New car depreciation hits buyers for £38 a day
New cars lose an average of £38 a day – or about 36% of their value – in the first six months of ownership, whilst three-year old second hand models shed just £3.10 a day over the same period, according to research by used car e-retailer, Carsite.co.uk.
As the new September registration begins one of the busiest periods of the year for new car purchases, Carsite is highlighting the not-so hidden, but often overlooked financial impact of vehicle depreciation. New car buyers not able to achieve one of the widely available dealer discounts – typically 10% off the car’s – will feel the effects of depreciation harder, and could find their new model losing value from anywhere between £10 and £70 a day. If it were a running cost, on average depreciation would equate to £1.16 a mile over the first 6,000 miles.
According to recent research by BMW Financial Services, more than a third of motorists do not look into the future value of their new car when making a purchase.
Bolstered by a thinning supply of used stock, second hand models valued between three years (36,000 miles) and three and a half years (42,000 miles) old show much slower rates of depreciation. In 2010 the average loss per day for a 2007/57 model over this period was just £3.10 per day.
To highlight the potential costs to new car buyers, Carsite found depreciation on some family-friendly models, such as a Vauxhall Zafira 1.6iran to about £56 per day, or £1.72 a mile, over the first six months / 6,000 miles.
Some of the biggest losses to depreciation occur in the luxury car market. For example, an Audi A8 4.2 TDI Quattro SE has an anticipated depreciation rate of £185 a day over its first six months, or more than 50% of the car’s value.
The 4x4 sector shows more stable demand – and slower depreciation – with off-road models such as the Land Rover Discovery, Hyundai Santa Fe and Honda CRV all expected to retain about 80% of their value.
Unsurprisingly, the economical supermini category produced some of the slowest value-losers, with a Mini First 1.6expected to retain about 85% of its sale price – a manageable £10.05 daily depreciation over the first six months.
Carsite analysed the purchase price and the trade values on a representative basket of models from each segment over six months in 2010.
John Guess of Carsite.co.uk commented; ‘Showroom tax, VAT, VED, high fuel prices, soaring insurance premiums, parking permits – today’s motorist faces a whole catalogue of costs before they can get behind the wheel of a new car. Then as soon as they pull off the forecourt, their vehicle is shedding value to depreciation - the biggest running cost of them all. We’ve found many buyers are choosing to invest in 2-4 year-old used models and letting others shoulder the financial impact of depreciation.’