A few recent posts got me thinking about vehicle costs, especially the ’diesel cars cost more to run than petrol’ thread. Bridging the comparison between diesel and petrol was the the fact that they are all new vehicles. I thought to myself that if you are really concerned about vehicle costs, surely the idea of new versus second hand is just as important; especially as quite a few replies were about depreciation and running costs from new.
I wondered a bit more about buying new vehicles and came up with this - there may be a few exceptions, but people buy new cars for only a couple of reasons;
1) because they can – (financially able to so ‘why not’)
2) ‘bling’ factor – nice to own something shiny and new
3) the security of a warranty
The first two reasons are straight-forward; it’s the third that got me thinking….
Firstly, this probably only applies to people that buy a personal vehicle; ie, not claimable on business or tax, not leased, or part of a salary etc.
Next it is important to understand that warranty is basically a type of insurance.
How much per year do individuals pay for other insurance?
Comprehensive vehicle – a few hundred
Medical – a few hundred
Is there any type of insurance that deviates from these general numbers? Maybe, but I don’t know them. Except for vehicle warranty.
I’m just going to work with rough figures here to illustrate my point; it is the principle I’m interested in, not the nitty-gritty details.
Let’s say a vehicle costs $70K new; then the same model but out of warranty (3yo or 100,00km) would have to be atleast $10K cheaper, maybe up to $20K.
Add on to that the service costs in that time to keep it in warranty (even if it’s not a Landcruiser with 5K oil changes) it is still $60 per hour labour.
So the servicing costs to validate warranty plus the difference in cost between a new and 2nd hand vehicle (so that you have warranty) would be, for arguments sake, around $20K
Already there is a marked difference; comprehensive vehicle insurance which covers writing off your vehicle or even crashing into a Ferrari or accidental death: a few hundred dollars.
Buying new so that you get a warranty: twenty thousand dollars. (just incase something goes wrong with the car).
‘But if I buy new I know the service history of the vehicle’ –
Well there are a few posts here that inform us that a service isn’t always a service. So there is no difference between a 2nd hand vehicle with a service record and a vehicle owned from new. Unless you check everything that was supposed to be done at a service you do not know that the service was performed properly. The only way to know something is done properly is to do it yourself.
Regards
Brian