Car scrap scheme

[Brown, Jon Brow]

http://news.bbc.co.uk/1/hi/business/7995928.stm

http://www.thesun.co.uk/sol/homepage/news/special_events/green_week/article2368161.ece

The government is likely to introduce an incentive scheme for car owners to scrap old vehicles in exchange for new ones. However, they are trying to sell this as an environmental plan, because new cars apparently pollute less than old ones.

I don't see what this has to do with the environment. Surely throwing away something you have and buying a new one is bad for the environment? This is clearly just a plan that would hopefully help the car industry. So why are they selling it it like this?

[leopard]

They say the plan is also to help car manufacturers which are suffering from dropped sales in this prolonged crisis, I think in the countries where crisis only give minor impact to their purchasing power, they will not implement this car scrap scheme.

The new car sales have a positive trendline, and the older used cars have their own segmented market.

[555-04Q2]

I read about this last week. I dont understand why. In these trying times for European consumers, the government should not be promoting the sale of new cars as this puts further strain on consumer debt. I can understand the environmental reasons, but financially it makes no sense at all.

[jim mcglinchey]

I wish the tax payer was subsidising our product. I'd be laughing all the way to the bank.

[Daniel]

Can you guess who will take advantage of this scheme to get a nice cheap new car? :)

[sal]

Getting 2k off the price of a new car at the moment doesnt need a government incentive, however someone who's driving a ten year old car is doing that for a reason and thats mainly the fact that they cant afford anything else!

[Daniel]

It doesn't work like that Sal. It's 2k for your old car as a voucher. The price of the car with the dealer stays the same.

[Sonic]

Stoooooopid idea on all fronts. There are two types of owners of ten year old cars; those who do because they HAVE to, and those who WANT to. Those who want to will not want to scrap their pride and joy for all the tea in China. And for those who have to run old cars - 2 grand will not change that (unless the Goverment is encouraging us all to get into massive debt!!).

Even if someone, somewhere takes up the offer, studies in other countries running this scheme have shown that whilst you may sell a few more cars the purchasers will simply cut back on other areas and won't go out and buy that new fridge or whatever.

[Daniel]

Stoooooopid idea on all fronts. There are two types of owners of ten year old cars; those who do because they HAVE to, and those who WANT to. Those who want to will not want to scrap their pride and joy for all the tea in China. And for those who have to run old cars - 2 grand will not change that (unless the Goverment is encouraging us all to get into massive debt!!).

Even if someone, somewhere takes up the offer, studies in other countries running this scheme have shown that whilst you may sell a few more cars the purchasers will simply cut back on other areas and won't go out and buy that new fridge or whatever.

What about the people like myself who have a car that's over 10 years old and see this as a chance to upgrade to a new car for significantly less?

I mean look @ this --> http://fiatsupasaver.com/ItemDetail.aspx?mID=20

A complete NEW car with warranty and everything for £3795 + a 406 which was probably only worth a couple of hundred pounds at most. You've got to be joking!

it's very simplistic to say that people will just cut back. I'll not be that much worse off financially (fuel, road tax and insurance considered) if I buy the car above. Certainly not enough to mean that we'd have to cut back on anything really important.

On that note I'm off to a Fiat dealer tonight to discuss all of my options. As a tax payer I feel this is a waste of taxpayer money, but as the owner of a 406 turbo diesel with a blown head gasket? I think this is a fantastic deal.

[GridGirl]

One of my clients is a Subaru and Fiat dealership. Last month when the audit took place and bearing in mind they have a December year end they had only managed to sell one new car this year. That was in January and it was an Impreza. I was suprised they weren't shifting any Fiats so you maybe able to squeeze more out of them Daniel. ;)

All my other clients which were in the motor industry which included BMW, Porche and a company which specialized in sports cars have all sold out in recent months because they weren't making any money. The Subaru and Fiat dealership made £56 profit for the year before I made a tonne of adjustments to give it a significant loss. I'm not entirely convinced the car scrap scheme will work though.

[Drew]

Stupid idea for the economy. People will just spend their money on cars and cut back on everything else. As for the environment, well somebody else will come along with figures and facts i'm sure

[Zico]

Cant see this ever happening.. Old bangers will shoot up in price due to everyone buying them just to get a new car discount.. they'll possibly then just sell the new car and pocket the procedes. I havent read all the finer details but unless its very tightly vetted I can see it being a scammers dream situation.

[Daniel]

You have to have owned the car for 12 months already.

[Mark]

That's good to know. I was thinking that it would just end up as a money making scheme for some and not benefiting those who matter.

[Brown, Jon Brow]

But how does it help the environment? Taking in to account all the energy that is required to build a new car, does it really balance out?

[schmenke]

I would have thought that government incentives in the use of public transportation as an alternate to passenger vehicles would be a more meaningful environmental investment :mark:

[Daniel]

I agree Jon. Still going to take advantage of it though ;)

[GridGirl]

Environmental issues are not what the government is interested in. The whole point of the scheme is to encourage spending, help save jobs in the motor industry whilst gaining a decent percentage of the £2000 back via the VAT paid by Mr Smith when he goes out and buys his new car.

Where does the government gain VAT from people selling or buying a used car from Autotrader or something? ;)

[Daniel]

Yep. I personally think the best thing for the environment is to keep old cars going.

[J4MIE]

Darn I was hoping it was only going to be 6 months!! :p :

[GridGirl]

I've been listening to the news about this car scrap scheme and the government and the car manufacturers will both contribute £1000 each. So even if Daniel buys his car for £4K the government will make £600 back through VAT on that sale alone and that's ignoring the VAT when the dealer gets the car from the wholesaler. That's easily a 60% return on buying a very cheap car. The average car sale only needs to be around £7k for the governent to get it's share back.

When I bought my car two and a half years ago I managed to get more than £2k off the list price anyway. I reckon you could get just as much off if you went and haggled with a dealer today. You won't have as much bargaining power if you already walk in with your £2K voucher in my opinion.

[airshifter]

I've been listening to the news about this car scrap scheme and the government and the car manufacturers will both contribute £1000 each. So even if Daniel buys his car for £4K the government will make £600 back through VAT on that sale alone and that's ignoring the VAT when the dealer gets the car from the wholesaler. That's easily a 60% return on buying a very cheap car. The average car sale only needs to be around £7k for the governent to get it's share back.

When I bought my car two and a half years ago I managed to get more than £2k off the list price anyway. I reckon you could get just as much off if you went and haggled with a dealer today. You won't have as much bargaining power if you already walk in with your £2K voucher in my opinion.

Good point. If the dealer doesn't come down off the list price the voucher may be worth as little as walking in without one and haggling price. Our last car purchase had almost $7000 taken off the list price on the sticker, and we had no kind of voucher.

You mentioned on a previous post the suggestion that the government might lose out on VAT on purchases through Autotrader or such. Is there no way of collecting on used car purchases over there? Here in the US the sales taxes are paid to the state, and upon transfer of registration they charge sales tax based on book value. I don't think it's uniform in all states how they do it, but it's easy for them to collect if they want to.

[Daniel]

I've been listening to the news about this car scrap scheme and the government and the car manufacturers will both contribute £1000 each. So even if Daniel buys his car for £4K the government will make £600 back through VAT on that sale alone and that's ignoring the VAT when the dealer gets the car from the wholesaler. That's easily a 60% return on buying a very cheap car. The average car sale only needs to be around £7k for the governent to get it's share back.

When I bought my car two and a half years ago I managed to get more than £2k off the list price anyway. I reckon you could get just as much off if you went and haggled with a dealer today. You won't have as much bargaining power if you already walk in with your £2K voucher in my opinion.

Well I went into a Fiat dealer today and he's said he can meet the online prices I gave. So now it's just a case of actually deciding whether we want to do this, seeing what the scheme actually entails and ordering.

The Fiat dealership you do the accounts for must be a bunch of idiots or must be in a bad area for car sales. The dealer I popped into yesterday was doing two handovers for Fiat 500's just last night and there are a lot of 09 plate cars from there running around here too. They must be pretty useless because Fiat Pandas and 500's are a couple of models which are still selling fairly well and which aren't just sitting on the docks rusting away like a lot of other models are. I went to a different Fiat dealership on Saturday to testdrive some cars and the salesman was an absolute fool. We testdrove two cars and unless prompted he didn't utter a word at all while he was sitting in the back, didn't know basic details about the cars and hasn't bothered to call me back at all even though I left my phone number with him which is just such a basic thing to be doing.

[Daniel]

Good point. If the dealer doesn't come down off the list price the voucher may be worth as little as walking in without one and haggling price. Our last car purchase had almost $7000 taken off the list price on the sticker, and we had no kind of voucher.

You mentioned on a previous post the suggestion that the government might lose out on VAT on purchases through Autotrader or such. Is there no way of collecting on used car purchases over there? Here in the US the sales taxes are paid to the state, and upon transfer of registration they charge sales tax based on book value. I don't think it's uniform in all states how they do it, but it's easy for them to collect if they want to.

Well I think it all depends on how the manufacturers do it. For instance at the moment Fiat is giving hefty discounts on their Fiat Pandas

For instance they're selling a top of the range 1.2 Fiat Panda online for £6195 (a discount of £2800) whereas they're selling top of the range 1.2 500s at their list price of £9700 (discounts of a couple of hundred pounds are available though) so will they just raise the price of the discounted cars? I certainly don't think they're going to raise the RRP of the cars at all because people won't react nicely to that at all but I can certainly see them bumping up the prices they're giving on heavily discounted models to protect their bottom line.

Details should be finalised in a week or so, so I'll be holding fire until then :)

Just noticed that Fiat have put up a scrappage deal.
http://www.fiat.co.uk/Content/?id=17415#scrappage/home
Only £400 cheaper than what you can buy it for online
http://fiatsupasaver.com/ItemDetail.aspx?mID=3

[GridGirl]

Well I went into a Fiat dealer today and he's said he can meet the online prices I gave. So now it's just a case of actually deciding whether we want to do this, seeing what the scheme actually entails and ordering.

The Fiat dealership you do the accounts for must be a bunch of idiots or must be in a bad area for car sales. The dealer I popped into yesterday was doing two handovers for Fiat 500's just last night and there are a lot of 09 plate cars from there running around here too. They must be pretty useless because Fiat Pandas and 500's are a couple of models which are still selling fairly well and which aren't just sitting on the docks rusting away like a lot of other models are.

To be fair the dealership that is my client is primarily a Subaru dealership with only about 20% of sales being generated by the Fiat side of things. I was suprised they weren't selling Fiats this year though.

Daniel, you should ask the dealer where he gets his Fiats from. Having seen quite a few purchase invoices for Fiats it's not suprising your dealer can match the Internet price. I know what I'd be paying for a new 500 or Panda and it's not that reflective of the showroom price. ;)

[Daniel]

To be fair the dealership that is my client is primarily a Subaru dealership with only about 20% of sales being generated by the Fiat side of things. I was suprised they weren't selling Fiats this year though.

Daniel, you should ask the dealer where he gets his Fiats from. Having seen quite a few purchase invoices for Fiats it's not suprising your dealer can match the Internet price. I know what I'd be paying for a new 500 or Panda and it's not that reflective of the showroom price. ;)
Sellers market for a 500. DIscounts are minimal. Anything else you can get huge discounts on though

[Daniel]

Well I've ordered myself a Fiat 500 with the scrappage deal :)

[555-04Q2]

Well I've ordered myself a Fiat 500 with the scrappage deal :)

Why :?: :p : :crazy:

[AndyRAC]

Well I've ordered myself a Fiat 500 with the scrappage deal :)

Well good luck - from what i've read, a lot of motoring journalists actually prefer the Panda 100BHP - maybe that's not offered in the scrappage deal.

[Mark]

Well I've ordered myself a Fiat 500 with the scrappage deal :)

Nice one! What price did you get in the end?

Some months ago I said to Karen "Would you buy a Fiat 500" and she was like "urgh, no!!". Then at the weekend she said "I quite like those Fiat 500's" :crazy: :p

[GridGirl]

You don't often see a bloke driving a new Fiat 500. :p ;) I seriously hope you haven't gone for a base model as some of the interiors are nothing short of terrible. A friend recently bought a duck egg blue 500 and it has a cool crome effect interior though. :)

[Daniel]

Why

Because it's a well made car and is nice to drive :p


Well good luck - from what i've read, a lot of motoring journalists actually prefer the Panda 100BHP - maybe that's not offered in the scrappage deal.

I would have got a 100hp but it's less economical, fits into a higher tax band (£150 a year as opposed to £35 fior the 1.2 500), Fiat have reduced the discounts on Pandas so you're effectively only getting the £1k off from the government now whereas I got 2k off a 500 plus it comes with some bits that the 100hp doesn't come with.


Nice one! What price did you get in the end?

Some months ago I said to Karen "Would you buy a Fiat 500" and she was like "urgh, no!!". Then at the weekend she said "I quite like those Fiat 500's"

List price. But getting 2k for my car which was at best worth £200 softens the blow somewhat.

She should drive a 500 or at the very least go and have a look. They really are a nice car inside. One of the reasons why we thought screw it and get it over the Panda which is a bit cheap inside.


You don't often see a bloke driving a new Fiat 500. I seriously hope you haven't gone for a base model as some of the interiors are nothing short of terrible. A friend recently bought a duck egg blue 500 and it has a cool crome effect interior though. :)

That sounds like Jive blue which they don't do anymore. There was a really nice blue I would have liked but they don't do it anymore either so I went for white as it's free, practical and it looks good :) I went for a sport as I didn't like the wheel on the pop (the lowest spec car) as it felt really spongey and horrible compared to the nice leather wheel the lounge and the sport come with. The pop seats were also a bit crapola and the sport seats are a lot more supportive. Just going to call up and order different wheels now :uhoh:

[555-04Q2]

Because it's a well made car and is nice to drive :p :

Well congrats boet :up:

I love the shape and love the old 500. Now all you need is to find and restore and old 500 to park next to your new one :)

[MattL]

It's an interesting debate, this one. Clearly the main aim of the scheme is to stimulate the car industry, albeit packaged as an environmental offer.

If you have a 10-year-old+ car, then it effectively gives you a guaranteed trade-in value of £1000 (the govt part of the deal).

From the manufacturer side, many of the discounts being offered were actually available prior to the announcement of the scheme. Some manufacturers have offered, and will continue to offer, more than a £1000 discount.

There are some examples and quite a good explanation of the scheme as a whole on the Renault site here: http://www.renault.co.uk/cars/scrap.aspx

One of the key points about the scheme is that while it even if it's not for everyone, it should generate some interest and act as a stimulus. There are always savings to be had in the motor industry, particularly if you are happy to be a little bit flexible with your spec requirements. This scheme will add £1000 to manufacturer discounts and get a lot more people thinking about replacing their cars. We'll find out over the next few months how many actually act on it.

[Daniel]

You wouldn't happen to work for Renno now would you Matt? :) It's just that I'd hate for someone to accuse you of advertising your employers products on the forum :)

[GridGirl]

While we're on the subject of new cars. Daniel, shouldn't you be taking back all your previous posts where you said it was a waste of money to buy a new car? ;) :p

[MattL]

How intuitive of you Daniel.

What have I been doing since posting that?...Checking out which other manufacturers have posted info on scrappage scheme offers. Some sites are better than others with the info they have at this moment in time.

BMW - http://www.bmw.co.uk/scrappage
Citroen - http://www.citroen.co.uk/scrappage-scheme
Fiat - http://www.Fiat.co.uk/Scrappage
Ford - http://www.ford.co.uk/ScrappageScheme
Peugeot - http://www.peugeot.co.uk/ScrappageScheme
Renault - http://www.renault.co.uk/cars/scrap.aspx
Toyota - http://www.toyota.co.uk/scrappage
Vauxhall - http://www.governmentscrappageprogramme.co.uk/

[Daniel]

How intuitive of you Daniel.

What have I been doing since posting that?...Checking out which other manufacturers have posted info on scrappage scheme offers. Some sites are better than others with the info they have at this moment in time.

BMW - http://www.bmw.co.uk/scrappage
Citroen - http://www.citroen.co.uk/scrappage-scheme
Fiat - http://www.Fiat.co.uk/Scrappage
Ford - http://www.ford.co.uk/ScrappageScheme
Peugeot - http://www.peugeot.co.uk/ScrappageScheme
Renault - http://www.renault.co.uk/cars/scrap.aspx
Toyota - www.toyota.co.uk/scrappage (http://www.toyota.co.uk/scrappage)
Vauxhall - http://www.governmentscrappageprogramme.co.uk/

Intuition? Nah I know, it's just that I would hate for you to be accused of advertising on the forum and all that :)


While we're on the subject of new cars. Daniel, shouldn't you be taking back all your previous posts where you said it was a waste of money to buy a new car? ;) :p

Well I'm getting a 2k discount on a car that up until now people were only getting a £200 or so discount on so I would still argue that for most new cars it's not worth it. But you have a point ;)

[Caroline]

I feel it is a waste of money to buy a brand new car and then change it in a couple of years for something else. I can't see that happening here though. I am of the belief there is no reason to change this little Fiat for a long time, so hopefully it will be a good buy.

[555-04Q2]

I feel it is a waste of money to buy a brand new car and then change it in a couple of years for something else.

It makes perfect sense. This is what myself and a friend of mine started doing 7 years ago.

Over here, you can buy a top of the line BMW, Merc, Subaru etc for cash and trade it in for a new model every 12 months. The devaluation over one year is around 10-15%, pay cash again for the difference on the new car. The benefits are:

1. You drive a new car every 12 months.
2. You never have to buy tyres.
3. You never are out of a service plan and have no maintenance costs.
4. You are never out of a warranty period.
5. You build up a good relationship with the car dealership and can demand better trade-in and purchase prices.

The catch is being able to purchase the first car for cash, but the system works. We get a great discounted deal on the two new cars and demand higher trade-ins when we get the next models 12 months later. 3 years ago in February 2006 we actually paid in only 3% difference between our trade-in cars and the new ones, thanks to some clever negotiating.

Dont believe me? Then sit down and work out the maintenance costs of your old car, tyre costs, repairs, poorer fuel consumption etc and work out an average yearly running cost vs the devaluation over 12 months. But you must pay cash for the first car, dont finance it.

[MattL]

The principle applies equally in the UK. the difference being that it's generally very hard to make it stack up over 12 months. Three or four years is generally the norm.

If, for example, you decide on a PCP (personal contract purchase) type agreement, you pay a fixed amount for (say) 36 months and then at the end of that time, you can either pay the balance and you own the car, or you simply hand it back (and take out a new agreement on a new vehicle).

While it might seem that you're paying out for something that you never end up owning, what it does is removes the risk for you. You have a guaranteed residual value built in to the deal, so if used car values fall, you don't have to absorb the loss. And if you never own a car for more than three years, you never end up outside of the warranty period (for most manufacturers, subject to mileage), so you don't get stung if something goes wrong. Obviously, you still end up paying for wear and tear items (like tyres) and servicing, but many companies give you option to build this in to your monthly payments if you wish, giving you total control over your outgoings.

It won't be for everybody, but if you want to drive a new (and therefore economical and safe) car, it's definitely something to consider. It's amazing how much some people will spend keeping an old car on the road when similar money could get them something much more up-to-date.

[Daniel]

The principle applies equally in the UK. the difference being that it's generally very hard to make it stack up over 12 months. Three or four years is generally the norm.

If, for example, you decide on a PCP (personal contract purchase) type agreement, you pay a fixed amount for (say) 36 months and then at the end of that time, you can either pay the balance and you own the car, or you simply hand it back (and take out a new agreement on a new vehicle).

While it might seem that you're paying out for something that you never end up owning, what it does is removes the risk for you. You have a guaranteed residual value built in to the deal, so if used car values fall, you don't have to absorb the loss. And if you never own a car for more than three years, you never end up outside of the warranty period (for most manufacturers, subject to mileage), so you don't get stung if something goes wrong. Obviously, you still end up paying for wear and tear items (like tyres) and servicing, but many companies give you option to build this in to your monthly payments if you wish, giving you total control over your outgoings.

It won't be for everybody, but if you want to drive a new (and therefore economical and safe) car, it's definitely something to consider. It's amazing how much some people will spend keeping an old car on the road when similar money could get them something much more up-to-date.

Very true. I guess different things suit different people. I stated many times before that I wouldn't buy a new car because it just wasn't worth it for the price and to a certain extent it's still not! I mean the 500 I've ordered retails @ £9700 and I could have got a £200 discount prior to the scrappage scheme which is a helluva lot for a small car. But take 2k off that, add a warranty, the knowledge that the car has been maintained properly, my choice of colour and trim and some options I've chosen myself and it suddenly seems a lot more worthwhile.

But I certainly don't see the point of buying a new car every few years and then trading up to something similar. But then again that's just me. If it weren't for all the salt on the roads, the distance I drive to work and not having a garage I think I'd be running a 30 year old classic as my daily driver.

[Mark]

Matt is right of course. That sort of deal meant that I was able to buy a car for a reasonable monthly payment of £150 whereas other finance deals where looking at £220+ for the same type of car. So it can make sense. Although there is the worry that at the end of the 3 years you have to pay off the balance, and you can't get finance to do it! It's alright saying hand the car back, but what if you want to keep it!

You have to think to yourself that, although it's over 3 years it's really more like 5 years with an option after 3.

But it's all assuming you don't trash the car, and high milage is going to dent your handback value.

I think they are a pretty good idea. Especially if you think of them less as owning a car but more as a car lease type deal where you get a new car every 2 years or so.

[Mark]

Dont believe me? Then sit down and work out the maintenance costs of your old car, tyre costs, repairs, poorer fuel consumption etc and work out an average yearly running cost vs the devaluation over 12 months. But you must pay cash for the first car, dont finance it.

As you say, you've got the full price of the initial car to factor into that, but I can well see your point. As long as you manage to get a good purchase price that will be within reach of the trade-in price.

Another key, of course is milage, do less than 10,000 in the year and you'll get a good trade in, more like 15,000+ then it won't start to work out so well for you!

Interesting you mention poor fuel consumption, why should this be so? I believe brand new cars are actually less good at fuel consumption than those that have done a few miles to bed the engine in will get better returns.

I'd quite like to see some real numbers on how your system works mind.

[555-04Q2]

As you say, you've got the full price of the initial car to factor into that, but I can well see your point. As long as you manage to get a good purchase price that will be within reach of the trade-in price.

Another key, of course is milage, do less than 10,000 in the year and you'll get a good trade in, more like 15,000+ then it won't start to work out so well for you!

Interesting you mention poor fuel consumption, why should this be so? I believe brand new cars are actually less good at fuel consumption than those that have done a few miles to bed the engine in will get better returns.

I'd quite like to see some real numbers on how your system works mind.

Hi Mark,

In theory you do get better fuel consumption over time as the engine wears in, but my figures prior to buying a new car as often as I do were better when the cars were new than when they got older. I drove >2000cc cars, that may have something to do with it. Driving style also comes into play.

I will pull out the info and post the formula of how the system works for my friend and I either tomorrow or Monday :)

[airshifter]

It makes perfect sense. This is what myself and a friend of mine started doing 7 years ago.

Over here, you can buy a top of the line BMW, Merc, Subaru etc for cash and trade it in for a new model every 12 months. The devaluation over one year is around 10-15%, pay cash again for the difference on the new car. The benefits are:

1. You drive a new car every 12 months.
2. You never have to buy tyres.
3. You never are out of a service plan and have no maintenance costs.
4. You are never out of a warranty period.
5. You build up a good relationship with the car dealership and can demand better trade-in and purchase prices.

The catch is being able to purchase the first car for cash, but the system works. We get a great discounted deal on the two new cars and demand higher trade-ins when we get the next models 12 months later. 3 years ago in February 2006 we actually paid in only 3% difference between our trade-in cars and the new ones, thanks to some clever negotiating.

Dont believe me? Then sit down and work out the maintenance costs of your old car, tyre costs, repairs, poorer fuel consumption etc and work out an average yearly running cost vs the devaluation over 12 months. But you must pay cash for the first car, dont finance it.

I hope you enjoy driving new cars all the time, because you'll have a hard time convincing most people that you're being financially savvy. Not paying finance charges is really the only thing financially smart about such a plan.

When we blow money on something we like we don't try to justify it as a good decision with our money, we just do it. :laugh:

[Mark]

I think the main problem there is buying with cash. Dealers don't really like it too much. They can for the most part give you a bigger discount on cars bought with finance as the finance company gives them a good amount of comission on every account set up, and the dealer can then choose to pass on part or even all of that as a discount on the car.

[Daniel]

I think the main problem there is buying with cash. Dealers don't really like it too much. They can for the most part give you a bigger discount on cars bought with finance as the finance company gives them a good amount of comission on every account set up, and the dealer can then choose to pass on part or even all of that as a discount on the car.
6 of one half a dozen of the other, you either get boned by finance or by the dealer with not getting as good a discount. I tend to agree with airshifter to be honest. I don't see the point in buying a new car every few years. I could probably count on one hand all the cars I'd actually consider buying right now and in a few years time it'll probably be the same cars or newer versions.

We've specced this car up just how we like it and for us to go and buy a new one in 3 years time and then spec it up how we like it would be a rather expensive excercise. Sure we'll have to worry about an MOT in 3 years time as well as tyres along the way but if things like the exhaust, suspension and brakes need replacing then I'll replace them with better bits that will last longer and barring any big mechanical failures I'll have a car that will run until it's rusted away which should be a long time considering the car is galvanised. I would have quite liked to get one of the new 2 cylinder Fiat engines which are uber economical but they're not going to be out for at least another 6 months so I've gone for he next best thing.

555 is talking about Subaru's, Merc's and BMW's. Well Subaru's are getting uglier by the year, BMW's ditto and I'm not sure about the build quality of South African Mercs but here in Europe they're somewhat of a joke. If having the newest car possible is important then I guess it makes sense but for most people who just want a reliable and cheap car to run I think there's nothing worse than buying a new car every 1-3 years.

At the moment I'd be wary of what I'm buying as well because there are a lot of cars sitting around at docks for a lot of time and that can't be good. Thankfully my 500 is factory build as they all are at the moment as there is virtually zero stock in the UK.

I don't think cars really cost that much to service and run anyway. Caroline's Subaru had the timing belt and tensioners done earlier this year as well as two new tyres and a service and will probably need a service soonish as well as a new CV joint but all in all if you have a decent car there won't be much cost involved in maintaining it.

[Daniel]

It makes perfect sense. This is what myself and a friend of mine started doing 7 years ago.

Over here, you can buy a top of the line BMW, Merc, Subaru etc for cash and trade it in for a new model every 12 months. The devaluation over one year is around 10-15%, pay cash again for the difference on the new car. The benefits are:

1. You drive a new car every 12 months.
2. You never have to buy tyres.
3. You never are out of a service plan and have no maintenance costs.
4. You are never out of a warranty period.
5. You build up a good relationship with the car dealership and can demand better trade-in and purchase prices.

The catch is being able to purchase the first car for cash, but the system works. We get a great discounted deal on the two new cars and demand higher trade-ins when we get the next models 12 months later. 3 years ago in February 2006 we actually paid in only 3% difference between our trade-in cars and the new ones, thanks to some clever negotiating.

Dont believe me? Then sit down and work out the maintenance costs of your old car, tyre costs, repairs, poorer fuel consumption etc and work out an average yearly running cost vs the devaluation over 12 months. But you must pay cash for the first car, dont finance it.
I agree with you :up:

[Daniel]

I feel it is a waste of money to buy a brand new car and then change it in a couple of years for something else. I can't see that happening here though. I am of the belief there is no reason to change this little Fiat for a long time, so hopefully it will be a good buy.
I agree with you but then again I would wouldn't I? :p

[555-04Q2]

This is the last deal I did between January 2008 and January 2009:

January 2008 purchased a 2008 Impreza WRX...

Retail price: ZAR 299,500
Discount: 8% = ZAR 23,960
Purchase price: ZAR 275,540

January 2009 traded in 2008 Impreza WRX (9500km on odometer) and purchased 2009 Impreza WRX...

Trade in value = ZAR 248,000
Loss = ZAR 27,540

Retail price of new car = ZAR 299,900
Discount: 8% = ZAR 23,992
Purchase price = ZAR 275,908

275,908 less my trade of 248,000 = 27,908 loss over 12 month period. Now at an average interest rate we pay of 18% over the last 12 months, the interest alone by financing this car in more than the 27,908 loss.

I drove my 2008 Impreza WRX for 12 months at a cost of ZAR 27,908 (OK I had to purchase my original car in 2002 for cash (which, granted, the average joe doesnt have lying around). No maintenance costs, no interest on finance, no tyres etc etc.

Three times in the last seven years there have been slight increases in the cars I bought purchase price (exhange rate and increase driven) which increases the gap between the trade car vs the new car price slightly, but even then it still remains viable for me.

To give you an idea, over here you cant buy a base model 1.6 VW Polo under finance for 27,908 per year all in. Most of you may have interest rates as low as 2 to 4%, but over here money is very expensive to borrow, especially when our interest rate was 21.5% as it was in November last year, hence my turning to my purchase system when our interest rate hit a high of 24% :crazy:

The bonus for me? I always have a new, reliable car in the garage, at an affordable annual cost parked next to my 2002 Prodrive Impreza and the wifes people mover.

(P.S. when I said I paid cash, I mean I paid by electronic transfer straight to the dealer's account, not with a truckload of notes ala Zimbabwe style)

[Mark]

When you have finance as high as that it makes sense. I'm currently financing my car at 8%. Which is high compared to my last car which was at 4.9%.

[555-04Q2]

When you have finance as high as that it makes sense. I'm currently financing my car at 8%. Which is high compared to my last car which was at 4.9%.

I'd give both my nuts for interest rates that low :p :

We have just had a 350 basis points cut in the interest rate over the last 6 months to counter the global economic situation and try and spur on consumer spending. But even after these rate cuts, prime lending rates are 14% on houses, 16% on vehichle finance and 23% on credit card debt :s hock: Now you know why Barclays Bank bought a 51% share in our largest homeloan finance provider, ABSA Bank, which controls 67% of the South African homeloan market.

And your return on saving money in the bank over here? 4 to 5% unfixed and 9 to 11% if you have a good fixed debit account with a large initial deposit value.

[Daniel]

It makes perfect sense. This is what myself and a friend of mine started doing 7 years ago.

Over here, you can buy a top of the line BMW, Merc, Subaru etc for cash and trade it in for a new model every 12 months. The devaluation over one year is around 10-15%, pay cash again for the difference on the new car. The benefits are:

1. You drive a new car every 12 months.
2. You never have to buy tyres.
3. You never are out of a service plan and have no maintenance costs.
4. You are never out of a warranty period.
5. You build up a good relationship with the car dealership and can demand better trade-in and purchase prices.

The catch is being able to purchase the first car for cash, but the system works. We get a great discounted deal on the two new cars and demand higher trade-ins when we get the next models 12 months later. 3 years ago in February 2006 we actually paid in only 3% difference between our trade-in cars and the new ones, thanks to some clever negotiating.

Dont believe me? Then sit down and work out the maintenance costs of your old car, tyre costs, repairs, poorer fuel consumption etc and work out an average yearly running cost vs the devaluation over 12 months. But you must pay cash for the first car, dont finance it.
What sort of depreciation do you get on cars there in South Africa? Here in the UK depreciation is a huge thing to consider when buying a car here in the UK. With the fact that everyone goes bloody ga-ga when the new plates are getting released this pushes the price of older cars down whereas in Australia where your plate has nothing to do with the age of the car depreciation isn't as much of a factor.

[airshifter]

I drove my 2008 Impreza WRX for 12 months at a cost of ZAR 27,908 (OK I had to purchase my original car in 2002 for cash (which, granted, the average joe doesnt have lying around). No maintenance costs, no interest on finance, no tyres etc etc.



But that is a constant loss system, entirely for the luxury of having a new car. Compare that yearly loss to the operating costs of maintaining your 2002 car, which at les than 10,000 km a year is next to nothing. You would proably just have recently had to get tires, a couple oil and filter changes per year, etc. But even if you add unforseen repairs not under warranty it's still much less than yearly loss for new cars.

With those interest rates it's a wonder anyone would pay anything other than cash. BUT, you might consider financing the next one. Simply ensure there is no penalty for early payment, secure an often better deal from the dealer due to the bank kickback for getting a loan, and then pay the loan in full. You're happy, the dealer is happy, and the bank isn't.

[555-04Q2]

But that is a constant loss system, entirely for the luxury of having a new car. Compare that yearly loss to the operating costs of maintaining your 2002 car, which at les than 10,000 km a year is next to nothing. You would proably just have recently had to get tires, a couple oil and filter changes per year, etc. But even if you add unforseen repairs not under warranty it's still much less than yearly loss for new cars.

With those interest rates it's a wonder anyone would pay anything other than cash. BUT, you might consider financing the next one. Simply ensure there is no penalty for early payment, secure an often better deal from the dealer due to the bank kickback for getting a loan, and then pay the loan in full. You're happy, the dealer is happy, and the bank isn't.

If I replace a financed car say every 5 years, the interest paid is more or less the same as the loss per year. The up side is I own my car outright, never have maintenance issues, breakdowns, need tyres etc and always have a warranty. If you have low interest rates, then it makes sense to finance, but at our rates, its crazy.

I cant compare to my 2002 car as I do very little mileage in it. It is a beefed up Impreza which I use occassionally on weekends for upsetting M3 drivers. I also bought it for cash.

On settlement amounts, over here they are always slightly higher than the actual loan value, to try and discourage you settling and the bank losing money on interest charges. I hate banks, period.

[555-04Q2]

What sort of depreciation do you get on cars there in South Africa? Here in the UK depreciation is a huge thing to consider when buying a car here in the UK. With the fact that everyone goes bloody ga-ga when the new plates are getting released this pushes the price of older cars down whereas in Australia where your plate has nothing to do with the age of the car depreciation isn't as much of a factor.

Depends on the model. Some cars lose 40% value as you drive out the carpark, but some of the upper class cars/models are between 10 - 15%. Toyota has the best overall resale value over here, whether it be one year old or ten years old.