Does Buying a Car Represent a Solid Investment

By
Real Estate Agent

Learning to drive and buying your first car was once considered to be a significant right of passage, but now new motorists have numerous operations in terms of renting and leasing vehicles.

 

Drivers have also become increasingly aware of the steep depreciation of vehicle values, with new cars losing an estimated 20% of their retail price during the first 12 months of ownership alone.

 

Over the course of the next four years, you can expect your car to lose roughly 10% of its value annually, creating a less than ideal scenario for motorists. So, does buy a car still, make sense in the modern age, and can you take steps to safeguard your investment?

 

Consider the Size (and Structure) of Your Total Investment

 

To begin with, it’s important to give careful consideration to the total amount that you invest when buying a car.

 

At the same time, you’ll need to think about the precise nature of this investment, particularly in terms of whether you buy a car outright or enter into a long-term financing agreement.

 

Where possible, we’d definitely recommend minimising the amount that you spend on a new or even used car, as while you can take steps to safeguard your investment the rate of depreciation will continue largely unchecked.

 

Buying a car outright where possible may also be better purely from an investment perspective, primarily because this affords you complete ownership of the vehicle and enables you to sell this free at an optimal time in the future.

 

Take Out a Third-Party Warranty on Your Car

 

When you buy a new car, you should also know that this typically comes with a manufacturer’s warranty that lasts for up to three years.

 

Although this can vary in some instances, once this warranty ends, you’ll be responsible for covering the cost of all repairs and unexpected breakdowns.

 

When you couple this with the depreciating value of an older car, this creates a financial double-whammy that really undermines the investment that you’ve made in your vehicle.

 

Fortunately, you can minimise this impact by investing in a third-party warranty from the RAC and ALA, which will provide extended coverage and protection even as your vehicle ages.

 

This type of product can cover popular cars such as the Vauxhall Astra and the Ford Kuga, and it can make a huge difference to the value of your investment.

 

Strive to Optimise Your Car’s Resale Value

 

Any investment lives and dies by the return that it eventually delivers, although your outlook should be slightly different when dealing with a car or similar vehicle.

 

So, while you may still aspire to optimise the amount that you recoup from your investment, in this instance your precise goal should be to cap losses and minimise any gap between the purchase price and the car’s value at the time of resale.

 

This approach will certainly help you to manage your expectations, while helping you to identify cost-effective and manageable ways of optimising the resale value of your vehicle in the future.

 

Keeping the car’s interior and exterior clean and fresh offers a relevant case in point, as does having your vehicle independently value to ensure that you don’t price potential buyers out of the market and can create competition between interested parties.

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