Green car buyer's guide: the depreciation equation

7 December 2009

Greener cars can save you money at the pumps, and often in tax and insurance terms too, but which is the best financial bet when it comes to the fiercest motoring cost of all: depreciation?

Hybrid cars depreciation curvesWe’ve spent some time sifting through the numbers offered by WhatCar.com’s depreciation calculator, to assess which are the winners and losers among two types of green cars: hybrids, and eco-diesels.

We looked at six models in total, and tried to choose six cars that might all end up on the same shortlist. All are practical family cars offering good interior space, and all cost roughly the same to buy. The cheapest car we looked at was the Honda Insight ES, with a base on-the-road price of £17,290, the most expensive the five-door Vauxhall Astra EcoFlex Active, coming in at £18,735 – about 8 per cent more.

Falling between these two fiscal goalposts were the ES-trim Honda Civic Hybrid, a Volkswagen Golf BlueMotion, a Ford Focus Econetic, and the cheapest (old shape) Toyota Prius – WhatCar’s data doesn’t yet cover the more expensive new Prius.

Eco-diesel depreciationResidual value is a tricky thing to assess because it tends to depend on who you ask, but WhatCar’s numbers are estimates of trade-in value over time. Dealers do tend to lean heavily on this kind of “book price” data before sucking their teeth, shaking their heads, and telling you that nobody wants your old car. Perhaps surprisingly, on-the-road prices for brand new cars can be just as fluid, with most dealers willing to offer a substantial discount to those willing to bargain hard.

But even with all these uncertainties, graphs of value over time are still a good guide to how big a hole a car might burn in your pocket.

The first lesson to learn from the resulting graphs is that every car depreciates differently. Some, like the Vauxhall, drop like greased brick in year one and then, having shed a huge chunk of value, fall relatively slowly thereafter. Others, like the Prius and Insight, don’t exhibit the same hockey-stick plunge, instead losing value in a more linear fashion.

The shape of the line is absolutely key, because it shows that the amount lost to depreciation depends not so much on what car you choose, but when you buy it and how long you keep it.

For example, if you want to buy new and keep the car for three years, there’s no contest: buy a Prius. Opting for the Toyota instead of the Vauxhall will save you about £3,000 when you come to trade-in time – even the ever-popular Golf won’t do as well as the Prius. But if you plan to buy nearly new at 12 months’ old and to keep the car for the same three years, the Prius is the last car you should buy. Opting for a nearly-new Vauxhall instead of the techno Toyota will save you almost £4,000 over the three years.

A couple of other interesting points also drop out of the graphs. The three hybrids generally do better than the eco-diesels, with the best performing diesel – the Golf – doing only marginally better than the Insight – the worst performing hybrid – from new to year four. And also, it doesn’t really matter which hybrid you choose if you intend to buy new and keep for four years, as they all end up losing roughly the same amount, but it matters a lot if you buy at year one, at which point you should buy the Honda Civic.

So whichever green car you have your eye on, it pays to do your homework.

We’ll return to this topic shortly, looking at what to buy for a particular budget.

No comments:

Post a Comment

Next » « Previous Home