Depreciation costs the average car owner almost £42 a week, whether the car is driven or not. Buying a standard car with a very high specification tends to create heavier depreciation. Small cars and high image cars (like Lotus Elise or Volkswagen Golfs) tend to lose less. Depreciation rates vary, but if you're going to buy new, then be prepared for a massive hit. At the worst end of the depcreciation spectrum, a new Daewoo Nubira may only cost £11k but it loses a massive 90.5 per cent (nearly £10,000) of its value over 3 years. Similarly a Vauxhall Omega that cost £25k in 2003 is now worth less than £5k. At the other end of the spectrum the cars that deprectiate the least are the (new style) Mini and the Audi A4, but both still lose 33% of their value in 3 years. In pounds terms that's £3.5k and £8.5k respectively. It is possible to acquire a car that actually appreciates in value - certain old and new rarities become sort-after classics. However, even if you can afford the usually high prices of such limited models, the cars have to be immaculately maintained, mirroring the untouched appearance of other collectables. That doesn't make it a practical choice for most of us.

 

 

 

If you're going to buy a new car, chances are you may only afford it on finance too. That means you're facing a double hit of new car depreciation and bank interest. Getting a quote for £53 per week may sound easily affordable and enticing, but for a 7 year deal that's £20,000 in total, of which around £5k is interest, and after which time elapsed your new car may have depreciated to be worth less than £1k on the open market.

 

 

 

Don't be the person in the above example, losing £5k in interest and £14k in depreciation over 7 years. Instead be the person snapping up that £1k 7-year old car outright without any financing needs. Over the several years that you then have the car, you will lose just a few hundred pounds in depreciation and zero in bank interest. Of course the main downside of buying older models is the potential for increased costs of repairs, so just make sure you buy reliable, and top of the reliability index are the Japanese brands of Honda, Toyota and Nissan. Of course the other downside of buying older and second-hand is you don't have the cool, the cred and the luxuries of the newest latest models. But is that really worth £20k? A new car maybe a thrill for the first couple of months but after that it will feel rather normal, and after a couple of years newer, fresher cars will be out, making your car look rather normal too.

 

 

 

The running costs of a car are considerable. After taking into account purchase, depreciation, insurance, servicing, VAT, tax, breakdown cover and fuel, the RAC believes it costs the average Ford Focus owner nearly £442 each month (assuming he drives around 12,000 miles each year). That's £5,302 each year to run a small family car. If you have two cars consider surviving with one. Selling a car is capital-gains tax free, so it would be a twin-win. If you do have to replace your main car then consider the factors and alternatives on the Car Expenses page.