Enormous depreciation?

I bought my MG4 LR 18 months ago for £28.5k with £7k down, so £21.5k credit to pay + about £3.8k interest over 36 months (7%), £15k guaranteed at the end. Asked for a settlement fee the other day, 18 months in, and that was £19.5k. Can't find an offer over £20k anywhere for the car, so essentially it looks like I've lost my £7k in 18 months and am now worried I'll only just about break even in another 18 months when it comes time to walk away. I have gap insurance but I'll lose 100% of the equity I have in the car - that strikes me as enormous deprecation, unless I'm missing something, not good at all.

meveringham said:

I bought my MG4 LR 18 months ago for £28.5k with £7k down, so £21.5k credit to pay + about £3.8k interest over 36 months (7%), £15k guaranteed at the end. Asked for a settlement fee the other day, 18 months in, and that was £19.5k. Can't find an offer over £20k anywhere for the car, so essentially it looks like I've lost my £7k in 18 months and am now worried I'll only just about break even in another 18 months when it comes time to walk away. I have gap insurance but I'll lose 100% of the equity I have in the car - that strikes me as enormous deprecation, unless I'm missing something, not good at all.

Click to expand...

So it seems from what you have said that you are on a 3 year PCP arrangement.
The £15k guaranteed at the end does seem a bit on the low side.
I bought an SE SR a year ago and am on a 4 year PCP and my guarantee is closer to £16k.

Nevertheless, I very much doubt that this is any different to any other similar EV depreciation and hopefully it will be worth more than that guaranteed figure.

And it would have cost you far more to lease.

It sounds pretty normal to me.

£5700 of the original price will be VAT that you lose the moment you collect the car and the value of a new car falls of a cliff the first two years and slows down in year 3 then much slower after that.

If the GFV is £15000 then they are estimating less than 50% depreciation over 3 years which is really good by normal standards. Used car prices have been completely out of the norm since COVID. Before all of that you’d be lucky to see 35% on 3 year old petrol Astra.

If you sold it now you’d be doing it while still on the steepest part of the depreciation. Mind you if you sold it for £16k at the end and only had £1k equity unfortunately that’s still pretty good by pre COVID standards.

Buster72 said:

So it seems from what you have said that you are on a 3 year PCP arrangement.
The £15k guaranteed at the end does seem a bit on the low side.
I bought an SE SR a year ago and am on a 4 year PCP and my guarantee is closer to £16k.

Nevertheless, I very much doubt that this is any different to any other similar EV depreciation and hopefully it will be worth more than that guaranteed figure.

And it would have cost you far more to lease.

Click to expand...

that's right. I wasn't singling MG out as particularly bad or anything, which your response appears to suggest, just that it's not a great situation

unbornidentity said:

It sounds pretty normal to me.

£5700 of the original price will be VAT that you lose the moment you collect the car and the value of a new car falls of a cliff the first two years and slows down in year 3 then much slower after that.

If the GFV is £15000 then they are estimating less than 50% depreciation over 3 years which is really good by normal standards. Used car prices have been completely out of the norm since COVID. Before all of that you’d be lucky to see 35% on 3 year old petrol Astra.

If you sold it now you’d be doing it while still on the steepest part of the depreciation. Mind you if you sold it for £16k at the end and only had £1k equity unfortunately that’s still pretty good by pre COVID standards.

Click to expand...

OK thanks, again, nothing to suggest that it isn't enormous deprecation, as I was asking, just that it's 'normal' and 'to be expected' which, I continue to say, doesn't make it less shit.

Depreciation has never bothered me,
(and no I'm not wealthy at all) it just never has. If you always worry about it, you'd never get a new car. Just get the car you really want, and enjoy it. That's my way of thinking anyway.

Any agreement which says "Guaranteed future value" actually means the amount you will still owe the finance company if you wish to purchase the car. It is NEVER an actual valuation of what the car will be worth.

I had a Ford Ka on PCP years ago and at the end of the PCP it was in negative equity, so I walked away and let the dealer or Ford deal with the loss.

For me if the car valuation at the end of the PCP is £15,000 and you can buy the same spec/age/milage car at the time for less you give the car back and buy the cheaper one.

Ex demo XPower with a few hundred miles on the clock are selling on AutoTrader for around £27,000, mine is 2 months old with 1,000 miles on the clock and the lease company said as new it was £36,500 ish. Just one reason I am leasing is so I will not take the hit on any depreciation and can just walk away from the car in 3 years if that makes financial sense.

Just watched this, depreciation shock! I'll stop my whining :-(

You should think yourself lucky, mine's 8 months old I paid £33K and it's worth £19.5k on Carwow.

NEVER buy a new (cheap car (under £40k or so )), if you're looking to break even selling it in a few years. It just doesn't work with the devaluation of the VAT as soon as you drive it off the forecourt.

I must admit the after years of cheap leasing and the MG4 being the first car I bought outright the depreciation was horrible and something that worried me daily - all the maths I did when I bought the car had gone to pot as the EV used car market crashed big time.

I sold my SR for £19,500 3/4months ago and I’m glad I did as it’s lost ££££ more since. ( I saw 2 year old corsa e’s being sold for £12k and guessed my MG could be worth similar )

I’m now I a 4 year old e-golf which I’ll use for 2 years and move on which should only lose a few grand at worse.

Everyone has a different comfort zone on this and the trick is to stay within it, and to look ahead to see that you'll still be able to stay within it if things change.

I bought my car new for £26,950 because I wanted a new car. I knew it would depreciate the minute I drove it off the forecourt, but since I have no intention of selling it, it doesn't matter. If things go as planned, any residual value it has in 15 years or so is gravy, and I've had a car I'll love for 15 years.

But what if it turns out to have been a bad buy? Really cheap car in comparison to its competitors, which corners have they cut, what have they skimped on, maybe it won't last? Well it should last its warranty period anyway, and at least it was relatively cheap to begin with. If used EV prices get really cheap then while I might not have much equity in my car, I should be able to find a nice used-car bargain if I really need to get rid of it.

What if all these great advances in EV technology that we're told are coming in the next few years mean that I'm really, really hankering for the new tech? And that has caused the value of the old tech to drop a long way? Well, either I resist the lure of the new, or I console myself that the most I can possibly lose on a £26,950 car is £26,950, and in practice it will never be that.

I'm looking at insurance renewal quotes and they seem to think my 9-month-old car is worth £19,500. I don't care, they're not having it.

All good points above, to summarise:

- Buying a new car is a loss making investment, no matter how cheap it is to run you'll lose thousands in depreciation immediately.

- You can protect yourself against future value uncertainty through a PCP or Lease (but you are still paying for the depreciation and paying for the security), there's no free lunch.

- Having a new car is very nice and isn't about making financial sense, just relax and enjoy it.

In some ways it reminds me of people spending £25k for amazing house solar+battery+heat pump setups that save them £750-£1.5k/yr. It's fun, it's exciting, it's environmentally good, it is cheap to run, but it actually makes little sense financially except over many many years. But so what? Life's too short so why not enjoy it!

tsedge said:

- Having a new car is very nice and isn't about making financial sense, just relax and enjoy it.

Click to expand...

Absolutely couldn't agree more.

Depreciation happens to everything you buy new. A new 49" Samsung smart TV costs £339 and a similar specification 1 year old used good condition one is available on Ebay for £80 or 23.6% depreciation.
Or on a £33,000 MG4 trophy with the same depreciation it would be worth £25,000 which is about what Arnold Clark are selling them for.

Buster72 said:

.............And it would have cost you far more to lease.

Click to expand...

You may be right for an MG4 SE LR but personally I think its well worth looking at the figures on a personal lease at the moment. There are some great deals out there on other cars / models compared to buying. It may not be the case with the OP and his SE LR but based on his figures after three years he may be left around £17.3K out of pocket (28.5K purchase + 3.8K credit fees less a car that may be worth £15K (= £17.3K lost). Hopefully the car will be worth more than £15K at the end so he can keep it or sell it for a bit more and pay off the £15K balloon payment and pocket the difference).

Now looking at an Xpower lease just an as an example (a more expensive list price) :-

Over 3 years you can pay £15,038 for 10,000 miles a year with no risk of depreciation etc. and get any metallic colour included.

Obviously lease prices at the time the OP bought his car would have been different but the point I'm making is that any new prospective owner should do the maths on a personal lease.

This is an interesting watch, same car same age/milage £10k cheaper a year later

That same vid was linked in post #7

Take the results with a pinch of salt, as they're based on trade values not consumer prices.

meveringham said:

I bought my MG4 LR 18 months ago for £28.5k with £7k down, so £21.5k credit to pay + about £3.8k interest over 36 months (7%), £15k guaranteed at the end. Asked for a settlement fee the other day, 18 months in, and that was £19.5k. Can't find an offer over £20k anywhere for the car, so essentially it looks like I've lost my £7k in 18 months and am now worried I'll only just about break even in another 18 months when it comes time to walk away. I have gap insurance but I'll lose 100% of the equity I have in the car - that strikes me as enormous deprecation, unless I'm missing something, not good at all.

Click to expand...

All cars inc EVs have crashed lately

siteguru said:

That same vid was linked in post #7

Take the results with a pinch of salt, as they're based on trade values not consumer prices.

Click to expand...

Yes, what I've noticed are that dealers are getting greedy. Due to their idiotic overbuying of second hand cars when prices were high and they're now looking for £5k+ profits on second hand cars to make up their losses, whereas before all the malarky they were only seeking £2-3k.

Never owned a car before? That kind of depreciation seems normal.

I bought a laguna estate once. Dealer demonstrator with 6 months 6k miles. 18k new sold to me for 12k

3 years later i got 4,500 for it

Thats depreciation