Are new Cars a good Investment or 2nd Hand better.
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  1. #1
    Good Sport danielsydney's Avatar
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    Icon1 Are new Cars a good Investment or 2nd Hand better.

    Upon talking to people recently was just wondering something. If a person takes out a loan for a new car over 5 years is it better to keep the car for 5 years and then update to another new car?
    Im not sure if this is a smart thing to do as it seems to me you would continually be in the cycle of debt for cars?
    However the car that is 5 years old would be owned and the person would be debt free, but then the car becomes a liability doesnt it?
    What do people think? Can they help me out a bit?

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    Real cars have hydraulics DoubleChevron's Avatar
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    The youngerst car I own is a Xantia ... It's a '96 model ...

    I consider this a *new* car, infact any less than 20years old seems young to me

    Who wants to owe money on cars. If you own the C3 for 5years, the best thing you could possibly do to get your $$$$ worth out of it is continue to drive it for another 5years ... then another 5years ... After all it now owes you nothing.

    Do you think cars self destruct as soon as they hit 5years old

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  3. #3
    who? when? huh? GTI124's Avatar
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    I disagree, if you're going to own vehicle you may as well hang onto it for more than 5 years. If you want to hold onto a car for 3-5 years, then work on a lease with a low residual. Then at the end of the lease, you sell the car for say 55% of the original value and use that to pay off the 45% residual, pocketing the 10%.

    This lowers the amount you are losing.

    But in the end, unless you use the car for work, a car is NEVER an asset. It is a liability.

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    Budding Architect ???? pugrambo's Avatar
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    Quote Originally Posted by danielsydney
    Upon talking to people recently was just wondering something. If a person takes out a loan for a new car over 5 years is it better to keep the car for 5 years and then update to another new car?
    Im not sure if this is a smart thing to do as it seems to me you would continually be in the cycle of debt for cars?
    However the car that is 5 years old would be owned and the person would be debt free, but then the car becomes a liability doesnt it?
    What do people think? Can they help me out a bit?

    i must say you have been well conditioned to the g'ments way of thinking that everyone should have new cars all the time to keep what they call the old cars off the road

    the newest car here is a 98 306 and i intend on keeping it for a long time yet

    car and investment do not belong in the same sentence

    you want to invest then find some good stocks or buy bricks and mortar

    mass produced cars are not investments

    the banks love it when people thimk along the lines of taking a loan, buying a car then selling it a few years down the track and then getting another loan for another car

    i have never understood people getting cars for personal use and then complaining about how they have to sell the car in a couple of years before depreciation really hits it and buying another one only to go through the same cycle again

    if the car is not costing you too much in upkeep then keep it till it is no longer servicable then buy another one that way you have got your money's worth from your initial outlay
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    Good Sport danielsydney's Avatar
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    Pugrambo you are exactly right. That was what I thought mate.

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    rek
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    Quote Originally Posted by pugrambo
    i have never understood people getting cars for personal use and then complaining about how they have to sell the car in a couple of years before depreciation really hits it and buying another one only to go through the same cycle again
    I agree 100%. If you are in a continual cycle of debt with cars, the car will eventually own you.

    I think that for buying a car (which implies long term ownership unless you like flushing money down the toilet), the best option is to buy a car a few years old; enough to have depreciation work for you in lowering the purchase price, but still be a modern enough car which will probably have some of its factory warranty left.
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    Quote Originally Posted by GTI124
    But in the end, unless you use the car for work, a car is NEVER an asset. It is a liability.
    Yep, EVERY piece of financial advice you get will tell you it's an expence and never an asset. There is some really rare exceptions to this ...

    But I say if you haven't got the money in the first place or you can't "package" a car (so it works outs pretty much cost neutral) then taking a loan for a car is just plain financial stupidity. Though it's EASY to convince oneself that it doesn't matter because of the enjoyment you can/could get from the vehicle.

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    an expense?
    i'd put it in the "depreciating asset" column... least you got something to show for it! (& its probably worth something...)

    i used to get it all the time from the old man... why buy a french car, blah blah depreciation blah blah resale.... umm i dont loose a cent if i dont sell it right?

    dont buy what you cant afford... is pretty much my motto... (cept for things such as a house etc). I bought mine new cause i will keep it for ages & want to know exactly what has been done to it etc...

    The finance guy tried to con me into a loan, "you'd be better off investing the cash & get a loan..." if it were that easy to get a garanteed x% on money (forget the loan rate), then i dont think there'd be many lending institutions about!

  9. #9
    Fellow Frogger! Reno's Avatar
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    i turn my cars over quite quickly... i will hold onto the clio for a couple of years though as it is a good car i enjoy alot. but i will sell it when it is about 3years old max.

    i always throw in atleast half of the cars value in cash, i pay that off in a few years. then when i own the car or close to it, i sell it.

    eg: car cost 30,000 new. i pay 15 upfront. loan the other 15. after 3 years or so, i have my 15 i initally put in + the cars now depreciated value which will be worth 20,000. so essentially i have $20,000 and have thrown away 10,000 in depreciation. although i wrtie that depreciation off as i see it as the enjoyment of having a new car, and the cheaper running costs (warranty, lower interest rate on new cars, and the fact i enjoy owning new cars etc). 10,000 loss over 3 years roughy 3300 per year the cars owes me ( +plus running costs). thats a figure i am willing to deal with, and it doesn't hanut me at all. the costs per year are releveant to my income and worth.

    thats just the basic jig i work on. this way i also keep steadily moving up the car ranges too. next car will be around the $40,000-$45,000 figure( as i will have about $20,000 already). saves getting stuck on a rutt of $15,000 cars. which for me personally is not what i want. but others will be very content with this, and see great value in owning near new cars. i just personally like buying new cars. i enjoy it.

    i dont think this should turn into a "your losing money, your an idiot" thread. its just the way i like to do things, and some people will see sense in it.... others will see it as complete rubbish.

    just another point of view.

  10. #10
    Real cars have hydraulics DoubleChevron's Avatar
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    I don't think anyone will argue with that. It depends entirely on your circumstances. eg. the amount of $$$$ you throw into your cars will allow me to have my whole house paid off in about 6years

    I'm probably looking at triple that time to get it paid off. If I put what I currently put into the house in plus what you pay out for cars I'd probably have the house paid of in about 4.5years

    There's a view from the other side of the pond When you have an extremely high disposable income the $$$ you speak of mean very little. When you have house loans & cars to run/family to support disposable income disappears to zilch and every $ counts. The idea of blowing $20,000 every couple of years on a car not only sound horendous, it's also impossible

    seeya,
    Shane L.

    Quote Originally Posted by Reno
    i turn my cars over quite quickly... i will hold onto the clio for a couple of years though as it is a good car i enjoy alot. but i will sell it when it is about 3years old max.

    i always throw in atleast half of the cars value in cash, i pay that off in a few years. then when i own the car or close to it, i sell it.

    eg: car cost 30,000 new. i pay 15 upfront. loan the other 15. after 3 years or so, i have my 15 i initally put in + the cars now depreciated value which will be worth 20,000. so essentially i have $20,000 and have thrown away 10,000 in depreciation. although i wrtie that depreciation off as i see it as the enjoyment of having a new car, and the cheaper running costs (warranty, lower interest rate on new cars, and the fact i enjoy owning new cars etc). 10,000 loss over 3 years roughy 3300 per year the cars owes me ( +plus running costs). thats a figure i am willing to deal with, and it doesn't hanut me at all. the costs per year are releveant to my income and worth.

    thats just the basic jig i work on. this way i also keep steadily moving up the car ranges too. next car will be around the $40,000-$45,000 figure( as i will have about $20,000 already). saves getting stuck on a rutt of $15,000 cars. which for me personally is not what i want. but others will be very content with this, and see great value in owning near new cars. i just personally like buying new cars. i enjoy it.

    i dont think this should turn into a "your losing money, your an idiot" thread. its just the way i like to do things, and some people will see sense in it.... others will see it as complete rubbish.

    just another point of view.
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    Good Sport danielsydney's Avatar
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    Shane for once I agree with you....

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    Fellow Frogger! Reno's Avatar
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    Shane thats good you can see where i am coming from... i think we agree on something.

    i am lucky, i dont have a house... or any other repayments. my only expense other then my car is my phone

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    Fellow Frogger! Industrie's Avatar
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    Quote Originally Posted by Reno
    i turn my cars over quite quickly... i will hold onto the clio for a couple of years though as it is a good car i enjoy alot. but i will sell it when it is about 3years old max.

    i always throw in atleast half of the cars value in cash, i pay that off in a few years. then when i own the car or close to it, i sell it.
    I'm wondering how you do this if you're a student?

    Maybe I should head back to uni & go on Austudy again if the payments have gone up that high

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    DanielSydney ... if you are in a high tax bracket, and you do a lot of kms e.g. 26,000km and up, AND your employer offers salary packaging / novated lease, AND you like always having new cars, then a loan is the way to go. For me, I don't have the first two, so a long term purchase on a car was the way to go, with the money coming off the home loan on a low rate of interest. This way the car is at least some kind of asset. How I long keep it depends on how well it survives the journey!
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    Fellow Frogger! Reno's Avatar
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    i dont have any austudy or allowance

    i work while i am at uni. manage to squeeze in about 25 hours per week.

    then when i am off work i work atleast 40hoursper week from end of uni to start of uni, also in mid semester breaks.

    i want cars bad... and work when others i know are playing. but thats what i choose.

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    Quote Originally Posted by Reno
    i am lucky, i dont have a house... or any other repayments. my only expense other then my car is my phone
    Oh the life of no rent, no mortage, no other outgoings ... most peoples yearly mortage payments per year could buy 1 of your cars outright !!! - the difference is houses rarely depreciate in value ..

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    Quote Originally Posted by XTC206
    Oh the life of no rent, no mortage, no other outgoings ... most peoples yearly mortage payments per year could buy 1 of your cars outright !!! - the difference is houses rarely depreciate in value ..

    - xTc -
    Mmmmmmm I wish I could go back to those days... I have to budget $650 a fortnight to cover car loan repayments, insurance, rego, servicing & tyres, then phone & electricity bills. On top of that I have to pay rent ($300 a fortnight - the joys of sharing), food and fuel.

    Suffice to say, since I bought the car I have not been able to go out and party every weekend. In fact I've become boring & not been out since my birthday over a month ago. I think at least one supplier of party favours has had to take up begging as a result.

  18. #18
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    I have never taken a loan for a car (personally), to me it's a bad debt through depreciation & interest repayments.

    All my cars have been second hand.
    My first car (a GS) I bought with paper run money for $1700. few more wreck GS's in between but my 2nd main car was the 205GTI I bought with $16,000 cash. It was piled up on the sellers coffee table in 1g lots

    My 2 company vehicles, Berlingo & Rodeo, are through company lease schemes where I can claim depreciation, initial GST, bank interest & running costs. Plus the main point is I need them to earn the $ in the first place.

    I very much doubt I'd buy a new car (for personal use), not just because of the bad experience I have had with new cars, but you can buy a decent one for half their new price within just a few years.

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    I have the luxury of driving new cars cos I'm in the business. But there is no way known I would buy a new car for my wife. Guaranteed to lose a stack more money this way. Best value cars are about 5 years old. Have done plenty of depreciating by then, but will still be fairly fresh.
    As for finance though. Most of my customers at BMW have car allowances or can finance in a tax effective way, so that the real cost is fairly low. Finance with a residual is great if there is some deductability.
    Otherwise financing cars comes with great cost. But it's not all bad. We are only young once, and if financing a car brings ones dreams to reality then well and good. Maybe it's worth it.
    Infinitely better to buy a house though, than stuff around with cars. And buy a house at a YOUNG age guys. The younger the better.
    Me, I would never buy a new car, and I would never finance one either. I wouldn't have any more fun in a new 307 (finance required) than my wifes 405 Mi16 (cash purchase).
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    I guess it all comes down to personal priorities. What do you want? In terms of value 2nd hand wins hands down. The car has done a lot of depreciation. My 35k car would be doing very well if I could sell it for 31k 4 months later. That being said I wouldn't buy a 180 2nd hand because of the risk that the previous owner had thrashed it. Otherwise I'm happy buying decent 2nd hand.

    The main reason I bought new this time, though, was that when I bought my 306 I had planned to keep it longer than 5 years. Problem was after 4 years I'd put 104,000kms on the clock for a total of 162,000kms. I'm one of those people who when they hear a noise thinks the car is going to die. So everytime I took the car on a long trip I stressed about breaking down, even though the car was perfect mechanically. This time I decided I wanted to buy new so that I could keep the car for longer.

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    Personally, I like the bigger cars and my last 2 I have bought ex-company cars 2 - 3 years old and kept them for at least 8 years after that. Huge reduction from new car price but car still like new. However I was a mechanic and keeping the older car going doesn't faze me.

    But there's another angle for those maybe younger buyers who are not able to do their own repairs (eg my daughter when she worked interstate so Dad wasn't there to look after the car).
    In my opinion there are some very good new car deals out there now. I estimate a car's good life to be 150,000 - 200,000 kms for the average owner. Try this: Used car price is relative to kms, look at a used car done 75000 - 100,000 kms and it will be worth about 50% of the same model new car, half its life has been used. You are always paying for the kms "left" in the car.
    So you can buy a 6 year old car for $10,000 - after another 6 years it is going to be worth virtually nothing. In that 6 years you've had to spend a fair bit on repairs because that's what happens with 6 - 12 year old cars.
    OR - you can buy a brand new car for $20,000, keep it for 6 or 7 years, sell it for $10,000 and guess what - nothing spent in repairs, and you've had a nice new car, in which everything works, to drive around in, and it still cost you about $10,000 of your money.
    I reckon that approx $2000 per year is good value - it means you've had a good car for $40 per week - not bad.
    My daughter liked that logic, bought a new car, paid it off in 3 years, now has a 5 year old car that looks and drives like new, I reckon thats good value.

    Cheers.

  22. #22
    Real cars have hydraulics DoubleChevron's Avatar
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    You Guys need to discover the wonderful world of old if you can do some DIY.

    Example of cheap motoring, Pieter Marchent in Melbourne has been trying to sell a DSpecial for some time. It needs a little welding to the front suspension mounting points. This car was rebuilt mechanically by a previous owner and hasn't really been driven since.

    If you could buy this car for less than $3000, spend a weekend with the MIG and weld up/strengthen the suspension tubes on the front (access extremelly awkard, extremely high swear rating). This car I'm sure I could run for the cost of Rego/tires/insurance/petrol for the very very distant future (having very tidy interior & exterior). DS's are built like Sherman tanks, it hasn't fallen apart in the last 30years, and it sure won't for the next 30years. As a bonus when your sick of it it'll most likely be worth vastly more than you paid for it.

    Take the next step, buy the best possible CX you can find, try to get an injected 5spd. Live with it's tatty door trims and melted steering wheel. Change the oil/tires/coolant and your expenditure in the long term will be microscopic. Really these cars are so overbuilt ...... I ran one through UNI and it used it for 11years since I got my license. I spent bugger all on that car ... guess what eventually put it to rest ??? ................. My father selling his CX2500GTi Turbo. I purchased that and parked the poor old faithful CX up the backyard when it's rego ran out.

    Moving on, buy a decent BX, and run it into the ground ... Spend a little as possible on it and when you have finished give it to someone or dump it at the tip. That's what I've done with my wifes BX, I purschased it about 5years ago, changed the cambelt and battery (it'd been sitting in a caryard for years). She procedded to stack nearly 100,000kms onto it within the first 2years. I replaced 1 starter motor and 1 driveshaft, along with sh!tloads of oil changes. It's been used as a 'trash' car for the last couple of years. It now needs a new muffler, new rear arms bearings, leaky struts fix, it's interior is used like a trailer with the back seat mostly laid down. It never fails to start, I thrash the absolute sh!t out of it, my wife hammers the guts out of the poor car ...... We just can't kill it. I can see it will not die rather it will be put out of it's misery when it's rego is next due.

    Go getcha self a horedously overbuilt DS or CX and tinker happily ever after

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    who? when? huh? GTI124's Avatar
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    Quote Originally Posted by DoubleChevron
    Moving on, buy a decent BX, and run it into the ground ... Spend a little as possible on it and when you have finished give it to someone or dump it at the tip. That's what I've done with my wifes BX, I purschased it about 5years ago, changed the cambelt and battery (it'd been sitting in a caryard for years). She procedded to stack nearly 100,000kms onto it within the first 2years. I replaced 1 starter motor and 1 driveshaft, along with sh!tloads of oil changes. It's been used as a 'trash' car for the last couple of years. It now needs a new muffler, new rear arms bearings, leaky struts fix, it's interior is used like a trailer with the back seat mostly laid down. It never fails to start, I thrash the absolute sh!t out of it, my wife hammers the guts out of the poor car ...... We just can't kill it. I can see it will not die rather it will be put out of it's misery when it's rego is next due.
    the advantage of living in Victoria where you don't need a Pink slip every year!

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    Quote Originally Posted by DoubleChevron
    You Guys need to discover the wonderful world of old if you can do some DIY.
    As great as old French cars are, for many people a classic French car just isn't appropriate. As much as I love driving them, sometimes they just aren't the right look in a business situation or general family situation.

    If you can afford to maintain a newer French car and a classic one then in my opinion that is a pretty ideal situation. I wanted to keep my 504 Ti and 405 but with WoF/Reg/Insurance this is just too difficult sometimes.

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    Quote Originally Posted by Louis
    As great as old French cars are, for many people a classic French car just isn't appropriate. As much as I love driving them, sometimes they just aren't the right look in a business situation or general family situation.
    And the safety features have improved a lot ... with all those SUV's on the road every airbag, seatbelt tentioner and other active safety (eg ABS) device I can get, the better. It's usually not "you" that is the problem it's those other 4WD idiots who think they should handle and stop like a sedan

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