Is buying a new car for cash better than at 3 years old?

By | 8th March 2017

New-vs-3-year-old-car

Following on from my post about how to minimise your motoring costs, I read an article from a US blogger where for him buying a brand new car for cash worked out better than a used one.

Using the same information as before, assuming 10,000 miles pa, I ran the numbers to see if the same situation would apply in the UK.

While there is indeed a reduction in motoring expenses by buying new rather than leasing, it is still more expensive than running a second-hand car from 3 to 9 years old.

In the table below I’ve used the same car, a Yaris Hybrid. While the new price is listed at £17000, you can pick one up through a broker for just over £15,000.

The fact that the second-hand values drop quite a bit makes purchasing a 3-year-old car better, however it is a calculation that you should run for yourself depending on which model of car you are looking at.

A 3-year-old car at £8,000 is significantly less than the discounted new price of £15,000.

For the example, I’ve assumed that the brand new car will be worth £4000 as a trade in at the end of 6 years.

10,000 miles paNew Car for cash3 Years Old
Depreciation£11,350£6,000
Extended Warranty£370£1,480
Fuel Costs£7,640£7,640
Servicing£1,250£1,500
Tyres/Repairs£200£500
MOT£180£300
Road Tax£0£0
Insurance£2,400£2,400
TOTAL£23,390£19,820
Yearly£3,900£3,300
Monthly£325£275
Per Mile39p33p
James McBrearty started his own business from scratch in 2006, to help the self-employed.

He helps people to escape from the corporate world and shares his thoughts here on the changing world of work, technology and personal finances; as well as the occasional travel post.

Over the next 10 years things are going to change significantly. James is a follower of frugality and minimalism; and an advocate of F.I.R.E. to minimise the coming disruption.

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