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New or used – it’s a tough decision

New or used - it's a tough decision
With the ever increasing rise in values of used cars this year, we have often highlighted the rapidly diminishing gap between a nearly new used car and a new one. At the end of 2008 and the beginning of 2009 a customer could safely expect to save thousands of pounds buying a used car, even with brands where the residual values were rock solid. Now, however, due to the lack of cars around and the unprecedented demand, coupled with negative press surrounding new car sales, things have taken on a decidedly different feel. In recent months, with the scrappage scheme accounting for an increase in new car registrations, new cars have become a far more popular choice and therefore car makers have added to this goodwill by introducing some very competitive subsidised finance deals. The effect of this means that by careful shopping around and by making comparisons, it could be very likely that those buyers who set out to buy a used car dictated by their deposit and monthly payment budget and if they are looking to fund a car by the increasingly popular method of PCP, they could actually buy a brand new car for a more competitive monthly payment than the used car.

Is that hard to believe? Well here’s how; although the price of a car new will clearly always be more than used (though there are certain cars where even that rule is broken) the way the finance company sets the GFV (guaranteed future value) or RV (residual value) means that the newer the car the better the final figure and the lower the monthly payment. A PCP is where you put down a deposit and agree a monthly payment based on a 2, 3 or 4 year payment period and by agreeing up front the annual mileage to be completed by the buyer. Whereas a car 1 year ago would be so much cheaper used, even with subsidised finance, the monthly payment would therefore generally be better on a nearly new car. As the gap has closed however, and with the added factor of a newer car and a subsidised finance rate often several percentage points better than on used cars, it can be a real opportunity to own a brand new car over used.

Someone we know passed on this example to us of just how this scenario can stack up. They were in the market for a mark 6 VW Golf and found a 08/58 plate example with 12k on the clock in a metallic blue. The sticker price was £13,790 with a £2k deposit and 12k per annum mileage the monthly payment over 3 years worked out around £260 per month, bearing in mind you could probably negotiate a discount you could probably get the payment to around £245-£250 and the RV is around £5,000 on that particular car.

If we do the same example on a brand new car including an average discount it would make the car around £14,200 OTR with a 2k depreciation and with a 12k per annum mileage the payment works out, with the subsidised finance, at £229 per month with an RV of £6,000 making a new car funded in this way substantially cheaper than its used equivalent due to the closeness of the asking price the subsidised finance and the superior RV. This will not be the only example.

“Madness!” we hear you say.

These are, indeed, crazy times.

Sep 17, 2009In51der
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    Comments: 2
    1. used cars
      12 years ago

      I would go for used. Its the same thing new or used, it will take you to where you wanna go. And buying used cars is more practical, it lets you save more.

    2. sam
      12 years ago

      this seems quite incredible but often these so called deals on new cars are only ever on cars that you cannot get,i,went to my local vw centre and they told me i would have to wait until maybe january to get the model i want.Sometimes you have to look beyond the headlines

    In51der

    Motor Trade Insider - Bridging the gap between the customer and the Motor Trade

    12 years ago Blog, Consumercar makers, car sales, depreciation, motor trade recession, new car buying, new car registration, new car sales, Scrappage, Used car, Used car buying158
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