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Thread: New to all this!

  1. #1
    Join Date
    Jul 2013
    Posts
    1

    Default New to all this!

    Hi all,
    Was just wondering if anyone out there could give me a bit of advice? Im about to purchase a Peugeot 208 1.4 Diesel but I'm faced with the decision to either buy brand new (14,664) or an 18 month old at approximately 10,000. These are my options:

    1. Get a new car for 135 per month over 3 years PCP (5.9%APR) with a deposit of 5250 and then either pay the bubble payment of 5000 at the end or trade in and get a new one
    or
    2. Buy the second hand one out right (12 plate, 17000 miles) 5000 of my money paid and the other half borrowed from bank of mum 0% interest!

    I am aware that cars depreciate in value ALOT so my aim is to go with the method where Ill lose least money over time. I realise that with the first option Ill be able to have a new car every 3 years which is a nice idea but its not that important to me.

    I know this probably isnt a very interesting topic for most of you but If anyone has had experience in this and has a bit of advice for me it would be much appreciated!

    Thanks alot,

    Rachel

  2. #2
    Join Date
    Dec 2008
    Location
    Grantham, Lincolnshire, England.
    Posts
    607

    Default

    Hello,

    Losing the least money is a good idea.
    The way not to lose too much money is to own and run a car that has little or no depreciation on it and that can be purchased and maintained entirely without borrowing or spending capital.
    There are some good bargains to be had in the ten year old plus category that are quite capable of such duties as modest commuting. Mostly all that is necessary is to spend an initial amount putting such a car in good order before it enters service.
    My own car is old enough to vote, cost two hundred quid and apart from a couple of days in the workshop at the start has served me well for five years. During that time it has needed a battery and a radiator repair.
    My old Ford transit cost seventy quid, needed a week in the workshop and then hardly a penny for eight years.

    By networking with the right trustworthy people it is possible to own and drive a car quite cheaply.

    Much of the initial depreciation of a new car is because purchasers of new cars give a large amount of money to the Chancellor in the form of taxes; Car Tax and then V.A.T. on the total. They force you to pay a tax and then charge you VAT on it just like with fuel and booze.
    As soon as a new car is sold the resale value drops by the tax element which could be a few thousand pounds on even quite a modest car.

    At least with a used car the tax element is only VAT on the dealer's profit margin.

    As you seem interested in depreciation I suggest you take a look at Parker's price guide which you will find on the shelves at W. H. Smith or browse the web site. It makes interesting reading.

    The biggest part of the decision you are trying to make is predicting your needs and guessing how your cir***stances might change. A lot can happen in 3 years; redundancy, illness, disability and so forth. Being tied into a 3 year deal that requires you to make monthly payments and then hand over a lump sum at the end might not be such easy terms if things go pear-shaped in that time. Such agreements aren't easy to walk away from and even giving the car back won't cancel the deal because the people who underwrite such deals aren't in the car business they are in the money business and all they care about is you being under contract to repay them their money plus a handsome profit.

    If you go with option one it will certainly cost you more money but you better make certain your employment is secure and your health is bullet-proof and your birth control is reliable.
    Read the small print very carefully.

    It is also worth considering the fact that when a car is used it does tend to pick up a surprising amount of bodywork blemishes and signs of wear and tear, especially if you go within a hundred miles of any public car park. Generally before the hand-over at the end of the three year or five year deal such blemishes are counted and a further sum will be outstanding equivalent to the cost of making good or the trade-in value will be "adjusted" by at least that amount.
    Such agreements also tend to force the "owner" into a minimum amount of servicing and maintenance work regardless of mileage.

    Going with option two makes much more sense if you need the reliability and/or the snob value of a late model low mileage car but if the car is to be a glorified shopping trolley and local taxi it is still represents an over-priced luxury and is still going to have a significant depreciation over the next five years or so.

    Not knowing what you are going to use the car for or how many miles each year you will cover it is difficult to offer much more advice other than it is usually best to spend less than your capital amount if you can because a person really doesn't know what is around the corner for them.

    Don't forget to budget for repairs and maintenance costs for whatever car you buy. It is useful to "save" a sum in a separate account each month equivalent to the depreciation of the car, next year's tax, insurance and MOT cost plus the anticipated maintenance and repair costs for the year. A simple mishap with a tyre can cost almost three figures these days and sometimes more for a branded tyre and such things won't wait until payday so it is useful to have a motoring account to draw upon. Don't forget to also pay into it a sum equal to the loss of interest at the bank of the capital and the expenses money you could have saved if you weren't a motorist. That serves as a hedge against inflation.

    When you have worked out the sums involved I can assure you of a surprise and perhaps a shock. The real cost of motoring is far more than most people think. If you can't afford to budget for those amounts you can't really afford to drive that sort of car.
    Paying on demand as most people do hides the true cost. Budgeting properly puts control into the hands of a car owner and helps ensure standards can be maintained.

    Please come back if you need more.
    Good luck!

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