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      01-10-2019, 05:33 PM   #1
cc3
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Why do we keep funding higher depreciation?

No surprise with problems at Jaguar: Land Rover, Ford etc.

Made me think as I was looking to change a car that new prices even with discounts are starting to get a bit ridiculous given the steeper depreciation now seen over a few years ago. We are all funding this depreciation either via finance with interest or from cash. Manufacturers like BMW who have been pushing dealers to shift higher and higher volumes have been storing up issues hoping once they have someone hooked on monthly payments they can just roll them into new metal. So people move from 3 to 4 year deals or have to lob in more upfront cash as dealers try to keep the monthly similar. Actually if you stop and think about it cars have become expensive relative to average growth in earnings. Think I will keep my car for another 12 months usually buy with cash. I get little return on money but second hand values are really pants relative to new plus extra tax over £40000 sticks in the throat !
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      01-10-2019, 05:54 PM   #2
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Why? For many users the desire for a new car is so strong, (too strong), manufacturers and dealers know it.

Cars are better than ever these days, much more life in them than 3 or 4 years, for the average user. But that desire...

The old adage applies, "fools and their money are soon parted".
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      01-10-2019, 06:51 PM   #3
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@cc3 have you really got these cars!?

1M, GT4, M2, M140i, 335d Touring

Are you a car dealer or something?

Lucky guy!!!!

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      01-11-2019, 02:21 AM   #4
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Quote:
Originally Posted by HighlandPete View Post
Why? For many users the desire for a new car is so strong, (too strong), manufacturers and dealers know it.

Cars are better than ever these days, much more life in them than 3 or 4 years, for the average user. But that desire...

The old adage applies, "fools and their money are soon parted".
I was thinking about this yesterday in fact. All I can add to it is what wastage! First problems with recycling plastic but think about the used car stock not shifting. There are thousands of cars on Auto Trader, thousands on Piston Heads...

Some people have the mentality if it is approaching 10 years or older then it will have problems. That is a broad brush view. There are some 10 year old cars out there that run like a dream and probably have less issues but I guess it must be the effort of research that puts people off.

I could go on... but you're right desire is the main thing. Be it keeping up with Jones' or believing a used 340i on the drive let's the neighbours know you're successful and made it.
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      01-11-2019, 04:26 AM   #5
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Cars seem to be getting more expensive in general

A mate of mine is looking to replace his A3 saloon with another in the next few months, I was suprised that a relatively low spec A3 Sport petrol 35 saloon was around 350 a month

Im sure you would have been able to find that for under 300 / month not that long ago

(Yes, I realise it depends on miles / deposit etc but the point remains that prices seem to have risen quite sharply)
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      01-11-2019, 04:36 AM   #6
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Originally Posted by Chelsea_Tractor View Post
I was thinking about this yesterday in fact. All I can add to it is what wastage! First problems with recycling plastic but think about the used car stock not shifting. There are thousands of cars on Auto Trader, thousands on Piston Heads...

Some people have the mentality if it is approaching 10 years or older then it will have problems. That is a broad brush view. There are some 10 year old cars out there that run like a dream and probably have less issues but I guess it must be the effort of research that puts people off.

I could go on... but you're right desire is the main thing. Be it keeping up with Jones' or believing a used 340i on the drive let's the neighbours know you're successful and made it.
I also think for many of us it's less 'look at me' than simply getting bored / over familiar with what we have. Objectively, my 4GC is still relatively new, is pretty, fast, practical and has lots of toys. But as much as I still rate and enjoy it, you can't sustain the collection day wow factor. That's why we all get the vicarious pleasure from other members' new cars, as well as endless 'research' for the next car. Even teaston will be out of his X3 honeymoon by the summer
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      01-11-2019, 05:00 AM   #7
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Quote:
Originally Posted by Sasquartch View Post
Cars seem to be getting more expensive in general

Yes, I realise it depends on miles / deposit etc but the point remains that prices seem to have risen quite sharply)
This doesn't help - chart shows GBP vs EUR. GBP has taken a battering against the Euro and the USD in the past few years. One of the -ve outcomes of the vote to leave the EU which gets surprisingly little coverage
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      01-11-2019, 05:16 AM   #8
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You took the words from my mouth. The exchange rate falls of last two years are really beginning to bite. That and the fact that manufacturers are not funding finance deals to the same level.
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      01-11-2019, 05:20 AM   #9
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Slightly different question but the OP mentions people going for 4 year deals rather than 3 - to my mind this seems a crazy thing to do

In year 4 you're out of warranty (assuming usual 3 year warranty) and you will either have to buy a warranty which might partly negate the saving of a 4 year deal, or you have to take a hit for any repairs which are probably more likely in year 4 anyway

As (to my mind) the whole point of a PCP or lease is to provide fixed monthly costs is a 4 year deal madness ??

Or am I missing something here ?
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      01-11-2019, 05:25 AM   #10
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What would you consider to be a reasonable amount of depreciation? My last car retained about 48% of its value over nearly 4 years. I don't think that's too bad really.
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      01-11-2019, 08:25 AM   #11
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Quote:
Originally Posted by thescouselander View Post
What would you consider to be a reasonable amount of depreciation? My last car retained about 48% of its value over nearly 4 years. I don't think that's too bad really.
What's the model? Theoretical, or obtained as a trade-in?

My car had lost at least 40% from list in a year and 6k miles, for me to be able to buy at 40% off list. Loaded BMW's drop like a stone.

My observation, best retained value is in the cheaper BMW's and near to base spec models.

Lowest depreciation per mile I've ever come across, was a friend with a Fiat Panda. Bought it new for £6k and traded for £3k at 3-years, with 60k miles, against another small Fiat. Five pence per mile.
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      01-11-2019, 08:36 AM   #12
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Quote:
Originally Posted by HighlandPete View Post
What's the model? Theoretical, or obtained as a trade-in?

My car had lost at least 40% from list in a year and 6k miles, for me to be able to buy at 40% off list. Loaded BMW's drop like a stone.

My observation, best retained value is in the cheaper BMW's and near to base spec models.

Lowest depreciation per mile I've ever come across, was a friend with a Fiat Panda. Bought it new for £6k and traded for £3k at 3-years, with 60k miles, against another small Fiat. Five pence per mile.
It was a Mazda 6 - Top spec with all the options. Paid £26,000 and got back £12,500 through a sale on Wizzle.

I think part of the problem with BMW might be that it can get very expensive if you tick too many options boxes and its difficult to get the money back on that. Running costs of higher spec variants are also relatively high which will put pressure on residuals as its a harder 2nd hand sell.
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      01-11-2019, 08:49 AM   #13
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Quote:
Originally Posted by Sasquartch View Post
Slightly different question but the OP mentions people going for 4 year deals rather than 3 - to my mind this seems a crazy thing to do

In year 4 you're out of warranty (assuming usual 3 year warranty) and you will either have to buy a warranty which might partly negate the saving of a 4 year deal, or you have to take a hit for any repairs which are probably more likely in year 4 anyway

As (to my mind) the whole point of a PCP or lease is to provide fixed monthly costs is a 4 year deal madness ??

Or am I missing something here ?
I recall when a lot of companies went from the typical 3-year lease of the time, to 4-years or 80,000 miles. Why? Because cars were now more reliable and it was more cost effective for fleet managers.

We only had 1 or 2-year warranties in those days. I believe the 3-year warranty is one of the reasons many only take a 3-year lease. Whether it is as cheap as running for 4-years and an extended warrant for a year, I'm not sure, man maths and sales tactics can easily distort true costs.

What we do know with cars like our BMWs, total costs for years 4 - 6 are not a lot cheaper than the first three years. Depreciation may be lower, but other additional expenses can keep costs per mile quite close to having a new car, if we get the right deal.
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      01-11-2019, 09:19 AM   #14
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Quote:
Originally Posted by HighlandPete View Post
I recall when a lot of companies went from the typical 3-year lease of the time, to 4-years or 80,000 miles. Why? Because cars were now more reliable and it was more cost effective for fleet managers.

We only had 1 or 2-year warranties in those days. I believe the 3-year warranty is one of the reasons many only take a 3-year lease. Whether it is as cheap as running for 4-years and an extended warrant for a year, I'm not sure, man maths and sales tactics can easily distort true costs.

What we do know with cars like our BMWs, total costs for years 4 - 6 are not a lot cheaper than the first three years. Depreciation may be lower, but other additional expenses can keep costs per mile quite close to having a new car, if we get the right deal.
According to my BMW dealer the depreciation of my 328i between years 5-6
was only £1K. He showed me the computer readout from the source they use
to value used cars.
Of course the value of my 328i was distorted by the drop in demand for diesel
cars and the fact that in 2012 not many petrol engined F30s were bought.
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      01-11-2019, 09:57 AM   #15
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Quote:
Originally Posted by Isow View Post
According to my BMW dealer the depreciation of my 328i between years 5-6
was only £1K. He showed me the computer readout from the source they use
to value used cars.
Of course the value of my 328i was distorted by the drop in demand for diesel
cars and the fact that in 2012 not many petrol engined F30s were bought.
There are always going to be examples of values which don't fit a linear or normal pattern. Hopefully my car is in a similar position. F11 535i models are rare, weren't the car of choice when launched, and now a few appear to want them in the used market. I'm estimating my depreciation has slowed to about £2k a year, in years 6 and 7. Even if a bit more, it is nothing like the first 3-years, which was more than £35k. Pleased I didn't have to 'absorb' £25k of that figure.

Last edited by HighlandPete; 01-11-2019 at 10:57 AM. Reason: Added "535i"
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      01-11-2019, 10:38 AM   #16
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Quote:
Originally Posted by cc3 View Post
No surprise with problems at Jaguar: Land Rover, Ford etc.

Made me think as I was looking to change a car that new prices even with discounts are starting to get a bit ridiculous given the steeper depreciation now seen over a few years ago. We are all funding this depreciation either via finance with interest or from cash. Manufacturers like BMW who have been pushing dealers to shift higher and higher volumes have been storing up issues hoping once they have someone hooked on monthly payments they can just roll them into new metal. So people move from 3 to 4 year deals or have to lob in more upfront cash as dealers try to keep the monthly similar. Actually if you stop and think about it cars have become expensive relative to average growth in earnings. Think I will keep my car for another 12 months usually buy with cash. I get little return on money but second hand values are really pants relative to new plus extra tax over £40000 sticks in the throat !
I have mentioned in another thread that I have ordered a 330i
Sport with all the available option packs and park assist plus.
I managed to get 11% discount through an internet broker.
I donít normally buy cars this way.
I normally buy an ex demo or a BMW used car.
I am really pleased with my 328i and itís £9K worth of extras, most of which are standard on the new 3.
The problem is it is 7 years old and although it has jiust passed its MOT with no
advisories old cars just get older.
Just say it will need a new exhaust, £1200 for an OEM or thereabouts.
Thatís more than 10% of what the car is worth. I know itís cheaper than depreciation to spend money on cars but it hurts to spend big £££ on older cars
There is a definite pleasure in buying a new car and an addicts denial about
depreciation, well maybe not denial but head in the sand attitude.
I know my new 3 will depreciate a lot but that is years away when i have to face it and as the saying goes Ďtomorrow is another dayí.
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      01-11-2019, 11:50 AM   #17
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Quote:
Originally Posted by TodmordenLad View Post
Quote:
Originally Posted by Sasquartch View Post
Cars seem to be getting more expensive in general

Yes, I realise it depends on miles / deposit etc but the point remains that prices seem to have risen quite sharply)
This doesn't help - chart shows GBP vs EUR. GBP has taken a battering against the Euro and the USD in the past few years. One of the -ve outcomes of the vote to leave the EU which gets surprisingly little coverage
Can't see BMW reducing prices if exchange rates improves! Pound v euro similar to period 2008/11. Rates go up and down and big manufacturers hedge their exchange risk.
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      01-11-2019, 12:18 PM   #18
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Those of you who can afford a new car cash then great, however the only time i purchased a new car was whilst i was serving with the army abroad and got them tax free. I then sold then on with no loss back to the dealer after 1 year.
I would never and i mean never buy a car new in this country as its just throwing good money away.
My last E90 330d which i purchased when it was 2.5 years old with 12k on the clock for 20.5k and put on another 60k on the clock over 4 years and moved it on. It cost me only £57.00 PCM to run (not including insurance) out of my own pocket due to work paying for my work milage. I expect my current F335d to cost me slightly more but i will not lose money anywhere like you guys do who purchase brand new cars!
My pholospy is alway by second hand with low milage and let those idiots who bought them new take the hit!
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      01-11-2019, 12:19 PM   #19
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Many consumers are more interested in the monthly cost of what they buy than the overall cost. Phones, broadband, netflix, sky, gym membership etc all £xx/month. The cost of cars has gone up partly to lead people down the PCP route as you'd be daft to buy one with your own money right?

I am always surprised by some of the people I work with who live pay check to pay check, their whole income absorbed by monthly outgoings with limited savings to fall back on. Most people on here a lot more savvy about total cost, finding a good deal and alternative funding options.
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      01-11-2019, 01:09 PM   #20
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Quote:
Originally Posted by Skwirrel View Post
Many consumers are more interested in the monthly cost of what they buy than the overall cost. Phones, broadband, netflix, sky, gym membership etc all £xx/month. The cost of cars has gone up partly to lead people down the PCP route as you'd be daft to buy one with your own money right?

I am always surprised by some of the people I work with who live pay check to pay check, their whole income absorbed by monthly outgoings with limited savings to fall back on. Most people on here a lot more savvy about total cost, finding a good deal and alternative funding options.
Living on monthly payments can be a two edged sword, fine while the going is reasonably good, but so easily goes wrong.

Problem today is not even living pay check to pay check, many more have moved to living beyond their means. UK households have seen their outgoings surpass their income for the first time in nearly 30 years, according to the Office for National Statistics, many supporting their outgoings with use of savings and taking on debt. Mostly debt from the figures.

I suggest that is a recipe for disaster.
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      01-11-2019, 01:55 PM   #21
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Quote:
Originally Posted by SSIIJAR View Post
Those of you who can afford a new car cash then great, however the only time i purchased a new car was whilst i was serving with the army abroad and got them tax free. I then sold then on with no loss back to the dealer after 1 year.
I would never and i mean never buy a car new in this country as its just throwing good money away.
My last E90 330d which i purchased when it was 2.5 years old with 12k on the clock for 20.5k and put on another 60k on the clock over 4 years and moved it on. It cost me only £57.00 PCM to run (not including insurance) out of my own pocket due to work paying for my work milage. I expect my current F335d to cost me slightly more but i will not lose money anywhere like you guys do who purchase brand new cars!
My pholospy is alway by second hand with low milage and let those idiots who bought them new take the hit!

I never pay list but will happily buy a pre reg. For example my 340i was 35% off list with a few miles on the clock , so under £30k. My previous was a 10 month Lexus with 1500 miles and 40% off list at £20k.

I appreciate that it will depreciate like no ones business but I'm getting the enjoyment of driving a new car. I'm also aware of the history and it will have a 3 year warranty, new tyres, discs, pads, never been tracked etc.

I don't see the problem with paying extra for that peace of mind...if you can afford it.
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      01-13-2019, 03:10 AM   #22
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I either buy brand new or demo car with under 20miles on clock. either upfront cost of hp. I refuse to pay finance at x amount extra each year when I know the car will loose 4k plus each year plus another 5k for just driving it from the garage on day one.

people like new cars, pcp, hire or lease. this makes it good for those looking for used cars that are in good condition. it's just a waiting game
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