As we approach the end of the year, many dealership will start to phase 2015 models out in favor of the latest iterations. This period is commonly seen as the best time to buy if you’re interested in buying on the new market. Any promotions will just be starting so they won’t have featured long enough for all of the desirable vehicles to have been sold out yet. There’s a lot more to analyzing the market than simply the time of year, though, so here’s a look at the bigger picture.
The Impact of PCP on the Market
In the UK, almost two and a half million new cars were sold in 2014, making it the strongest year in the past decade. However, many experts in the industry have cited concerns over the growing prevalence of personal contract purchase (PCP). PCP plans typically operate over two-to-four years, where the customer pays an initial deposit and then a low, fixed monthly payment over the course of the agreement.
At the end of the contract, the driver then has the opportunity to make another more substantial payment and take full ownership of the vehicle, or they can trade in the residual value of the car in the form of a deposit on a new vehicle. Many of those working in the industry are predicting that the majority of buyers will favor a new vehicle, potentially flooding the used market and pushing overall prices down.
Should You Buy Used or New?
The used market is often seen as an attractive proposition for price-sensitive consumers who don’t want to bare the full effects of depreciation. Typically, an average new car will lose around 50-60% of it’s original price after three years of normal use. In fact, you can expect a loss around 20% of the original value in the first year of ownership, followed by a further 15-20% during the second and third years.
Where new car buyers often see the most damage is in premium vehicles from brands like BMW, Audi, and Mercedes-Benz. As a result, these types of vehicles often remain highly desirable on used markets like Ridgeway. Buying a five-year old BMW executive car makes much more financially sense when compared to buying it new. It’s in these first few years of ownership that the vehicle’s rate of depreciation suffers most, and from then on the effects will be much less noticeable.
Some cars will noticeably drop in value, especially the performance counterparts to normal road going cars. Other models such as the BMW i8 on the other hand will hold value due to limited runs and its future proof technology. Check out this awesome drag race between a lot of depreciating horsepower and some modern hybrid technology.