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
After building up 17 years experience in industry and practice, James started his own business from scratch in 2006. He now helps others to do the same, while minimising both the risks and costs. James is dual qualified in tax and accounts, and has won multiple awards for small business. In 2014 he was invited to Downing Street, as one of the Small Business Saturday 100 winners.

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