The Advertised Cost vs The Real Cost
After all the hours of reading reviews and visiting showrooms, you’ve finally decided on your next new car. It’s a good price too, in fact, it the best deal you’ve seen anywhere. But wait, before you click that order button, or sign on the dotted line, is there something missing from that headline cost?
Surely not? You made a short-list, compared them side by side, and checked that you were looking at vehicles with comparable deposits and the same number of monthly payments. Where could you have possibly gone wrong?
When choosing a new car, most of us look closely at the finance cost, fuel efficiency and price of insurance. Afterall, there’s no point saving £10 per month on monthly payments, only to hand it over at the petrol station. The trouble is, although these things are important, it’s far from the complete picture.
Which of these is more expensive?
No matter how much you love your new car on day one, you won’t hang on to it forever. At some point you will look to sell it on and, when this happens, the amount you receive makes a big difference to what you ended up paying for it in real terms. So, let’s try it out, which car below is more expensive?
Avg price new: £23,434
Avg price new: £24,655
It’s easy isn’t it. The Skoda Karoq is the cheaper of the two. It certainly appears that way, but let’s look again and this time add in the resale value.
Avg price new: £23,434
Avg value at 3yrs/30k miles:£14,232
Actual cost: £9,202
Avg price new: £24,655
Avg value at 3yrs/30k miles: £16,665
Actual Cost: £7,990
Which one is cheapest now?
That’s right, the VW T-Roc may have appeared to be £1,221 more expensive but it’s actually £1,212 cheaper than the Karoq.
Whatever you decide in the end, at least it will be a more informed choice. That said, it’s important to bear in mind that these are just the current predictions. They are still quite likely to change in the future, depending on new model releases and vehicle availability at the time. And that’s one of the main problems with buying a car, you never really know what it will be worth in three or four years’ time.
On the other hand, if you opt to lease your new car with a Personal Contract Hire arrangement, it’s the leasing company that takes on all the risks relating to the second-hand car market. All you need to do is to pay a fixed monthly fee to use the car for anything up to 4 years and then, provided you have kept to the anticipated mileage and looked after the car properly, you simply hand it back and choose a new one (or walk away if that’s what you prefer).
One of the main problems with buying a new car…you don’t really know what it will be worth in three or four years’ time
Servicing and maintenance
Most of us have been in the situation where, having dropped our car off for a routine service, we receive the dreaded phone call. The tyres need replacing, there’s a problem with the gear box, or there’s something on the diagnostics report that needs further investigation. All of sudden, the once manageable bill is getting bigger and it’s not something you’ve budgeted for this month.
On average, UK motorists spend around £350 per year on servicing and repairs but this varies greatly between models, with more expensive or luxury cars unsurprisingly topping the charts when it comes to service costs. There are other key factors to consider as well, such as the age of the vehicle and its mileage, the type of service being conducted and the cost of any necessary repairs.
Even when all these elements are the same, prices can still vary depending on the quality of the garage and whether or not genuine parts are being used.
One thing you can be sure of is that, year on year, servicing your car will get more expensive. Unless of course, you opt for a fixed priced maintenance package that’s built into your monthly payment. That way, you will be protected from any price rises or unexpected repairs bills in the years ahead.
Servicing your car will get more expensive…unless you opt for a fixed price maintenance package
Is buying a new car really worth it?
There’s no simple answer that suits everybody. Some people simply like the idea of ownership. The freedom to chop and change your car whenever you want without penalty. And, by factoring in the true cost of owning and running each vehicle, you can at least make a more informed decision.
However, with ownership comes a certain degree of unpredictability and risk. What will I do if the car isn’t worth as much as I thought when it’s time for a replacement? Am I comfortable with fluctuating servicing and repair costs which go up every year? And do I have really have the buying power to get the best price?
In the current climate, it’s this last point that could make all the difference. We all like to think of ourselves as good negotiators, able to strike the right deal on a big-ticket item such as a brand-new car. Unfortunately, recent events have created some major problems with car manufacturing. Not least, the global shortage of semiconductors which is currently resulting in changes to the scale and production methods used by almost all manufacturers.
For some, this has meant a pause in production, with the obvious knock-on impact to future availability. For example, Ford have gone as far as saying that they will be producing 1.1 million fewer cars this year.
Limited availability tends to result in rising prices, with manufacturers and dealers operating a supply and demand policy that can make discounts hard to come by. With this in mind, it can make more sense to piggyback the buying power of a business that buys tens of thousands of cars each year. So much so that it could make a real difference to the true cost of driving your next new car.
It can make more sense to piggyback the buying power of a business that buys tens of thousands of cars each year