Appreciation... not depreciation
It's easy to forget that there are far better assets to own than cars. The theory of "Bangernomics", found at www.bangernomics.com suggests that chosen well, an old banger is much kinder on your wallet in the long run than a late-model car. That's mainly thanks to the fact that someone else has weathered the depreciation.
How Bangernomics works is that if you can swallow your pride and drive a slightly older car or hold onto your existing wheels for longer you'll be able to afford other luxuries, or even better, save more with RaboPlus. Check out the website www.turnerschallenge.co.nz if you want to see just how rapidly cars lose their value. The lowest price for a 2003/4 Honda CRV sold at auction in Wellington in the last six months of last year was $16,400 compared with $7,750 for the 2001/2 year. And the older one had fewer miles on the clock. Ouch. Think of how many holidays to the Gold Coast or Fiji that would cover.
Some expenses cost more for new cars than old ones. That includes regular service at a main dealer, rather than Joe Bloggs local motors, to keep your warranty alive. You're likely to pay more in insurance as well.
Wellingtonian Tim* discovered Bangernomics while on his OE in London. Faced one night with a £25 taxi fare, he bought a mate's Nissan for £80 on the spot. Tom owned the car for five months, in which time it cost him nothing more than ordinary consumables such as petrol and window washer fluid. He then sold it for £50. Tim's next car, an £8,000 Range Rover cost a further £8K over four years.
That doesn't mean you need to buy a rust bucket. Rather try keeping your existing motor for longer and don't fall for the industry's marketing ploys to sell you a new or nearly new car every year. The money would be better put towards assets that grow, not depreciate.
If you really want to know exactly what your car is costing you, visit the car cost calculator on the NZ Motorsport website at: http://www.nzmotorsport.co.nz/calculator/carcost.cfm
You can find more useful information about cutting the cost of motoring at:
www.fuelsaver.govt.nz
www.aalemoncheck.co.nz
www.aa.co.nz (for car running costs)
Diana Clement
Independent Financial Commentator
*We've changed his name.