Depreciation vs Maintenance.

[MBDevotee]

Popped into work briefly this morning for a couple of things and was listening into a conversation between a salesman and a customer.....

Without going word for word, the conversation went along these lines.....

C - “No, I can’t afford that monthly payment. I need to keep my costs down as with the pandemic, I am earning a bit less than I was”

S - look I’ll go see what can be done”


So then we tried to do a deal and we’re still a way away.

So when it looked certain we weren’t going to do a deal, we went back and offered the guy a free service if he then bought a 3 year warranty at £650 that would cover everything a new car warranty would, and the finance to pay off his balloon payment would have been £180 per month not £379 for the payments on the new car..... and this is when it got silly....

Cust - “ Oh no, because I’ll have to get the car MOT’d and the servicing will be a load more expensive - it will be cheaper to just buy the new one....” which half an hour later is exactly what he did.....

Given in 3 years this guy had lost nearly £20,000 in depreciation (much of which the moment he drives it away) is it possible that people genuinely don’t see / realise what depreciation is, and that it pales almost every other motoring expense into ‘also rans’.

This guy genuinely thought it was cheaper to buy a new car than service and maintain a 3 year old one!

I am really grateful people like this exist, but as someone who buys cars of an age where I feel depreciation is practically finished, and the car won’t lose more than 10% of its value over the next 3 years I can’t understand it.......

I often think the sweet spot in reality is buy a car at about 4-5 years old and sell at about 8 yrs old, with the proviso it doesn’t go over 100k in my ownership.

Where do others see the sweet spot in a cars life?

 

[LostKiwi]

My 210 is my sweet spot.
Cost £600 to buy with 114k miles.
Now has 154k miles and has cost around £1000 in non wear items in 5 years (I'm not including oil changes, servicing or consumables like disks, pads and tyres.
I'm pretty sure even now I'd get all my money back or more ...

Historically I've bought cars at 100k miles and run them to 200k.
Only had one bite me (Saab 9-3 2.0t). That had cooling issues and needed a new radiator, intercooler, AC condenser, turbo, water pump and two head gaskets. Got rid of it after the second head gasket.

Next best one to the 210 was a Volvo S70 T5SE. Bought at 98k and sold at 221k. Only ever had a throttle body, MAF and engine mount. Cost £6k sold for £1.5k 5 years later.

 

[MBDevotee]

Yes, I’ve owned a few really old cars.

I do like a bit of tech (cruise, Bluetooth, air con that works) and so on, but brand new cars have way too much now!

 

[robin.large]

Absolutely agree. Simple mathematics is beyond many, and depreciation is something that happens to others.
PCP plans are another thing altogether and the complexity of the calculation baffles most. 'but it includes servicing costs'!

Of course it does. But at what overall cost?
PCP on Merc EQC. Deposit plus payments on a £67000 car is 37000 over 4 years. Residual value of £30k. That's pretty much all depreciation! Yikes! What is hidden is that most of that is in month 1!

Sent from my ONEPLUS A5010 using Tapatalk

 

[dry run]

I can see the used car market changing substantially over the next few years as more and more EV's come to market. At the moment I couldn't even consider a used EV as I don't have confidence in the tech yet and wouldn't even know how to go about fixing any issues. So it would have to be new - which of course is exactly what the manufacturers want !

 

[mioba]

A customer who is happy to take a 20K hit when driving off the forecourt in a new car is a salesmans dream, its what the sales man works for.
A customer wont pay that in maintencance over 3 years.

Horses for courses, that particular customer is happy and as said above cant detangle simple math vis a vis a HP agreement. Then again, if that custmoer works on budget over 3 years it works for him.

I have been though it all with merc, brand new, approved used, low mileage second hand, I have zero regrets with any route I took, I think as we get older and wiser (hopefully) this changes our rationale for logic.

 

[Janchee]

It's a tricky one to answer, and I think it boils down to pure conveniance. When you look at a used car, there is always that thought of how the previous owner has treated the car and if there is any 'lingering' problems that the dealer doesn't know about. Also, used car warranty isn't that reassuring as you can guarantee they'll try and wiggle out of any claim. I had a used car warranty with my Mercedes last year, and everything was rejected as it wasn't a mechanical failure. Cost me a fortune. Even now, buying a Mercedes approved-used warranty, it's got a whole page of exclusions including seals, lamps, suspension etc.

A lot of the market seems to be hitting the online leasing sites like leaselocco, leasing.com etc. where you can simply pay a monthly sum, and then hand it back. You can pay more for maintenance so you get tyres, brakes, servicing included etc.

However, I had a fully-loaded Mini Cooper S for 2 years (ex footballers sons believe it or not), bought from a private dealer. I had no warranty and bought used at 2 years old. The car hardly lost money, and cost me close to nothing to keep it for 2 years. Because it had spec which was hard to find, I sold it for close to what I bought it for! That was an absolute win!

The way numbers are perceived by the public, is no longer what the list price is ... but what the monthly cost will be ...

 

[AnthonyUK]

Yes, I’ve owned a few really old cars.

I do like a bit of tech (cruise, Bluetooth, air con that works) and so on, but brand new cars have way too much now!

Even my S203 has those
Maybe not the most fuel efficient but I think I'm in negative depreciation now

I think people are always worried about a massive bill that crops up so very infrequently as they are not able to do a lot of the work themselves.

 

[Ron240]

Disrearding the original example which did make sense...some people simply prefer to buy new and fully accept the depreciation. If you take depreciation out of the equation then it can actually be cheaper to buy new.
I have never been fortunate enough to buy any car that will lose £20k the moment I drive it out of the showroom. Now that may seem like a dumb thing to say, but for a car to lose anything close to this amount it will be in a new price bracket that I cannot afford.
My cars at 2 years old generally lose around £10k from their original purchase price.
The biggest winners in all ways are the second owners of my cars.

I am pre empting the potential replies I could get here...so please remember this is my preferred way to buy cars and my eyes are fully open while doing so.

 

[MBDevotee]

Disrearding the original example which did make sense...some people simply prefer to buy new and fully accept the depreciation. If you take depreciation out of the equation then it can actually be cheaper to buy new.
I have never been fortunate enough to buy any car that will lose £20k the moment I drive it out of the showroom. Now that may seem like a dumb thing to say, but for a car to lose anything close to this amount it will be in a new price bracket that I cannot afford.
My cars at 2 years old generally lose around £10k from their original purchase price.
The biggest winners in all ways are the second owners of my cars.

I am pre empting the potential replies I could get here...so please remember this is my preferred way to buy cars and my eyes are fully open while doing so.

No criticism here!!

I think my point in the OP was that people seem terrified to get a £300 bill (which is the most I'd expect a 3 year old, serviced cars MOT to be - the VERY most!) but happy to pay £150-200 more a month to not have that!!! I just don't get it. Being in the motor industry I'm happy they will do it, but wow.

 

[Mr Greedy]

For my current car, the 1st owner lost £24k in depreciation in the first 3 years.
The 2nd owner lost £24k in depreciation in the next 6 years.
Depending on scrap value, I can't lose any more than about £6.5k in depreciation. Ever.
Of course, maintenance costs start to offset that a little. It's in for oil cooler seals as I type, at £850.

 

[MBDevotee]

I can see the used car market changing substantially over the next few years as more and more EV's come to market. At the moment I couldn't even consider a used EV as I don't have confidence in the tech yet and wouldn't even know how to go about fixing any issues. So it would have to be new - which of course is exactly what the manufacturers want !

I agree, not sure for the reasons you say mind.

Used EV’s are safe enough bet - most have a 7-10 year battery and drivetrain warranty - the issue is what is a “good” range now will be rubbish in 3 years, so resale is questionable for that reason alone.....

A Zoe that started out 5 years ago with a 100 mile range was considered ok back then, but that will have fallen to 90ish now, which is laughable with the current cars hitting 280+

In 3 years a 400-600 range will be the norm.

However, as long as the range is over 200, the car “works” as daily transport - but 80 lie range just plain doesn’t.

You also have to remember that these electric cars are proving remarkably reliable - there isn’t much to go wrong with the drivetrain - only issues are usual things like bulbs, tyres etc which are all the same....

If an EV works for you do it, do it now - seriously, I have saved £220 per month in fuel (on about 14000 m a year) although I realise mileage is less this last year - but as I can usually get free electricity (many many free chargers still) the savings are huge, servicing expected to be around 50% of ICE cars too, zero co. car tax last year and 1% this year as well.........

But look at the cheaper ones, Kia, Nissan Leaf, MG even...... the new MG 5 Estate is on offer on PCP (so you CAN hand it back after 3 years or keep it or pc it) for £279 down £279 per month for the top of the range. Only 214m range admittedly, but that’s a damn cheap EV estate car!

 

[malcolm E53 AMG]

For my current car, the 1st owner lost £24k in depreciation in the first 3 years.
The 2nd owner lost £24k in depreciation in the next 6 years.
Depending on scrap value, I can't lose any more than about £6.5k in depreciation. Ever.
Of course, maintenance costs start to offset that a little. It's in for oil cooler seals as I type, at £850.

Interesting - I’m sure mine will want doing at some point who is doing the work for you

 

[MBDevotee]

For my current car, the 1st owner lost £24k in depreciation in the first 3 years.
The 2nd owner lost £24k in depreciation in the next 6 years.
Depending on scrap value, I can't lose any more than about £6.5k in depreciation. Ever.
Of course, maintenance costs start to offset that a little. It's in for oil cooler seals as I type, at £850.

I think this is my point. The first owner would have also had to pay for tyres etc, so would anyone really pay £5000 in “repairs” as distinct from “servicing” over a couple of years? Unlikely, so depreciation is by far the largest expense of all.

 

[SL63 Mark]

I tend to buy high end cars near the bottom of their depreciation curve. The trick is, buying a good one that has been cared for with low mileage. Then you can have many years of happy motoring. So my SL55 for example, cost new £102,000. I paid £24,000 for it, when it was 8 years old. It is now worth around £18,000. So the car lost £78,000 in depreciation in the first 8 years, then a further £6,000 in the next 9 years in my ownership. I have done 40,000 miles in it. All in all, a pretty good ownership proposition, I would recommend it. A victory for "man maths", as I keep telling Mrs. '55.

 

[MBDevotee]

Yep, that's where I am at too.

Bought a CLK320 for £5000 - kept 3 years, did 45,000m in it, sold for £4800. Now admittedly I converted to LPG so that cost £1400 - but that saved me over £3000 in fuel so I'm ignoring that.

Bought a CLK270 for £3500 and sold for £3700 2 years later

Bought a ML500 for £3000 and sold for £3500 a year later.....

So all in all, not paid out a fortune in depreciation.......

 

[welease woger]

When my sons started driving (and ever since!) I tried explaining depreciation but it fell on deaf ears. What is often overlooked is that apart from substantial depreciation most buyers are also paying interest on a loan and the exact same next car is also going up in value each year so it's a triple whammy. The reason so many folk don't consider depreciation is that there isn't an actual cost that has to be physically paid every month. In over half a century of motoring I've only ever bought one new car - never again. I always buy at three years old and always pay cash.

 

[Janchee]

No criticism here!!

I think my point in the OP was that people seem terrified to get a £300 bill (which is the most I'd expect a 3 year old, serviced cars MOT to be - the VERY most!) but happy to pay £150-200 more a month to not have that!!! I just don't get it. Being in the motor industry I'm happy they will do it, but wow.

My 66 plate E class, 40k miles has had 6 new LEDs, new battery, new lower control arms, discs and pads all around due to warp, new alarm and just recently air suspension compressor! The amount I have spent on it ... could’ve just got a new one ... warranty as I said earlier was toffee from private dealer.

For cheaper cars, used cars are great ie mini was 12k. But for luxurious cars, when they go wrong - they can cost a dear penny. It would be ok if you could trust a warranty! And probably a reliable manufacturer

 

[Flyinspanner]

The CL500 I sold on Friday cost me £110 per year in depreciation.

I can happily live with that.

 

[sonic]

My sister in her 60's divorced years ago buys a new cars every 3 years, the car won't have done 20K miles when its traded.
I have told her time & time again to keep it another 2 years or buy second hand about 12 month old.
She is terrified of the MOT costing her money so won't do it.
My e class is coming up to 10 years old, & we sold my wife's SLK last year 10 years old. No trouble with either car.