I have a friend, who I’ll call Roger.  Back in 2015 he bought a 6 month old BMW M3 for a little over £50k.  It was a very lovely thing. I have another friend, I’ll call him Bob, and around the same time he paid a BMW main dealer £30k for a 4 year old BMW M3. 

Now Roger and Bob both love their cars very much and were thrilled with their purchases, so much so that they kept them for just over 3 and a half years, a lifetime to some car enthusiasts. In late 2019 when they came to sell their cars they had very different experiences.   You see Roger’s car, after three and a half years of ownership and less than 30k miles, was worth a shade under £30k when he came to sell it. And that was a private sale, part-exchanging it for a newer car returned closer to £26k, which represents a loss of £24k… In just 42 months, or just over £550 per month… In depreciation alone! By contrast Bob’s now 8 year old car was now worth £22k as a private sale or £20k as a part exchange. That’s a loss of £10k, or around £240 per month in depreciation. From now on he shall be known as ‘Smug’ Bob.

Now I appreciate there are a number of factors, and some generous man maths to consider, so let me try and cover them now. 

Finance

Although Roger and Smug Bob paid cash not everyone has £50k in the bank ready to spend on a car. It has never been easier to buy a car on finance, whether through lease or PCP deals, and considering this car finance probably warrants its own, potentially rather dull, article.  That said whichever route you choose you’d be faced with putting a chunk of money down, somewhere between £5k and £10k, and paying at least £500 per month for 3 years.  So over the term you’re not a million miles away from paying out the same amount as you’d lose in depreciation. This is all you are effectively doing when financing a car anyway (sorry, I’ll save the rest of that for the finance article…)

Warranty

Buying your car new means you get a fully-fledged, no-quibble, manufacturer’s warranty.  Sounds great doesn’t it? A manufacturer’s warranty is typically 3 years, but you have the option of extending it.  Roger was offered the chance to extend the warranty on his M3 when the 3 years was up, and it would have been the best part of £1,200 – basically £100 per month.  Potentially worth it for the peace of mind alone, however it still adds to your monthly cost. By contrast the 4 year old M3 from a main dealer came with 2 years warranty and Smug Bob was also given the opportunity to extend it, although I don’t know the cost.

Running costs

There are certain benefits of buying new / nearly new cars – no need for an MOT, servicing every 2 or so years, new (or nearly new) tyres, brakes etc.  It is also logical that older cars require more care, maintenance and attention but would it ever cost over £330 per month, every month, for 42 months, to maintain? I very much doubt it.    

Mod cons

Do cars really evolve that much in 4 years?   Is the new M3 significantly better than the old one?  I’ll have to pass giving an opinion on this, as I have only driven a 2008 M3 for a few miles, and my experience of the more recent generation of a BMW M3 is limited to a 330D touring, which although similar in some respects, is a very different car.  Certainly the infotainment has improved but the heated seats, electric windows and air-con worked in much the same way.

So a new M3 or £14k in the bank?

I appreciate it’s not quite that simple and I’m taking liberties when comparing the situations like for like, however applying my flavour of man-maths brings me to the following conclusion:

Buying a 6 month old car makes a lot more sense than buying a new car. It’s possible to lose 10% to 20% of the value of a car when you drive it out of the showroom in depreciation alone. In the example of Roger’s M3, by buying a 6 month old car he saved himself the best part of £10k (around 17%) off list price, before you consider options.  Taking into account that the new M3 will undoubtedly be faster and better in every way (according to BMW, and as this isn’t a car review I’m not going to suggest otherwise) is it £4k a year better? 

Now for some Man Maths…  If I bought the newer car for £50k and in 3.5 years wanted to buy a similar car again I’d be paying out an additional £25k… Repeat this from the age of 30 to 70 and in that time I’d have spent a total of £285k just on upgrading my car every 3.5 years.  Buying the older car each time and repeating the same pattern would mean spending £115k over the same period, just by having a car 4 years older each time. Is it really worth £170k to have the latest car each time? I’d rather have one, two or three generations of car older and save the difference – I did exactly this when buying my 12 year old Audi RS 4. Admittedly I didn’t have £50k in the bank at the time, or even £30k but that’s not the point of Man Maths, is it?

Man Maths for beginners…

The art of using numbers to justify, often illogical, decisions. Typically the number of calculations required to meet the desired outcome correlates with how illogical the concept was in the first place.