Its a question to which I do think there is a definitive answer, but I would welcome your thoughts.
For the average owner ( a 12k car new, lets assume no finance to factor in), on a reasonably average income, doing 10k a year including their 45 min / 15 mile stop start commute over the potholes and speed bumps of Britain, at which point does it make most sense to change a car.
I previously owned a 1996 Mondeo from 1997- 2003 and found the last 2 years quite expensive in terms of wear and tear .
In 2003 I purchased a new corolla, and have been pleased with its reliabily to date( incidently find myself needing a garage visit for seized door lock/ stubborn bulb connector I cannot access)
Its probably worth no more than ? £4.5k now, so has depreciated £8K, and cost about £2.5k in servicing/tax/tyres/brakes.
Question is, is the likely increased cost of ownership over the next 4-5 years sufficiently offset by the lower depreciation? is the increased risk and inconveinience of garage visits worth the extra outlay for a new warranted vehicle?
the downside for me of long term ownership are the irritations of more frequent repairs to continue driving what is for most of our relationship an 'older car', plus a bit of boredom.
However, the overall financial picture is imprtant, as I do not want to spend my 'retire pot' on cars
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The most economical way is to only change a car when it becomes no longer viable to repair i.e the cost of a repair exceed the value of the car. Probably 10 years plus for most cars
However as a car becomes older it tends to need more attention, although this is not necessarily the case. Some of my most troublesome cars have been less thatn 3 years old. Of course there is also the the boredom factor and desire to own something new which you have identified.
At the end of the day ou just have to decide what is the more important, saving money or having that new car.
Most of us however tend to try to justify our purchases on a a spurious economic basis somehow claiming we ar actually saving money by spending it!
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It becomes no longer viable to repair i.e the cost of a repair exceeds the value of the car.
No-one has yet persuaded me that this argument makes sense - it is just an easy comparison to make. I suspect in many cases the owner is just saying 'it's not worth much to sell, so why spend money on it?'. At a time when a car's market value approaches zero at 10 years or less, on this basis an expensive repair could mean it is junk after only 7 years, especially when parts continue to escalate in price. And if the car cannot be sold despite trying, its 'value' may be zero anyway.
If the car in question has otherwise been reliable, and fulfils its requirements, even a fairly expensive repair could be financially sensible after allowing for the immediate depreciation that occurs after changing to a newer one. Often, better the car you know ...
One thing I would say is Buy nearly-new, not New, if you want to reduce depreciation.
Edited by Andrew-T on 13/03/2009 at 11:08
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>>Often, better the car you know ...>>
My thoughts exactly. It's always amused me that some car owners won't pay out £200, £300 or whatever sum to repair what is probably a basically a sound vehicle, yet readily shell out thousands to replace it.
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No-one has yet persuaded me that this argument makes sense
Didn't intend to imply this was an absolute rule but if you've been running a car since new with a view to minimising total cost there does come a time when you have to think about replacing it. When the cost of repairs exceed the value is a good marker as to when you might think about replacing it but there could well be valid economic reasons for keepig the vehicle
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As a bangernomics driver it's not cost of repairs versus car value, it's cost of repairs versus cost of depreciation on something newer; I've often spent more than a car's value on it, on the basis it'll probably keep going for another year.
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>>..versus cost of depreciation on something newer>>
You've forgotten to take into account the purchase price...:-)
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... Question is, is the likely increased cost of ownership over the next 4-5 years sufficiently offset by the lower depreciation? is the increased risk and inconveinience of garage visits worth the extra outlay for a new warranted vehicle? .. >>
It depends on the reliability of the make but even then I question your basis for your perception that the "increased risk" is significant. The reliability stats published by a number of publications show that most makes of cars nowadays are generally very reliable. Evolution has meant that the unreliable makes have become extinct.
IME, there has been no increased risk. Unless your garage is ripping you off, in the case of your Corolla, the next 5 years should be very cheap motoring.
Which Corolla is it in HJ's Car-by-Car breakdown?
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its a 2 litre diesel hatch 114psi T3
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All good comments; in my case FYI I think the change came due to the "boredom, new motor syndrome" and a trigger event. I had a VW diesel (old style 1.9 no electronics) bought nearly new and used for nine years, no major issues ay all, getting a bit tatty, high mileage. My friend's daughter needed a car for her uni course/work, so over to her. She loves her "tank" (no Afrika Corps stickers on it though!) and still going strong four years on, no major issues. Everyone happy with outcome.
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its a 2 litre diesel hatch 114psi T3 >>
Let me find it for you then. Here it is: tinyurl.com/bc8y99
[see first link found there].
It says
" Joint 8th in 2007 UK J.D. Power Customer Satisfaction Survey with 83.9% score. "
and
" Most reliable 4 - 8 year old car in the UK according to 2008 Warranty Direct claims figures. "
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I think it all depends on personal circumstances, I would love a new car but I cant afford to spend or have the monthly payments that buying the car i would like would demand, this been something modest not flash, like the current Astra (although as the new one is coming out there is 0% at the moment)
I would LOVE a Insignia but at the same time I still would love the Vectra ( i like them, and am not ashamed ;-) ) but just right now, even one of them is out of my scope
- so my Astra G is going to have to last a few years just yet its already 6 years old (52) but its all paid for, and i dont owe anything for it - and im sure its got another 6 to 10 years in it - my circumstances would have changed by then so a new car will be hopepefully will be on the cards - but until then the Astra G is going to get fixed if it goes wrong unless its stupidly expensive ie £3k + in one go.
I have also realised that i may be going off the subject of the topic somewhat sorry for that :-)
Edited by redviper on 13/03/2009 at 12:23
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All I will say on this issue is that I've never kept a car more than 2 years. I've done the maths and it's cost me a fortune, I know. There's no way on Earth that paying for repairs can ever be worse than depreciation, especially if you've already got a car that's running well.
Maybe if you were hit with combined engine and gearbox failure and the car was rusting terminally, perhaps then it makes sense to change!
Otherwise, you're just changing because you want to! :)
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>>There's no way on Earth that paying for repairs can ever be worse than depreciation,
>>especially if you've already got a car that's running well.
That just cannot be true. The likelihood is that repairs will be cheaper than depreciation over the long run.
However, if either:
1) you are unlucky; or (/and)
2) you are running a previously well-depreciated car
then it is perfectly possible for your statement to be untrue.
I have recently bought myself a Legacy. 3 years old, cost £3,750. I imagine that it has 7 years' life in it; that makes £535 per annum depreciation. I should be surprised if it costs me less than that in repairs over a similar period. In fact, it might cost me more than that in servicing.
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OP is asking the $64k question.
The car he's got has a solid reputation and has been reliable. He finds it boring but doesn't want to spend his retirement pot either.
What happened to his Mondeo tells him nothing about what might happen to the Corolla. Equally he might trade the Corolla and have bad luck in what he buys.
He might put a warranty on the current car for a relatively small amount but given the age there might be a limit on the payout. He could also put the warranty money in the bank and effectively underwrite the risk himself.
I'd suggest he sticks with it. With cars as with most other things you can't have the penny and the bun.
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The likelihood is that repairs will be cheaper than depreciation over the long run
I should think someone who buys new or nearly-new every 2 years would never consider doing so if he/she expected to pay over 3 grand repairing each car! Equally any bangernomics driver who spent more on depreciation than repairs has found the secret of perfect motoring. I suppose the ultimate in cheap car ownership is to buy the best bangers and repair them oneself (though parts do get steadily dearer ...)
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>>Equally any bangernomics driver who spent more on depreciation than repairs has
>>found the secret of perfect motoring.
In 8.5 years (provided you ignore the £1,500 of Mercedes-es that were nicked shortly after acquisition) I guess I have spent the following on motoring:
Metal: £2,800
Unexpected repairs: £1,200 (2 alternators, 1 cylinder head)
"Optional" servicing costs
Cambelts: £730
Wear & tear items
Exhausts: £475
Brakes: £100
Tyres: ???
Damage
Rear windscreen £250
Sundry servicing: £500-1000
MOTs: 7
So I would say that with depreciation of £330 per annum, unscheduled repairs of £140 pa, other servicing of £300 pa I've had pretty cheap motoring. And one trip home with the AA - over maybe 75-100,000 miles in total.
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£330 per annum! My depreciation costs have been more like £500 per month recently!!
Over the last eight years with an array of bangers and some nearly new cars, my average has been £238 a month on depreciation. Ouch. And I made a profit on one of the bangers!
Yep, nearly £23,000. It pains me when I think what else I could have spent that money on.
Hence my comments above... :)
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In fact, I forget I have also had £1,275 back from two third party insurance claims over the period - £150 per annum back.
That makes deperciation £180 pa.
My new Legacy has cost somebody perhaps 17,250 over the past 3 years - in fact, they received 1,000 less than I paid for it... so £506 per MONTH. I reckon it cannot cost me as much as that per ANNUM... on the basis of (current eBay no reserve prices) £1-£2k value at 10 years old.
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Equally any bangernomics driver who spent more on depreciation than repairs >>
You cannot "spend" more on depreciation than repairs, only suffer depreciation...:-)
The repairs may, hopefully, never be required so depreciation, in effect, will be lower in real terms.
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You cannot "spend" more on depreciation than repairs, only suffer depreciation
Of course you can - you have to. You just believe you are spending it on a car ...
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If you wanted you could keep a car for donkeys years with luck. It's really interesting seeing why and when people change their cars, some of my mates buy new and change every couple of years and others run them as long as possible. I reckon the most expensive part of motoring is buying the car in the first place and the longer you keep it the less it depreciates as the years go by.
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I reckon the most expensive part of motoring is buying the car in the first place and the longer you keep it the less it depreciates ...
This supreme truth may not be news to 'mature' motorists. My rule of thumb used to be that an ordinary car lost about £1K a year (probably more this century), except in the first year or so when the serious knock-back happened. The loss slowed down when the residual was about £2K. So after your car's depreciation rate has halved to about £500/year or less, you can afford to pay that amount on repairing it, instead of replacing it and going back to the steeper part of the depreciation curve.
But if you are a confirmed bangernomic, you are never on the steep part of the curve anyway.
Edited by Andrew-T on 13/03/2009 at 21:56
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But if you are a confirmed bangernomic you are never on the steep part of the curve anyway.
True, you are on the wobbly part of the curve where the cars value goes up significantly with a fresh MOT.
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" the wobbly part of the curve where the cars value goes up significantly with a fresh MOT."
Bouncing off the x-axis just before! (and flat-lining if it fails badly...)
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"It's really interesting seeing why and when people change their cars"
Indeed. There's a psychology PhD in there somewhere. The self-delusion that some people* apply in order to 'justify' a new car never fails to amaze me. After all, they liked the old one enough when they bought it!
*I include myself, of course.
Edited by J Bonington Jagworth on 14/03/2009 at 16:19
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I've had a new car ( well new to me anyway ) for about 8 months. It's younger, faster, possibly looks nicer, has done a fraction of the mileage of my old one and so on. I still have my old car too. Strange thing is, I still prefer my old one. I'm quite comfortable with being accused of being a bit odd though......
Edited by Humph Backbridge on 14/03/2009 at 17:36
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