Does it make more financial sence to buy a newer car than an old one?

blobert

Hi folks,

My current motor is on the way out ( www.adverts.ie/22810 ) so I'm looking at another small engined car (either a new or older model automatic Nissan Micra as a replacement). I've driven them both and while the new model one is obviously nicer, I'm not sure whether it's really worth paying double the price.

Here's my question. Does it make more sense to pay more for a 3-4 year old new model one (let's say €8,000) and then sell it on in two years (for perhaps €6,000) than to buy a cheaper old model one (7-8 years old for €4,000) and it sell it on for more of a loss (maybe only get €1,000 for a ten year old one) after the same 2 years. I know these figures suggest buying the new one but I have made them up.

People have said here before that the best way to not loose much money on cars is in buying one that has already taken the initial hit in price (after 2-3 years) and then to sell it on in a another 1-2 years. Is this true? My fear is that I'd struggle to get anything in 2 years for a then 10 year old Micra (the new model will have been out 6 years at that stage) even though it seems to be the better value car at the moment (ie the newer one is not twice as good as the old one as the price suggests).

Any advice on this situation (sorry if I have explained it poorly) would be appreciated.

I can happily afford to buy the newer model Micra but will only do so if it is less likely to loose me money than the old model one. Though I like cars a lot, my love of value and spending money wisely is greater (hence the buying of a second hand Nissan Micra!)

rebel.ranter

IMO you will always get better value on a 2nd hand car, particularly on the large engined luxury cars. A friend of mine bought a 04 Lexus LS430 with 26k miles (yes miles not km) for €51k, the new equivalent is ~€129k.

As far as I have read & observed the biggest depreciation occurs in the first 3 years so from this ppoint of view it would make sense to stick to the 2nd hand car as the percentage depreciation should be less.
On the other hand a new car comes with a warranty which will give piece of mind, so this would indicate a new car is better. Then again if you get a good 2nd hand car to begin with for a reputable dealer then there is usually a warranty.
I personally would never buy a new car, I've had new company cars and to be honest they only feel new for a few months (not because I'm messy or rough with the cars!!). I just try to look for a very good 2nd hand car with low mileage & good spec, that keeps me happy. Horses for courses though.

ambro25

The advantage in your case is that you're apparently set on a Nissan Micra and nothing else, so that should narrow your decision quite nicely (you're playing with nigh-on fixed variables).

In that context, i don't believe it's useful to ask your question in such general terms (i.e. is it the same for all cars?), because the answer is entirely down to the type of car and the corresponding depreciation curve for the particular model - all of that will vary on a case by case. Plus the all-important question of how long you intend to keep it - either period X (shorter) designed to minimise loss of value , or period Y (longer) to maximise return on investment through use. Read up on carzone, autotrader and the like, and make up your mind.

Oh, and re. your maths, why assuming €2k depreciation per 2 year range right up to year 8, and then a €3k drop? By your logic, at age 9-10 you should still be getting 2k, so your depreciation in both examples is the same (especially for a popular model like the Micra if reasonably looked after).

From experience (and common sense, really),

I'd buy a young car (1-2 years old) if I want peace-of-mind motoring and I intend to keep it quite a while, so with least possible mileage (= no checkered past, bugs/recalls all fixed) and 60k/3year warranty (say). All the 'main' miles to be put on will be by me, so I'll know how the car's been treated/serviced/etc. from very early in its infancy etc.

and I'd buy an old car (3+ years) if I'm in a bind and I need wheels for a short while (6m/1 year), and don't particularly care if there's major bills on the horizon (or, alternatively, if I'm indulging and I want a luxo-barge for a spell ).

But I certainly wouldn't buy an old car having just potential resale value in mind: you have to factor in the extra maintenance, parts, wear etc. that begin to surface at 4/5 years.

Point in case -

I bought a '97 Scoob Impreza in '04 with 59k on clock for £3k privately, only ever put petrol in it (+ servicing of course) and never a day's worry, sold it last month (so about 3 years on) for half (£1,5k) and 83k on clock. That was a 'quick fix' car (well, lasted much longer than expected after all :rolleyes: - these cars are built to last).

Now bought the exact same (2.0 R Sport) in '06 guise (new engine type, extended warranty, etc.) with 8k on the clock for £11k from main dealer (comparable to private prices, actually - you gotta buy at the right time from dealers, i.e. when they come up to year-end/cut-off date for bonus/stock rotation and they need to shift wheels on the forecourt). That's a 'keepsies' car for the next 4/5 years at least, at which time (and I reckon approx. 55k on the clock) it will probably still be worth at least half of what I paid for it.

Horses for courses

blobert

Thanks for the advice guys. I certainly wouldn't be looking at new Micras: it's between a 3-4 year old (most recent model one) or a 6-8 year old (older model one). They do seem to depreciate on a fairly even level (prices seem to drop by €1,000 per year on carzone) so perhaps it wont make too much difference whether or not I get the newer or older one?

I just thought as time goes on and the second hand newer model becomes more affordable that the demand for the older model might drop faster than the new and thus the price also?

ambro25

Nah... well, I'll mitigate that: not unless a 'new' type is so much beyond an older model (e.g. new engine type, new suspension setup, new body/not just a facelift, etc.) that it warrants a somewhat stronger residual.

On a 7+ year old car, you're now into residual value territory rather than car make/model territory, i.e. how much a punter is willing to pay for any car of that size with Y miles and a fully documented history to go from A to B, rather than punters specifically after a Nissan Micra.