Consumers warned not to exhaust their finances

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 2007 depreciated by an average of 43% or £6,124 in the first year alone – leaving consumers £5 billion out of pocket.

Consumers stand to lose £510 a month due to depreciation - this monthly loss has increased by £13 since the last round of new number plates hit the roads six months ago.

Levels of depreciation vary from one car to the next according to factors such as the popularity of the car, the number of vehicles manufactured and the perceived value or quality of the brand among consumers. Depreciation accelerates after a car’s first birthday hitting 54% by the second year of purchase, 61% by year three and 68% by the fourth year. In fact, uSwitch.com estimates that an average of £9,800 is wiped off the value of a new car in just four years.

The worst performer is the UK’s 10th best-selling car - the Vauxhall Vectra 1.9 CDTI - which loses 58%of its value after the first year alone, and 75% after four years. The combined depreciation loss in the first year of ownership for consumers who bought this model in 2007 stands at over £550million. On a brighter note, the BMW 325d SE Coupe is the car that depreciates the least, losing 25% of its value in the first year and 56% by year four. However, consumers should be aware of its hefty £30,000 price tag.

Eco-friendly motorists who want to do their bit for the environment may find that their ‘bid to green’ can be a cost saving exercise. Not only can driving a green car generate savings of up to £300 a year on running costs, but there is also money to be saved on depreciation costs over standard cars. The Volkswagen Polo BlueMotion comes with a price tag of £12,720 and depreciates by £4,846 (38%)in the first year and £8,123 (64%) after four years - coming third in the league table for cars that hold their value best in year one.

Ashton Berkhauer, insurance expert at uSwitch.com, says: “Buying a brand new car is an exciting moment, but in reality it’s not as simple as just driving off the forecourt and onto the open road. For most people a one year old car represents far better value for money as this is the period when the bulk of any depreciation takes place. The amount of money lost on a car in the first year does vary from one brand to another but the Vauxhall Vectra clearly takes the number one spot with over half of the car’s value disappearing after just 12 months.

“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, Diamond and Elephant who will only pay out the ‘market value’ - the value of the car minus depreciation - if the vehicle is written off within its first year. So even if a customer makes a claim after just two weeks they will receive a payment from their insurance provider which factors in depreciation, which is on average £6,124 in year one.”

Ashton Berkhauer 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.”

uSwitch.com allows consumers to look for quotes on a vehicle without inputting the registration plate, this means there should be no nasty surprises after the purchase has been made.