The situation regarding buying used cars has now reached a point, due to the current economic crisis, where they are quite possibly becoming the only realistic option when choosing your next car.
Obviously there will always be people who only buy new cars and like to change them regularly no matter what, but maybe these customers are as unaffected by the credit crunch as they are by depreciation (i.e they couldn’t care less!) and therefore can carry on buying new.However these consumers may need to wake up and realise that if they can buy a 3 month to 1 year old car for up to 40%(!) less than when it was new, they may have to have a closer look at it.
It is no secret that new car sales have been steadily declining but the problem is compounded by the fact that manufacturers, leasing and rental companies are under enormous pressure to keep turning their used cars on to the market and dealers are snapping up batches of very cheap cars and passing the savings onto customers to keep the doors of their showrooms open and hopefully keep profitable.
The ratio of activity now between used to new car sales is wider than ever so clearly customers are seeing the savings which can be achieved by buying used. What will be the long-term effect? Well without a doubt this situation will need to change in the long term as manufacturers need to keep building new cars and developing new models to make money and won’t be able to unless they keep a consistent market share.
Talking to some senior executives in the trade this week it seems that they believe that new car prices will come down, there will be some aggressive marketing campaigns so watch out for the sale posters in showrooms (have you noticed that the motor trade is becoming like DFS with an almost permanent sale in operation!)
All things are relative and If a car owner is struggling to maintain a monthly payment on their current car, or needs to change for any reason then in the short term they could suffer some pain (where there are winners there are always losers) but in general for the consumer the retail car sector will really be able to say that they are giving great value.
However confusing it may seem the advice as we stand today (and remember with some marques this is changing almost daily) is to buy a nearly new pre-owned or used car because they have depreciated so much lately that a new car at today’s prices is not competitive and although this has been the case with many volume franchises for many years it has now reached traditionally depreciation proof cars like many German models, so although this is the picture at present, don’t for one minute expect manufacturers to not react and when they do the offers will be strong and sustained in order to kick start new car sales
So if you have a car that is less than 18 months old and can afford to run and maintain it then keep it. If you have a car that is low maintenance low tax and insurance then keep it unless you can buy a newer version of the same model for a great changeover figure.
Finally if you don’t have a trade-in at all but are in the market for a car, buy one which is 6 to 18 months old as you will get it at a great price generally and if you are looking at a finance deal always check out the dealer offers as contrary to popular belief they can often be more competitive than high street lenders (although in this climate it could be a bit of a lottery).
There will almost certainly be dealers closing down in all areas so be sure to choose a dealer that is part of a large group where possible if you want some continuity of service, otherwise you may find that if you take your car back with a problem the doors may be bolted shut!