount of money you spend/lose during your ownership of said car, which is usually going to be:
- depreciation/loss in value
- maintenance / service items eg tyres
- repairs
- insurance
- fuel
- taxes
- interest on money borrowed (or foregone investment income if you pay in cash)
- fines!
I completely 100% agree with you. People need to do a back-of-fag-packet estimation of how much a prospective car purchase will actually cost to run over a few years.- depreciation/loss in value
- maintenance / service items eg tyres
- repairs
- insurance
- fuel
- taxes
- interest on money borrowed (or foregone investment income if you pay in cash)
- fines!
There is an interesting effect now, due to high petrol prices and high insurance/servicing/consumable costs, which makes the depreciation/finance cost less significant than they were in years gone by.
A BMW M6, plucking an example out of thin air, might have a spread of selling prices between €40000 and €60000, depending on year and mileage, which is a massive difference on the face of it, but when you build in all the running costs, the jump from the cheaper car to the more expensive car is not necessarily as big a jump overall, as you might have expected.
If you plan to only put a few 1000 miles on the car each year, then the running costs obviously start to become less important, but for a normal years mileage of say, 12000 miles, running costs can really start to outweigh purchase price.
Back when you had to pay to scrap cars, I got given my first car for free (a 1991 Ford Sierra).
50 quid of welding got it an MOT, and I sold it 6 weeks later for 300 quid.
An infinite percentage return on my initial investment of sweet FA!
The only other car I've made money on was a 2005 Ford Mondeo 2.0 diesel. Bought for just under 300 quid with an ABS light on ... sold a year or so later for £500. Needed a few sub-50 quid parts along the way, but would have still come out ahead (ignoring costs like insurance and VED).
So the moral of the story seems to be to buy cheap!
I do tend to run cars for years with fairly minimal maintenance (that's not zero ... but it's also not main dealer servicing and getting the Chips Away guy out every time someone scuffs it in a car park). So while I never make a headline profit, as high mileage scruffy cars are always much lower in price than lower mileage, immaculate ones, I find the difference in the two prices is less than the cost of maintaining in tip top condition.
Ironically, according to Autotrader, my current car is 'worth' about £1200 more than I paid for it in Feb 2024. A 2013 Toyota GT86 that I paid just under £11k for last year.
50 quid of welding got it an MOT, and I sold it 6 weeks later for 300 quid.
An infinite percentage return on my initial investment of sweet FA!
The only other car I've made money on was a 2005 Ford Mondeo 2.0 diesel. Bought for just under 300 quid with an ABS light on ... sold a year or so later for £500. Needed a few sub-50 quid parts along the way, but would have still come out ahead (ignoring costs like insurance and VED).
So the moral of the story seems to be to buy cheap!
I do tend to run cars for years with fairly minimal maintenance (that's not zero ... but it's also not main dealer servicing and getting the Chips Away guy out every time someone scuffs it in a car park). So while I never make a headline profit, as high mileage scruffy cars are always much lower in price than lower mileage, immaculate ones, I find the difference in the two prices is less than the cost of maintaining in tip top condition.
Ironically, according to Autotrader, my current car is 'worth' about £1200 more than I paid for it in Feb 2024. A 2013 Toyota GT86 that I paid just under £11k for last year.
Having work done on the car is more expensive than ever with even back street garages charging a fortune presumably due to increased running costs. Parts seem expensive too depending on make and model. My wife's Hyumdai needed a new windscreen washer bottle and pump a couple of weeks ago and the parts alone were over £400. For a plastic water bottle ffs. I think that buying cheap cars only works out well if you do your own maintenance or know someone who can do it for a good price. For those of us who don't reliability is important. I can see the attraction of leasing where its all covered and you know what you're paying out.
I’ve not kept a spreadsheet over my ownership of around 40 cars but in aggregate I know I have definitely lost money.
I did make a sizeable “ profit “ on my X5 as it was new out and when I sold it still not many about - it was one of the only manuals around -this didn’t make it a good car though.
From memory the profit was circa £10k which got ploughed into another X5.
I also made a circa £20k+ profit on my 997.2 GT3 after 9 years of ownership.
I did make a sizeable “ profit “ on my X5 as it was new out and when I sold it still not many about - it was one of the only manuals around -this didn’t make it a good car though.
From memory the profit was circa £10k which got ploughed into another X5.
I also made a circa £20k+ profit on my 997.2 GT3 after 9 years of ownership.
I look at the costs, but also the 'value' I get out of a vehicle.
One car I bought for £3k, spent about £2k in maintenance, sold for £1k or so.
Divide that over 60,000 miles I did in it, it's OK. It delivered the value of being good to go wherever I wanted, whenever.
I sold some 'classic' bikes for notional profits, but when I bought my Triumph for £1200, beer was a lot cheaper than when I sold it for £4k and I'd spent a lot on it and not really done many miles on it.
One car I bought for £3k, spent about £2k in maintenance, sold for £1k or so.
Divide that over 60,000 miles I did in it, it's OK. It delivered the value of being good to go wherever I wanted, whenever.
I sold some 'classic' bikes for notional profits, but when I bought my Triumph for £1200, beer was a lot cheaper than when I sold it for £4k and I'd spent a lot on it and not really done many miles on it.
The term would be whole life cost.
As out in the shed has said though, most people acquire a car to perform a function.
Normal people don't generally do it, but if you were a business you would depreciate the value of the "asset" in line with the consumption or usage. It is expected that the value will be consumed over its life.
Although there will be outliers, the running costs of a car will follow a general pattern that correlates with your usage and the age of it.
Also worth reminding people it's not typical to have the cash lying around to invest in exotica type cars that will appreciate, and it's not normal to then compare those with shed fiestas being parked at the station or shed Peugeot's going to the tip.
Broadly, the price of a car reflects the desirability of a car Vs it's availability.
And the cost of running a car will vary a few percent depending on luck, usage and it's depreciation profile.
But I imagine for the vast majority of buyers price will be top priority, it's specification and size second with whole life running costs quite a way down.
As out in the shed has said though, most people acquire a car to perform a function.
Normal people don't generally do it, but if you were a business you would depreciate the value of the "asset" in line with the consumption or usage. It is expected that the value will be consumed over its life.
Although there will be outliers, the running costs of a car will follow a general pattern that correlates with your usage and the age of it.
Also worth reminding people it's not typical to have the cash lying around to invest in exotica type cars that will appreciate, and it's not normal to then compare those with shed fiestas being parked at the station or shed Peugeot's going to the tip.
Broadly, the price of a car reflects the desirability of a car Vs it's availability.
And the cost of running a car will vary a few percent depending on luck, usage and it's depreciation profile.
But I imagine for the vast majority of buyers price will be top priority, it's specification and size second with whole life running costs quite a way down.
I think the point being made is that when choosing a car, it may be possible to get a better more expensive one with cheaper overall cost?
For example, if you were quick enough to have bought a GR yaris on the original 0% finance deal it would probably have cost you less over 4 years than say a Mini Cooper S.
For example, if you were quick enough to have bought a GR yaris on the original 0% finance deal it would probably have cost you less over 4 years than say a Mini Cooper S.
Completely agree OP - I often use the argument "it's not the price it's the depreciation that matters" when justifying a purchase to the Mrs!
To answer your question, never made money on a car, although only 'lost' £1K on an E400d estate after 12 months and 13k miles in the weird price period post covid.
I have owned a couple of cars which would definitely now be worth more than I paid for them if I hadn't sold them ages ago:
- M Coupe breadvan
- Manual 997.2 GTS
To answer your question, never made money on a car, although only 'lost' £1K on an E400d estate after 12 months and 13k miles in the weird price period post covid.
I have owned a couple of cars which would definitely now be worth more than I paid for them if I hadn't sold them ages ago:
- M Coupe breadvan
- Manual 997.2 GTS
I've always lost money but don't change cars very often so I get value out of the pleasure of driving them.
I'm hoping my best win will be my Z4M (if I ever sell it!). Bought for £21k in 2011 and now on 70k miles. If I sold it now I'd see a loss but for 14 years of pure hilarity it's been worth it.
I'm hoping my best win will be my Z4M (if I ever sell it!). Bought for £21k in 2011 and now on 70k miles. If I sold it now I'd see a loss but for 14 years of pure hilarity it's been worth it.
ChrisH72 said:
I think the point being made is that when choosing a car, it may be possible to get a better more expensive one with cheaper overall cost?
For example, if you were quick enough to have bought a GR yaris on the original 0% finance deal it would probably have cost you less over 4 years than say a Mini Cooper S.
When buying bikes, I normally buy to keep and I believe there's a saying about the joy of getting a cheap deal lasting a few months, while the joy of having a better bike lasts until after you've sold it.For example, if you were quick enough to have bought a GR yaris on the original 0% finance deal it would probably have cost you less over 4 years than say a Mini Cooper S.
Getting a bike for a grand under the going rate is under £100 a year when you keep them as long as I do.
OTOH you might as well buy something 5 years old instead of 3, because it's all the same when you've owned it a while.
There was definitely a time about 18 months ago when cheap cars looked like poor value, particularly if you were looking for a medium sized estate.
Once you're out of warranty though, there is always an element of risk. It's nice when your toys don't owe you anything, you've got value for money already and if it dies, you can afford to shrug and replace it. Buying the shinier, newer, lower mileage example does not always mean it will be trouble free
I often see people buy cars that are reasonably cheap to buy for a big performance bang, a 2006 Impreza WRX for example just a few years ago could easily be picked up for 4k, which is close to shed money these days, but then they can't afford to run and maintain them properly as the costs of keeping them in tip top shape is well above the average car, most parts seem to be up to 4 times the cost of the average daily driver type car and I don't think people always factor these things in.
These owners either don't keep the car long or run them into the ground. Lots of bargain barges out there to use as a daily for work, but most I wouldn't touch with a barge pole due to the associated costs.
These owners either don't keep the car long or run them into the ground. Lots of bargain barges out there to use as a daily for work, but most I wouldn't touch with a barge pole due to the associated costs.
Skeptisk said:
Anyone else made money on their cars when looking at the whole period they have owned cars (I mean as private individuals not dealers)?
Never on a car. I do have a 1977 Ducati 900ss that I paid £2395 for in the eighties (£7k in today’s money) which I reckon I’ll do ok on.Gassing Station | Car Buying | Top of Page | What's New | My Stuff