Depreciation Problems

There is no doubting the many advantages that you benefit from if you are lucky enough to be able to afford your own new car. For one, modern technology is constantly improving year on year and as such new cars are becoming better and better in terms of the equipment and features which are on offer.

Moreover, you have the peace of mind that nobody else has driven your motor and you have guarantees in the form of manufacturer warranty – Kia for example offer 7 years or 100,000 miles, where as you would not get this with a used Kia Sedona or a second hand Kia Carens. New cars are not required to be MOT tested for their first three years either.

However one of the big problems with new cars, in addition to their expensive list prices, is the fact that they depreciate at quite an alarming rate. Effectively as soon as you buy a new vehicle from a manufacturer you are constantly losing money until you sell it. The amount any particular car depreciates is relative to its worth at the time of purchase and depends on a number of other factors. Some brands depreciate quicker than others – Audi vehicles for example hold their value better than most, as they are credited as being very reliable and can usually be driven for over 100,000 miles with minimal problems.

There are some useful resources online which can help you get a rough idea of the amount by which your vehicle may depreciate year on year, and there are actually even a few dedicated sites on which you can input data about your car and calculate an estimate of the amount of money you will lose over a specified time frame.

Because of the rapid manor in which cars depreciate, many people who want to buy a brand new car often now turn to leasing instead. With a lease deal you pay a relatively small up-front payment and then effectively pay off the depreciation over the course of 36 monthly payments (it can be over a shorter or longer period but 3 years is quite typical).

This is by no means a method of escaping the vast amount of money you will lose from driving a new car, but it does soften the blow in terms of how quickly the money departs your account. For example you may be looking at around £20,000 for a Suzuki Grand Vitara whereas with a lease you could pay as little as £1,500 initially and then £200 a month for 3 years.