Magazine article The Spectator

Money: Cash to Spare? Why Not Invest in a Nearly-New Car?

Magazine article The Spectator

Money: Cash to Spare? Why Not Invest in a Nearly-New Car?

Article excerpt

If you're lucky enough to receive a legacy of, say, £10,000 or £20,000, what should you do with it? You'd expect me, as an investment pundit, to point you towards a cheap passive stock-market fund. But there's another option that can make financial sense: buying a nearly-new car.

I have recently bought two popular family cars, both just over a year old, for less than half the price I would have paid if I had bought them new. Keith Adams, editor of Parkers Car Price Guide, says, 'For canny buyers there are some amazing secondhand car bargains, especially if you're after a volume-produced family car. Just pick petrol, not diesel, and you're in the pound seats.'

These days, car manufacturers persuade us to buy brand-new cars with 'zero per cent finance' offers. The deals offered are so good that consumers keen to drive the latest model tend to come back and buy new again. Last year a record 2.7 million new cars were registered in Britain; in January 2017, another 174,564 came onto the road -- the highest number since 2005. But the effect of this bonanza for manufacturers is that it leaves vast fleets of barely used cars sitting forlornly on forecourts.

In December 2010, Autotrader listed 54,145 cars for sale that were less than a year old. By December 2016, that number had risen to 127,625. In six years the number of nearly-new cars available on Autotrader had more than doubled. Economics teaches us that an increase in supply must drive down prices. Keith Adams agrees: 'Used car values in the UK have collapsed and now lag way behind Europe.'

And I have taken advantage. The first nearly-new car I bought before Christmas was a 1.6-litre Vauxhall Astra SRI, 13 months old with 15,000 miles on the clock. It cost me just £8,000, compared to a brand-new list price of about £19,000. The second car I bought, a couple of weeks ago, is a Ford Focus with an Eco engine. Brand new: about £21,000. Just over a year old with 5,000 miles on the clock: £10,500, again half-price for barely used.

I would not have got those deals a few years ago. Keith Adams says that in 2010, the average one-year-old family car was worth 75 per cent of its original list price. So the nearly-new slump has probably saved me (compared to what I might have paid for a comparable pair of cars in 2010, if I'd been inclined to buy them) £10,000, which I can invest elsewhere -- perhaps even in a cheap passive stock-market fund. …

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