How to Buy a Cheap New Car (Tip 9 of 10)

TIP 9: Check the likely depreciation

There are two ways to lose money on a new car. The first way to lose money on a new car is to pay too much for it at the outset. Most of the tips here are devoted to getting the sharpest price you can, at the point of purchase.

However, you can also lose bucket-loads of money to depreciation – the value that’s lost as the car ages, reflected in its resale value at any point in time.

Predicting the future is difficult – just ask the weather bureau. However, a reasonable guide to the likely future value of the new car you want can be found by looking at the new price versus the current resale value of an equivalent model at two, three, four or even five years of age.

Not all cars offer equivalent resale rates. BMW 7-Series, for example, is a shocker. Holden Commodores and Ford Falcons aren’t real flash, either.

It really, really pays to do the sums on this up front because it’s no good saving $3000 (or something) on the new car of your dreams only to have it lose $5000 more than a similar model from another brand, which the used car market simply likes better.

No new car is an investment; they all lose money fairly quickly. Often the cost of depreciation is higher than the fuel cost – it’s merely mitigated by the fact that depreciation is a hidden cost, which you incur only when you sell the car after several years.

Where can you check up on the likely resale values? Just go to www.redbook.com.au to search a comprehensive database of used cars by make, model and variant. New prices as well as both current trade-in and private sale prices are available for free to private buyers.