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You couldn't call it sensible really, but there's nothing grossly stupid about it either. If you like new cars - and who doesn't? - and can organise the money it seems a good way of ensuring trouble-free motoring, with no nasty surprises because everything is always in warranty. A bit expensive of course, but worth the money to some obviously.
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I buy new and swap when I feel the desire or have the need, cars have been 6, 7 and 5 years old when disposed of, latest is 3 1/2 years old and the current plan is to keep for another 18mths/2years. Given current mileage it would have got to 130-140k at that point.
SWMBO also has a new car and again the view is that it will be kept for 5 years, when eldest will have left college and will probably claim it, by which time no 2 will also have practiced driving in it.
Why? Car maintenance is an alien subject to me. I hate the hassle with looking at second hand cars. I need a reliable car for work. I am lucky enough to be able to afford it.
As to nearly new prices my experience is that you can buy new with hard negotiation at less than dealer 6 month old prices.
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My own logic says whether you buy a new-ish car (within warranty) or bit older, cost of motoring (extra cost vs repair cost etc.) will be more or less same per year.
So, I like to enjoy the pleasure of riding a late model :)
The situation is driven by mainly two factors - [1] rising labor cost to fix anything [2] the number of years of warranty offered by manufacturers
Also, brand perception is fast changing with long warranties from far eastern manufacturers.
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Saying that it is most sensible to buy new and change every three years is really a typical British polite way of covering up the fact they are making a fairly indulgent purchase and obviously are wealthy enough to afford a nice car new. It's almost like an apology or post event justification. It's to me the same as people saying they bought the very large 5 bed farmhouse in a posh postcode because of something minor like "well we really needed space for our piano...or little jessica's pony" when what they are too polite to say is "we bought a much more expensive house than you and we can afford it"....
Basically buying new is a wealth statement - I can so I will...and certain people want to make that statement. Others are driven by inverse snobbery and do the opposite and drive around in bangers even if they had the money to buy half the forecourt.
I think it varies around the country. In aggressively competitive parts of the middle class commuter belt places and especially on new developments seem awash in people buying very new cars. In more inner urban areas and in country areas especially more established non arriviste type places people seem to drive a more modest range of ages of car.
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To add....I find it amazing how much people will spend on cars ie new ones. When you add up all the other living costs either there are alot of people earning about £90k a year or alot of people with very very tight "everything allocated" finances...I just don't know who the garages are selling to...cept self employed types fiddling their taxes (sorry using their allowances and the tax system)....
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Just back from seeing a mate who has a 51 reg Range Rover. He bought it at three years old for £23k, it having listed at £53k new, he said. That means that the first owner lost over £30k on it, perhaps as much as £33k. £11k a year - amazing, when you consider it was probably stationary for 22 hours a day.
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Yes - I should have said above that there are some cars that I wouldn't buy new. The Range Rover is one, even supposing I could afford it - similarly most Fords, which lose too much value through oversupply.
It'll be interesting to see whether the improved quality of Fords, which the magazines are raving about, will show through in better residuals.
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Yes - I should have said above that there are some cars that I wouldn't buy new. The Range Rover is one even supposing I could afford it
After seeing the number of times my boss' Range Rover went back to the garage with faults, I'd be nervous about running one out of warranty!
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A couple of people queried my costing - yes, the scenario in which you keep the car for 10 years does include rising expenses associated with lower reliability over time and also deteriorating fuel economy. I didn't include opportunity costs as I assume a 2-car family where one car can be used flexibly to cover during times when the other is being serviced.
There were some eminently sensible comments about warranty concerns given the steady rise in complexity in today's cars. Especially if you buy something with a reputation for catastrophic unreliability e.g. a modern Land Rover it would make sense to hold it for three years then pass it on.
But, as others have commented, the depreciation hit in the first three years of ownership (some unusually desirable models excluded) is huge. I cannot see how servicing and other maintenance expenses for a car being kept for 10 years could be anything like as large as the impact of taking three consecutive hits of 50% depreciation (three cars in ten years).
Others (bigbirdy) effectively say "it's a lifestyle choice - deal with it". Fair enough, each to his own. I spend money on travel, you spend it on cars, others spend it on clothing or their home, whatever.
What surprises me (and apparently some others here) is how people manage to afford this. I regard myself as well paid but I would really notice the cost of buying and selling a 40k motor every three years. Not only do you have the depreciation hit (let's say 7k a year) but you also have the cash outlay every three years.
Maybe I am completely out of touch with modern Britain but I'm puzzling over how people can afford this sort of vehicle-related expense, a mortgage and the yearly overseas holidays that I understand are expected these days on, say, 50k a year (30k after tax).
Or is the answer simply that I have got the wrong end of the stick and only a very small minority does change their cars every three years or so? It would be interesting to see statistics on car ownership.
Anyway, thanks to everybody for their thought-provoking input.
Suss
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I'd agree Suss...
I do wonder especially when you see relatively young people behind the wheel eg under 40 something family types who are driving around in a few months old Merc E class estate or a Audi Q7 or new Discovery....Where do they find £35-40k for these cars if say they are also paying a £200k mortgage, holiday costs etc... Or are there just alot of 35 yr old types earning 6 figures? Ir is someone daft enough to let them increase their mortgage to pay for it?
or at the other end of the spectrum people barely in their 20s who have never done anything other than drive a very new car ie avoided completely the "cheap car when young situation". Presume borrowed money and lots of it.
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i think its probably a small minority who buy a new car every 3 yrs.
im very lucky as only 38 but bought my house at 20 and paid 40k for it and already paid for.
we had years of rubbish cars which involved spend hours at the weekend under the thing and now id rather spend that time playing with the children. also my family are fairly spread out and i wouldn't want a unreliable car spoiling a rare day out for the children to be able to see their grandparents.
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we had years of rubbish cars which involved spend hours at the weekend under the thing and now id rather spend that time playing with the children. also my family are fairly spread out and i wouldn't want a unreliable car spoiling a rare day out for the children to be able to see their grandparents.
I think you know that used cars are not now significantly less reliable than new ones.
But as you say, you spent years scrimping and saving and now can afford a bit of extravagance, but would rather justify it externally that it's just because of reliaiblity that you buy new, which really is nonsense these days.
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"Maybe I am completely out of touch with modern Britain but I'm puzzling over how people can afford this sort of vehicle-related expense, a mortgage and the yearly overseas holidays..."
That's why the UK has the dubious honour of being Europe's most indebited country. Put simply, they can't afford it - but that doesn't stop them trying.
As to the very cheapest way of running a car, I think its to buy an ex-demo/ex hire fleet car from a maker of known reliability (sorry, no Land Rovers!) at one year old, run it until ten years old, then repeat the exercise. I'd be interested to hear how the figures came out on that scenario using your spreadsheet, Suss.
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" I'd be interested to hear how the figures came out on that scenario using your spreadsheet, Suss."
Basically what I have done is assume a 16,000 pound car, held for 10 years. Servicing charges over that time about 5k, heavily weighted towards the final 5 years. So the cash outlay over that time is 21k (I haven't included tyres in this as I didn't think the rate at which the car would consume tyres would increase that much with age).
For the "3 cars in 10 years" scenario I assume 16k as the purchase price and further assume that after three years the car is worth 42% of the initial price i.e. 6,750. I use this as the part exchange figure so that the cash outlay for the second car is 16,000 minus 6,750 = 9,250. The cash outlay for all three purchases is therefore 16,000 plus 9,250 plus 9,250 = 34,500. As you're always in warranty it's unlikely that you'd have more than a few hundred pounds in servicing each, thus the total cash outlay might be around 36,100 pounds.
My estimate is that the cash outlay for the "1 in 10 years" is 21k and the cash outlay for the "3 in 10 years" scenario is 36k, or about 1.7x the cost. That's quite a difference. Of course, the more expensive the car, the larger the hit in absolute terms. If you habitually buy cars worth 50k then the difference would be larger again but I wouldn't expect the ratio of costs in the two scenarios (1.7x) to be that much different.
Admittedly it's a pretty crude spreadsheet but as I assume that the car in the "one every 10 years" scenario is bought new, Gromit's scenario (whereby you buy a used fleet car) would be cheaper again. The issue is whether or not that would be offset by higher servicing charges that a higher mileage car might incur.
Suss
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Suss,
Thaking the basic cost of running a car for 10 years as 25K, then add on to that the cost of onr or more major repair, such as engine, gearbox etc., might take the figure closer to 30K so that extra cost of running a car for 3 years works out at 600 per year. Not too much to pay to take advantage of the developments offered by the manufactures (extra air bag protection, economy, comfort). MO.
BIG
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"add on to that the cost of onr or more major repair, such as engine, gearbox etc., might take the figure closer to 30K"
The 21,000 figure already includes a 1,500 expense in year 7 to represent an engine rebuild or similar. I agree that this is the area that is most difficult to model. On the other hand, for a 16,000 car that has been sold in large numbers (something like a focus) I assume that the cost of spares should be fairly low and the labour should be reasonable if carried out by a trusted local independent.
Suss
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Just one thing here...
At thee end of 10 years (buying one car and keeping it) you have a c ar thats worth .. say £2000
At the of 10 years (buying new every three years) you have a 1 year old car valued at say £13,000
So do you not deduct this amout from the overall totals???
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I'd agree Suss... I do wonder especially when you see relatively young people behind the wheel eg under 40 something family types who are driving around in a few months old Merc E class estate or a Audi Q7 or new Discovery....Where do they find £35-40k for these cars if say they are also paying a £200k mortgage holiday costs etc... Or are there just alot of 35 yr old types earning 6 figures? Ir is someone daft enough to let them increase their mortgage to pay for it?
Easy - a young professional couple - say one an engineer in the right industry (oil/electronics/software) and a wife with a similar qualification / job - £150K joint income no problem.
I used to work in a Glasgow office above one of the "expensive clothes shops" - the cars dumped on the double yellows were top of the range and the cost of clothes were similar - more drug dealer type money than young Doctor/Lawyer types - from the way they spoke they were not from "a professional background"
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I'm interested to know how does Britain's "cost of repairing" compare with other European countries.
Is it just a fad here to own new cars or there is reason behind it?
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Its number plate snobbery which does not exist in mainland Europe.
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My Accord went for a 2 year Service and it was £380 my Mustang went in for its 2nd year service and it was £125. I also notice that the Mustang needs oil changes more frequently than the Honda but the Mustang needs air and pollen doing at 30K and the major service is at 100K.
Why do European cars need more expensive servicing then?
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USA - lower tech /lazy V8 as against - Higher Tech Higher Revving 4 - pot might be an answer.
More likely to be servicing in USA it is accepted that you service/change oil more frequently and a "lube" is as much as some services are.
UK Franchised Workshop is often the "Main Profit Centre @ £75-£100 / hour" of the business - sales has too many overheads (Glass Palaces) and loads of staff that do little for the customer.
My son & DiL were £200 for a Honda service last week - all told 1hour 20 mins start to finish for 1 x mechanic and that included the invoice / payment time. Oil & filters £70, Time £100 and VAT £30.
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Re the above
Because of the "greedy hourly rate" I would like to know how many "Private Motorists" as distinct from Co Cars, still have their car serviced at a Franchised Outlet rather than an Indie.
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OP is happy to drive a 10 year old car, on grounds of cost. He'd be much better off buying three 7 year old cars over that ten year period. When 7 years old, that 16k car will already have suffered 90? 95?% depreciation.
Welcome to Bangernomics.
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so the 3 cars in ten years works out at 70 pounds per week. or 10 pounds a day. hardly extortionate as a lot of people would spend nearly that much on lunch and morning coffees.
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"so the 3 cars in ten years works out at 70 pounds per week. or 10 pounds a day. hardly extortionate as a lot of people would spend nearly that much on lunch and morning coffees."
You're right that for some people, based on the example of this 16,000 car, the differential in absolute terms would not be that large. On the other hand, in this case the difference is roughly 15,000 over the ten years, which is 1,500 a year. That's equivalent to approximately one brand new high-end flat screen TV *every* year, or an overseas holiday.
As we agreed earlier in this thread, people have the right to spend their money as they please. What initially interested me in the subject was the apparently widely held view that changing cars reqularly is cheaper.
Some of the other commenters to this thread still appear to believe that it's cheaper to swap cars frequently but they haven't advanced any supporting figures. I think we've gone some way towards establishing in this discussion that the "once every three years" faction are paying a substantial amount more over time. Whether that's worth it or not is an individual choice.
Suss
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Lots of them will be company cars, or private cars that do a lot of business mileage so effectively funded by the company.
I'm 21 driving around in a brand new (now 1 year old but had from new) Focus Titanium 2.0tdci - an £18k+ car - but I haven't had to pay for it. It will be replaced with another brand new car. That must cover a large amount of the young professional type people you see driving about in new cars.
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"On the other hand, in this case the difference is roughly 15,000 over the ten years, which is 1,500 a year. "
Strictly yes, but to make the maths work the £1500 p.a should be invested and not used for other things so that when the 10 year old car dies you can go and buy another £16,000 car, expect by then it may be £20-25,000.
That's how it worked in the good old days where you only spent what you had saved.
Now a brand new car can be had for as little as £99 a month, pay £99 for three years then drive into the dealership and repeat the excercise.
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Problem with buying a 3 year old car is that it could have been driven like certain people I know drive their co. cars & hire cars. i.e. ragged to oblivion and beyond!
I've seen brand new motors with clutch smoke pouring out of the bell-housing. Brake discs glowing red from heat. Engines thrashed so hard they overheat. Down-shifts at speed that send the engine rocketing past 8,000 rpm with valves bouncing off the cam lobes. Brand new PD engines topped up with £2.99 oil from the local market. Diesels mis-fuelled with Petrol and then driven. Clutches dumped from standstill so often the CV joints eventually give way.
All of these cars "looked" like a good used buy...
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Judging from some of yr previous posts whoopwhoop you yourself are the perpetrator of some of this abuse... It's amazing what some cars will stand up to though.
:o/
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In terms of what we choose tp spend our money on, bear in mind this is a motoring site [pedants, all of us!]. Was this a home decorating site, I dare say its users would be more likely to go for bangernomics and have a spectacular conservatory, or a floodlit staircase instead!
We all choose our cars with a much higher proportion of heart not mind, compared to average I guess.
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"all choose our cars with a much higher proportion of heart not mind,"
Include me out:-)
I never buy a car without investigating the cost of running it.
I expect 10 + years life from a car and NOW buy at 2 years old with 40% depreciation from new.
Annual maintenance costs should be less than £300 and mpg>45 overall.
You can run cars for long periods of time relatively cheaply.
Like you can buy most things cheaply if you get your timing right and do your research.
The most profitable sales of consumer goods are those made to the ignorant who are in a hurry.
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>>bear in mind this is a motoring site
Indeed, so full of people who like to spend their money on their cars wisely. I spend more on suits (per suit) than I have spent on a car. I have even spent less on a car than I have spent on a pair of shoes for work.
Actually, I spent nearly as much on an umbrella (used for work - or at least for commuting) as on a car.
Funny old world, isn't it.
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it would be interesting to see if this is an age thing. is it wily old people being thrifty and youngish ones being wasteful or vice-versa
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I'm personally quite fond of the 'Buy used prestige car at 4 years old from original owner sell when you can afford something loads better' school of thought.
It means I get to drive around in a nice car rather than some of the cheap plastic crap the likes of Renault stiff people 5 figure sums for.
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Easy - a young professional couple - say one an engineer in the right industry (oil/electronics/software) and a wife with a similar qualification / job - £150K joint income no problem.
I know lots of electronics and software engineers. I can't think of any off the top of my head who make £75k a year!
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I know lots of electronics and software engineers. I can't think of any off the top of my head who make £75k a year!
I agree. I live in London and know a few people earning £75K a year plus but they are in sectors that don't exist elsewhere in the country eg city financiers, really specialist city types etc...So it always makes me wonder who are the people in provincial parts of Britain keeping Merc dealers in 2nd homes...
I think what also drives it to me is people who believe very strongly these days in their own success ie spending right to the limit of their earnings and gaining alot of perceived status from it and almost using it as a means to push for more...I know some people who really follow this track - effectively believing if you drive a car that matches where you want to go you'll get there and will/demand of yourself that you will keep being more and more successful in the career /earnings ladder.
It's completely opposite to the "buy what you need/can get by with and no more" that seemed to be the method of my parents...
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Plenty of people I know in the sticks maintain a steady enough income to keep them in steady change of high end vehicles. 75k isn't exactly thin on the ground you know !
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So what exactly are these people doing that bring in £75K plus a year? They can't all be GPs and retired stockbrokers.
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"£75K plus a year"
I used to make more than that when I was based in London as a self employed designer. It's really not that hard if you can hook up the right clients and get by without sleep. I would have been lucky to get half that on a proper salary.
I know plasterers in Manchester who earn more then a thousand pounds a week so not far off that figure either.
Property developers?
Probably more people than you would imagine.
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In 2005/06 1 in 20 taxpayers earned over 56,000 and 1 in 100 earned over 132,000.
www.hmrc.gov.uk/stats/income_distribution/table3-1...f
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Headteachers, Senior Police Officers, Solicitors, Accountants, Doctors, Dentists, Plumbers (:-) ) once you start looking its not that hard.
Some would have to be at the top end of their professions possibly, but I bought and paid cash for my last two BMWs. I actually HP'd the Skoda because I got a very good deal and Mrs P said I'd be better off leaving the cash I had left over from my 5 series in savings (she locked it away though....:-( )
Edited by Pugugly {P} on 04/02/2008 at 22:58
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Sales with a "blue-chip" computer Company - £75K basic - can double this with bonus.
Chartered Status Engineer Oil (35yrs old +) - Aberdeen up to £70 / hour - 12 hrs / day if you want. Drilling Engineers are £700 / 8 hr day - if you can find one
All work onshore - off-shore rates are higher for those needed in Nth Sea
Local Dentist £100K NHS - £150K + Private. Newly qualified can make £60K
Local Senior Lawyer / Partner - £100- £300K
Plenty people with money and they are not all old and grey
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Like one of the other posters here I don't think I know many if any people outside the City earning 75k a year. I would dispute some of the figures for specific professions - I am certain that our local dentists don't make 100k, for example - but I think the income distribution figures to which hxj has already provided a link give some useful insights.
If only 1 in 100 UK taxpayers earns 132k or more and there are 35 millon taxpayers (according to the National Audit Office) then then the pool of those earning 132k or more is only 350,000 people. If all of these stick to the 1 car every 3 years rule then only 120,000 or so will be replacing their car in any one year. That's only 5% or so of the, what, 2.4m new car registrations every year?
All interesting stuff...
Suss
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There are plenty of people earning good money and you should be looking at household income, not individual earnings. High-earning professional types tend to marry/partner similar people thus giving them lots of disposable income. How many GPs are there? Dentists? Vets? When the new GP contracts were introduced new Audis, Mercs and Lexus appeared as if by magic at my local surgery.
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Read in the Daily mail recently(so it must be true)that 90% of workforce earn less than £40k a year.
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That is broadly true according to MM Revenue & Customs. For 2005-2006 (the latest figures) a pretax income of 41,300 pounds put you in the 90th percentile - so nine-tenths of the tax paying population gets less than that. And 95% get 56,200 pounds or less.
Suss
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So what exactly are these people doing that bring in £75K plus a year? They can't all be GPs and retired stockbrokers.
There are several management consultants and overseas businessmen in London who actually earn much more than this. Also, some contractors can earn similar amount in London where daily rate is £500-£700 (not very uncommon in London).
Every time I visit London, I feel just amazed by seeing so many brand new Ferraris, Bentleys, Rolls, Maserratis and so on....
If people can afford a house in London, buying a nice car is simply equivalent to shopping at Tesco at weekends!
UK is the only country in developed with most unequal distribution of wealth - now that's another matter altogether ;)
PS: not all flashy cars belong to individuals - hire firms buy them a lot.
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"If people can afford a house in London, buying a nice car is simply equivalent to shopping at Tesco at weekends!"
Yeah right. When I had a house in London, I never had a pot to pee in.
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I suspect that our wealth distribution is in reality fairly even comapared to the rest of the developed world, or at least not dis-similar. Only finance in London and related specialist fields, where we are world leaders, produces high 6-figure earnings. Apart from footballers and musicians of course. Kate Bush earned 600K from royalties alone last year, and hasn't made a decent record for 20 years.
If you exclude that [say] 5% at most, the other 95% are probably fairly evenly distributed down the scale - they must be if 90% earn 40K of less. At the lower end, welfare means that even the poorest have livable incomes, at least if they can be bothered to fill out Gordon's endless forms.
Yahoo's [uselss] ex-chairman earned $75m last year; wonder what he drives / flies?
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>UK is the only country in developed with most unequal distribution of wealth - now that's >another matter altogether ;)
Not at all. This is common place in almost every country in the developed world and at similar or WORSE levels.
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The UK does not have - as the other commenter seems to have claimed - the highest inequality of income in the world but it usually appears in the upper half of the Gini coefficient tables. While the Gini coefficient isn't perfect (it doesn't measure asset ownership) it is a useful tool and it suggests that the UK has higher inequality in income than most European companies and Japan as well.
Suss
Edited by Susukino on 05/02/2008 at 14:34
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Just one thing here...
At the end of 10 years (buying one car and keeping it) you have a car thats worth .. say £2000
At the of 10 years (buying new every three years) you have a 1 year old car valued at say £13,000
So do you not deduct this amout from the overall totals???
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"At the of 10 years (buying new every three years) you have a 1 year old car valued at say £13,000
So do you not deduct this amout from the overall totals???"
Yes and no.
"Yes" because by the nature of the "new car once every three years" scenario there will always be a substantial amount of value left in the car at the end of the three-year period. That value is reflected in the calculation in that I reduce the cash outlay for the next car by the part-exchange value of the existing three-year old car.
"No" because I do not perform this calculation at the end of the 10-year period. My aim was to look at cash outlays over an arbitrarily chosen period of time; this just happens to be 10 years. If I extend this to 12 years or 25 years or 47 years there will *always* be a point where there is a car being owned by the "frequent changer" that has substantial value remaining. You have to cut it off somewhere: there will never be a neat ending.
However, this doesn't in my opinion affect the cash outgoings. If I had taken 20 years instead of 10 the calculations suggest that the "frequent changer" would have a far greater cash outflow (say somewhere between 1.5x and 2.0x) than the "buy and hold" type.
Suss
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almost every country in the developed world and at similar or WORSE levels.
Not to mention the developing world, where inequalities can be truly staggering.
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But where would we be if our forebears, or some of them, had not hurled themselves with ruthless abandon into 'the primitive accumulation of capital'?
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If only 1 in 100 UK taxpayers earns 132k or more and there are 35 millon taxpayers
If all of these stick to the 1 car every 3 years rule then only 120,000 or so will be replacing their car in any one year. That's only 5% or so of the, what, 2.4m new car registrations every year?
Hello Susikuno.
There are a lot of people in the UK who buy on the never never, although the crazy lending criteria days are now mostly over. Although you can still find the likes of the old defunct "yescar" credit still happily lending to the needy.
Most people, I would say 99%, are penny wise and pound foolish.
IMO your assumptions are wildly out. Just take this example - Just a few weeks ago there was a thread here regarding someone who was/is planning to buy a new car every 3 years. He was going to start off with a purchase using £10,000 cash and then change every 3 years. His income was £200 a week or just barely minimum wage level and yet he feels comfortable buying new every 3 years.
I concur with the economists who are predicting a huge fallout during 2008 and 2009 as a result of people being caught out by the credit crunch.
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"IMO your assumptions are wildly out."
Maybe I should clarify a little. I suggested that if all buyers in the top income bracket changed their cars every three years it would only account for 5% of the total.
I did not say that these are the only people that are changing their cars frequently - as I mentioned at the beginning, a relative of mine is doing the same thing and he is definitely not well-off. If the top income bracket only accounts for 5% of car purchases (even on a frequent-change schedule) then it implies that a whole lot more people are changing their cars every few years.
For what it's worth my suspicion is that most people - maybe not 99% but maybe 70-80% - just do not sit down and do the sums about car ownership. Or they intuitively understand that changing their car every three years is more expensive but choose to ignore that because whatever it is that this strategy confers (higher social status or perhaps the excitement of getting a new car) is more important to them than the dramatically higher cash outlays required.
Like you (jbif) I sense that a lot of people are living very close to our beyond their means when it comes to their cars. This thread was an attempt to find out whether I was missing some mitigating factor. So far I haven't found one.
Suss
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