New car owners lose £497 in depreciation every month

Consumers buying brand new cars next month should brace themselves for a sharp financial shock the moment they drive off the forecourt.

New research from price comparison and switching service, uSwitch.com, has revealed that the top ten selling cars in 2006 depreciated by an average of 42% or £5,967 in the first year alone – leaving consumers £4.8 billion out of pocket. Last year consumers forked out more than £11 billion for almost one million new cars.

The research also shows that depreciation accelerates after a car’s first birthday hitting 52% by the second year of purchase, 60% by year three and 67% by the fourth year. uSwitch.com estimates that an average of £9,676 is wiped off the value of a new car in just four years. Levels of depreciation vary from one car to the next according to factors such as: the popularity of the car, the number of manufactured vehicles and the perceived value or quality of the brand among consumers.

The worst car is the Ford Focus Style 1.8 which loses 48% of its value after the first year, and 70% after four years. Motorists who want to do their bit for the environment may find their bid to ‘go green’ a costly exercise. The Toyota Prius 1.5 T Spirit comes with a price tag of £20,677 but depreciates by £9,348 or 45% in the first year and by £14,027 (68%) after four years.

Aron Thompson, Head of Insurance at price comparison and switching service, uSwitch.com, says: “Buying a brand new car is an exciting moment, but in reality it is not as simple as just driving off the forecourt and into the sunset. For most, a one year old car represents far better value as this is the period when the bulk of depreciation takes place. The amount of money lost on a car in the first year does vary from one brand to another but the Ford Focus clearly takes the number one spot with almost half of the car’s value disappearing after just 12 months. Despite this, it was the UK’s top selling car in 2006.

“Despite the rapid depreciation of new cars, insurers are generally sympathetic certainly in the first year of ownership. For example, the AA, More Th> n and Swiftcover will all provide a ‘new for old’ vehicle in the event that the car is written off. Companies such as SAGA will even extend this level of cover to two years. However, consumers should also beware, there are several key providers such as the Admiral Group who will only ‘pay out’ the value of the car minus depreciation or the ‘market value’.”

For motorists that have the cash to flash, investing in a ‘supercar’ could be a better long term investment. The top ten ‘supercars’ decreased in value by an average of just 26% after the first year – 16% less than the average car, and 51% after four years. The Audi R8 Coupe 4.2 FSI is the best investment, decreasing in value by just 16% after the first year and 44% after 4 years – however this car comes with a hefty price tag of £76,825.

Aron Thompson concludes: “Buying a brand new car is a big expense so it’s really important that people do their homework and find a car that will give them value for money. In addition to this, motorists need to think about the cost of insuring the car before they hand over the money.”