Could buying a new car actually offer genuinely better value right now?
It's certainly possible, because not only is there a plethora of sharp offers on the market from most brands in Ireland, along with warranties of ever-increasing length, but second-hand values are staying stubbornly high. The old adage of buy at three years and sell at five is getting harder and harder to stick to as the supply of good second-hand cars remains tight and values remain overinflated.
There's worse news too in the shape of currency fluctuations. The recent dive in the value of the euro relative to sterling has apparently turned off the tap of used imports, which had been filling important gaps in the market. With new car sales in Ireland having been severely depressed from 2009 to 2014, used cars coming in from the UK have been a significant source of good quality stock from those years, for both private and trade buyers.
Since the euro fell off a cliff though, that has begun to change. In fact, January this year saw a five per cent decrease in the number of used cars being imported, the first downward blip in that graph for many a year.
That decrease is hardly surpassing when you consider that a £10,000 car would have cost you €12,779 (not including bank charges, of course); today that same car would set you back €13,826 – a significant jump. Worse still, with Irish market used values remaining strong, the sting in the vehicle registration tax tail remains as unpleasant as ever.
And those values are set to stay high for now at least. Michael Rochford, managing director of Motorcheck told The Irish Times "the market will probably keep climbing for the next year or two as confidence continues to permeate throughout the economy.
“Last year was the first time we really saw this, so there is still some way to go yet. I firmly believe demand will remain strong and will increase in the used car sector as confidence continues to grow and personal credit is more readily available.
“Just look at all of the money the banks and credit unions are pumping into advertising personal loans at the moment. Rather than seeing prices fall in the used market over the coming years we may actually see prices continue to remain steady – our previous research on used car values that showed that three-, five- and 10-year-old cars were being sold for far more now than they were fetching five years ago.
“Although I would throw in a caveat that since the new car market is now back to healthy levels, we will see an increased availability of two-year-old used stock in 2016 onwards and if exchange rates move again then UK imports can easily plug any gaps and will look attractive again . . . But for the moment with unattractive exchange rates and demand outstripping supply it’s a seller’s market when it comes to used cars.”
So, does that mean we’re all fated to spend too much on our cars now? Are there no bargains left to be had? No, it’s just that you need to do your home- work that bit more carefully, and make a few difficult choices to decide where you want to save the money.
Take your model choice for instance – if you choose one of the most popular cars, you will inevitably pay more for it than an unpopular model; a simple consequence of supply and demand. In January, the most popular imported used cars were the Ford Focus, Volkswagen Passat and Golf, Opel (Vauxhall) Insignia, Ford Mondeo, Audi A4, Opel (Vauxhall) Astra, BMW 5 Series and 3 Series and the Toyota Avensis. So, choose a car that's not one of those and you should pay a little less, simply because there is less demand for it.
Of course, it’s not quite that simple. Less popular cars will always suffer higher rates of depreciation – so do you want to save money going in or coming out of your car deal? If you’re planning to keep the car for a long time, then it might well be worth picking a car with a steeper initial depreciation curve (ie a less popular model) and hope that the curves will level out as the years roll on. Which they very probably will. Planning on chopping it in again in two or three years? Then take the hit of the higher entry price now. You’ll be thankful you did 24 or 36 months down the line when you start getting trade-in offers.
Peaks and troughs
The other tactic is one of timing – second-hand sales fluctuate far less across the year than new car sales do (which peak in March and July and then tail off significantly) but there are peaks and troughs.
Motorcheck has analysed used car sales over the past five years, and the average shows that there is a steady ramp up of used sales from January to March, followed by a gentle tail off from about 73,000 sales in March to a mid-year low of about 62,000 in June. It then hovers around the 65,000 mark for the rest of the year before significantly tailing off in December – on average since 2010, just 43,000 used cars change hands in December.
So, if you can possibly do your car shopping along with the Christmas shopping, December is clearly the best time to be out there. Last year, 841,437 second-hand cars changed ownership, whether in private-to-private sale, dealer-to-private, trade-ins or dealer-to-dealer. That figure utterly dwarfs the 95,000 new car sales in 2014, and shows the scale of the challenge and opportunity facing the used car buyer right now.
On the one hand, there is a bewildering choice, a justifiable concern over the condition and history of so many of those 841,437 cars and the unyielding strength of used values right now. On the upside, surely somewhere in that vast number of cars moving around there’s the right car for you. You just have to go and find it.