Learning to drive and buy a new car was once considered a significant right of passage. Still, new motorists now have numerous operations in renting and leasing vehicles.
Drivers have also become increasingly aware of the steep depreciation of vehicle values, with new cars losing an estimated 20% of their retail price during the first 12 months of ownership alone.
Over the next four years, you can expect your car to lose roughly 10% of its value annually, creating a less-than-ideal scenario for motorists. So, does buy a new car still, make sense in the modern age, and can you take steps to safeguard your investment?
Consider the Size (and Structure) of Your Total Investment
To begin with, it’s important to carefully consider the total amount you invest when buy a new car.
At the same time, you’ll need to consider the precise nature of this investment, particularly in whether you buy a new car outright or enter into a long-term financing agreement.
Where possible, we’d recommend minimising the amount you spend on a new or even used car, as while you can take steps to safeguard your investment, the depreciation rate will continue largely unchecked.
Buying a car outright is also better purely from an investment perspective, primarily because this affords you complete ownership of the vehicle and enables you to sell this free at an optimal time.
Take Out a Third-Party Warranty on Your Car
When you buy a new car, you should also know that this typically comes with a manufacturer’s warranty that lasts up to three years.
Although this can vary in some instances, once this warranty ends, you’ll be responsible for covering the cost of all repairs and unexpected breakdowns.
Coupling this with the depreciating value of an older car creates a financial double-whammy that undermines your investment in your vehicle.
Fortunately, you can minimise this impact by investing in a third-party warranty from the RAC and ALA, which will provide extended coverage and protection even as your vehicle ages.
This type of product can cover popular cars such as the Vauxhall Astra and the Ford Kuga, and it can make a huge difference to the value of your investment.
Strive to Optimise Your Car’s Resale Value
Any investment lives and dies by the return it eventually delivers, although your outlook should be slightly different when dealing with a car or similar vehicle.
So, while you may still aspire to optimise the amount you recoup from your investment, in this instance, your precise goal should be to cap losses and minimise any gap between the purchase price and the car’s value at the time of resale.
This approach will help you to manage your expectations while helping you to identify cost-effective and manageable ways of optimising the resale value of your vehicle in the future.
Keeping the car’s interior and exterior clean and fresh offers a relevant case in point, as does having your vehicle independently value to ensure that you don’t price potential buyers out of the market and can create competition between interested parties.
