New car is a depreciating asset

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If you are buying a new car it is really important to remember that a car is not an investment – a new car is a depreciating asset. Over time it loses its value so buying a new car is not cost effective.

New cars deprecate in value over time and in the first year your new car will lose its most value. In fact after fuel depreciation is the biggest cost of motoring. In the first year the average car will lose around 40 per cent of its value. But this varies greatly from car to car and some popular models will only depreciate by only 10 per cent in the first year, but this is still a big depreciation.

Supposing you do 10,000 miles a year, after three years the average car will lose around 60 per cent of its value. This means that in just three years your car is worth less than half of what you paid for it.

What’s more even super cars are not immune from depreciation as a Porsche 911 will lose 10 per cent of its value in the first year.  However, in general the prestigious makes such as BMW, Audi and Mercedes depreciate far less then the budget end of the market, as it is felt that they stand up better to general wear & tear.

However, family cars can lose as much as 60 per cent of their value in just three years. Research shows that the average three year old car loses £3.10 per day in value. However, an average new car will lose around £38 a day, which is a big loss. A car like the Audi A8 4.2 TDI Quattro SE has a depreciation value of about £185 a day for the first six months.

In fact, the moment you drive your new car off the forecourt it starts to lose value so by buying second hand you are not losing as much money. Even buying a car that is just one year old can help as most of the depreciation happens in the first year of car ownership.

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