Tag Archives: CAP Automotive

When buying new is cheaper than used – it’s all because of depreciation

Looks wild, depreciates even more wildly when it's bought as a new car (Picture  © BMW)

Looks wild, depreciates even more wildly when it’s bought as a new car (Picture © BMW)

Popular opinion among bar-leaning soothsayers is that used cars are always cheaper to buy and own than new. The simple logic is that the depreciation curve is at its steepest in year one and flattens off thereafter. However, CAP Automotive has given me the figures to bust the myth that you’re wasting money by buying a car from new.

The cost of running a car is split multiple ways. Many factors stay the same year in, year out when it comes to working out a cost of ownership. It doesn’t matter what car you run, if we’re talking like for like in terms of mileage, engine, specification and driver, the cost of fuel will be the same whether that car is brand new or one-year old.

Servicing and maintenance costs, however, will be lower in the first year of ownership than in year two because the car is likely to need a more extensive service in its second year. In three years on a car that’s been bought new, you’ll just have a single expensive service, in year two. If that car was bought as a one-year-old, over three years you’ll have the two expensive services of years two and four. And that can be a significant cost. Keeping a VW Up! fettled for three years will cost £848 if it’s bought new, £1183 if it’s acquired at one-year old.

Then we come to depreciation. Some cars cling to their value so enthusiastically that they’re actually more expensive to buy second hand than they are new, assuming 12,000 miles a year. Take the Range Rover Sport. Buy it new and it’ll cost you £59,465. Buy a one-year old car and CAP claims its value to be £58,250. “If a car holds its value like this, you’d be better off buying it new,” CAP consumer specialist Philip Nothard said. Extrapolate that over three years and the figures show that you’d actually be £2677 better off. “You’d be daft to buy it used,” he added. “At the moment it really is a new car market.”

Depreciation is still the driver of the cost of ownership. Ignoring cars wearing Bentley and Aston Martin badges, which can depreciate more in three years than the average UK wage earner brings home over five, let’s look at a performance SUV. The BMW X6 M (top of the page) will depreciate by £61,385 over three years if you buy it new. Buy a one-year old and you’ll ‘only’ take a £31,425 hit. The difference in total ownership costs over three years between buying new and used are £28,816 in favour of second hand.

Cutting to the chase: the cars that CAP Automotive claims will save you money by buying new are the Range Rover Sport and Evoque five door, Skoda Roomster, Porsche Cayman plus Audis A1 and S3. Those that will really cost you are prestige execs such as the Jaguar XJ, Audi A8 and VW Phaeton. No surprises there. More ordinary cars that barely cost you over three years if you’re running new rather than used include the Audi Q5 and A3, Nissan Juke, Skoda Fabia and Mazda CX-5.

Where these costs fall down is that they don’t take into account any discounts you might negotiate. And as dealers, egged on by manufacturer masters’ sometimes unrealistic demands, are desperate to shift new metal at the moment those can be significant. Forget conventional used over new wisdom. In some cases you’d be daft to buy a used car as the man says.