MG4 Depreciation

[kevinji]

I had previously leased a Mercedes before so was inclined to lease as buying new almost involves significant depreciation so I did not look at the option of purchasing cash or PCP. With salary sacrifice I am effectively paying just over £300 pcm (including all maintenance and parts) for £15k miles pa. So the trophy is costing me £3.6k per year which I think is way less than the depreciation if I bought it. Over 3 years it may even out a bit more but if you can get salary sacrifice leasing rather than buying it is a no brainer.

People buy new cars for various reasons other than financial considerations and i understand that but financially, if you can do it, leasing by salary sacrifice is far better.

 

[welshwizard]

Everyone has a different comfort zone on this and the trick is to stay within it, and to look ahead to see that you'll still be able to stay within it if things change.

I bought my car new for £26,950 because I wanted a new car. I knew it would depreciate the minute I drove it off the forecourt, but since I have no intention of selling it, it doesn't matter. If things go as planned, any residual value it has in 15 years or so is gravy, and I've had a car I'll love for 15 years.

But what if it turns out to have been a bad buy? Really cheap car in comparison to its competitors, which corners have they cut, what have they skimped on, maybe it won't last? Well it should last its warranty period anyway, and at least it was relatively cheap to begin with. If used EV prices get really cheap then while I might not have much equity in my car, I should be able to find a nice used-car bargain if I really need to get rid of it.

What if all these great advances in EV technology that we're told are coming in the next few years mean that I'm really, really hankering for the new tech? And that has caused the value of the old tech to drop a long way? Well, either I resist the lure of the new, or I console myself that the most I can possibly lose on a £26,950 car is £26,950, and in practice it will never be that.

I'm looking at insurance renewal quotes and they seem to think my 9-month-old car is worth £19,500. I don't care, they're not having it.

I agree. I paid £30k for my MG4 long range 6 months ago. mine's on 2 years no interest just a deposit £10k . I'll save what I can in the 2 years and then get a cheap loan for the rest. I'm keeping my car and I think I'm laughing. I'm on 7.5ppk charge at home. Saving a fortune in fuel. So really the savings I'm making and that's about £100 a month easy if not more. I have a scratch cover for 50 claims and 7 years warranty. Nothing to worry about to be honest

 

[davz]

I had previously leased a Mercedes before so was inclined to lease as buying new almost involves significant depreciation so I did not look at the option of purchasing cash or PCP. With salary sacrifice I am effectively paying just over £300 pcm (including all maintenance and parts) for £15k miles pa. So the trophy is costing me £3.6k per year which I think is way less than the depreciation if I bought it. Over 3 years it may even out a bit more but if you can get salary sacrifice leasing rather than buying it is a no brainer.

People buy new cars for various reasons other than financial considerations and i understand that but financially, if you can do it, leasing by salary sacrifice is far better.

You do need to be very careful with salary sacrifice if you have a contributory pension scheme. I contribute 8.7% but if I used salary sacrifice at a £300 monthly payment, that would reduce my contribution by £313 a yr, close to £1k on a 3yr lease, over a 35yr working life that is £12k loss of contributions in today’s money. That will reduce your pension when you retire, depending on the type of pension it could be significant in the long term if you manage to stay alive! It certainly doesn’t work for me on an index linked pension, It’s basically having the car cheaper now but paying for it in later life when of course you will want as much money as possible.

 

[Lesterp]

Of course, the other side of the coin means that it’s a little easier / cheaper to buy one….
I’ve just bought a 3 month old refreshed Trophy with 1300 miles on it for just over £25k - from a main MG dealer. My Tesla that I just sold lost £19k in the 3 1/2 years I had it. Swings and roundabouts…….

 

[CarbonEV]

I mean, that’s pretty much any car,

I saw some S-Class costing £100-£150K new going for £40-£60,000.

They were 2-3 years old, not many miles, pristine interior.

Of course, expensive to buy, expensive to run & maintain - however losing that much in 2-3 years is crazy!

But that’s cars.

 

[Ian Key]

Depreciation only happens when you come to sell it, prior to that don't worry about it and enjoy the car.

 

[JimD]

IMO it's like house-buying. The only factor that matters is the cost to change when you trade up or down. Intrinsic 'market value' is just a meaningless number.

 

[meveringham]

NEVER buy a new (cheap car (under £40k or so )), if you're looking to break even selling it in a few years. It just doesn't work with the devaluation of the VAT as soon as you drive it off the forecourt.

This just doesn't apply if you're on a PCP deal.

Never owned a car before? That kind of depreciation seems normal.

I bought a laguna estate once. Dealer demonstrator with 6 months 6k miles. 18k new sold to me for 12k

3 years later i got 4,500 for it

Thats depreciation

Of course I've bought cars before, the condescension isn't helpful. The point is not that they depreciate, but the degree to which it has depreciated in the timeframe, something that is not normal by any stretch and in fact has been explained better, and more intelligently, elsewhere as noted (Tesla price drops, EV distrust with car dealers, insurers, etc). I should not expect my £7k deposit to evaporate in 18 months, on a PCP deal. That's not depreciation, that's the EV market being in disarray and everyone acting irrationally out of ignorance. Hopefully some kind of sanity will re-establish itself soon.

 

[Kithmo]

I don't understand why people think a PCP is a good deal ?
At the end of it you still have to pay the rest of the full price, the GFV final payment, to keep the car and suffer the depreciation or you hand the car back and the depreciation suffered is the payments you've made but you don't have a car.
The only advantage over buying outright to start with is if it's a 0% finance deal where you can keep your cash in the bank earning interest up until the final GFV payment.

 

[Rolfe]

That was my instinct when I saw the deals on the dealers' web sites. It was tempting to think I could drive out in a new car and only be committed to a few hundreds of pounds a month instead of raiding my savings for a lump sum of £23,000. But without doing any actual sums, my natural caution informed me that these guys weren't a charity and one way or another they were going to make money out of this, and by hook or by crook it would cost me more.

 

[tsedge]

Of course I've bought cars before, the condescension isn't helpful. The point is not that they depreciate, but the degree to which it has depreciated in the timeframe, something that is not normal by any stretch and in fact has been explained better, and more intelligently, elsewhere as noted (Tesla price drops, EV distrust with car dealers, insurers, etc). I should not expect my £7k deposit to evaporate in 18 months, on a PCP deal. That's not depreciation, that's the EV market being in disarray and everyone acting irrationally out of ignorance. Hopefully some kind of sanity will re-establish itself soon.

I understand your frustration. However, if using a PCP to protect against future depreciation you should steer clear of a large deposit, to make sure you are not at this risk. Of course, that does make the payments higher.

 

[salty]

I understand your frustration. However, if using a PCP to protect against future depreciation you should steer clear of a large deposit, to make sure you are not at this risk. Of course, that does make the payments higher.

Catch 22 then, as Rolfe said, they are not your friend, they won't be doing owt for nowt. ?

 

[tsedge]

I don't understand why people think a PCP is a good deal ?
At the end of it you still have to pay the rest of the full price, the GFV final payment, to keep the car and suffer the depreciation or you hand the car back and the depreciation suffered is the payments you've made but you don't have a car.
The only advantage over buying outright to start with is if it's a 0% finance deal where you can keep your cash in the bank earning interest up until the final GFV payment.

Because people don't keep the car.

PCP is a way to have a new car every 3-4 years. Usually the value exceeds the MGFV a bit and that's rolled straight into a new deal. PCP is much more flexible than a leasing arrangement which suits a lot of people's lifestyles.

People are not using PCP deals to buy the car outright unless the residual value significantly exceeds the MGFV and they decide to keep it.

PCP does protect against depreciation in the sense that the maximum depreciation is baked into the deal - if you avoid putting down a large deposit that you could lose.

If always buying outright, PCP makes little sense in terms of total cost but is very attractive in terms of monthly payment when people cannot afford to buy outright at the start.

It is one of the most effective finance schemes ever invented and over 80% of private buyers use it.

 

[siteguru]

What I don't like about PCP is that you're paying interest (assuming you don't get a 0% deal) on the whole balance (after deposit) - including the MGFV amount. (I think a lot of people don't realise this, and they think they're only paying interest on the difference). But in this modern world it's all about the monthlies. ?‍

 

[tsedge]

What I don't like about PCP is that you're paying interest (assuming you don't get a 0% deal) on the whole balance (after deposit) - including the MGFV amount. (I think a lot of people don't realise this, and they think they're only paying interest on the difference).

True, never get something for nothing. It is only the monthly payment that people look at, since that dictates "what they can afford".

 

[siteguru]

True, never get something for nothing. It is only the monthly payment that people look at, since that dictates "what they can afford".

I edited to add about the monthlies as you were replying.

 

[tsedge]

We bought our MG4 on a PCP precisely to fix the depreciation risk. I was nervous that EV prices might collapse with Tesla's behaviour and the pace of change of the technology. It wasn't the cheapest way to buy it at all, but since we'll probably change cars in the next 2 years anyway, the flexibility suited us.

Our MGFV after 40,000 miles and 4 years is something like £16,500, which is 52% of the purchase price - this kept the monthly payments low (at the time, rates and MGFVs have changed a lot since).

 

[siteguru]

I bought ERO outright ("cash") as I'm not planning on replacing him for quite some time.

 

[tsedge]

I bought ERO outright ("cash") as I'm not planning on replacing him for quite some time.

That's the right choice if you will keep the car for years and years. Only thing better is 0% finance and keeping the return on your capital.

 

[salty]

In the end you do what is best for you, nobody else's business. But PCP isn't some sort of magic deal. Buy outright or pcp or hp you are going to lose money, simple's. Probably about the same loss whichever deal you go for. Just get your new motor and enjoy it. ??