John Blauth explains that new cars are often better all-round buys
IF YOU are tempted by bargains this August (and I expect most of us will be) you may find yourself looking eagerly at the forecourts of cars with the words "nearly new" written temptingly on their windscreens. The cheaper prices of these cars, tainted only by a few miles, certainly look appealing, but beware: the deal may not be so good when compared with the offers that come with almost every new car.

A strong pound allows car manufacturers and importers vastly improved margins on new cars, despite the pressure it puts on them as exporters. In the new car market, instead of reducing prices, manufacturers have put the extra money into improving levels of equipment with free extras as well as giving special finance deals and massive incentives such as free insurance or servicing and even guaranteed buy-back deals.

There is no getting away from the fact that the used car market is very flat at the moment. Huge numbers of ex-rental and demonstrators are flooding the market, in addition to the normal stream of three- and four-year-old ex-company cars. The consequence is that used car prices have fallen by an average of 6% this year since January and will keep dropping.

Adrian Rushmore, from the motor trade's bible Glass's Guide, believes that buyers looking for used cars costing more than pounds 8,000 may find better deals on new cars if they take into account the full running costs involved. "People will make up their minds on the basis of monthly repayments," he says, "and if the repayment includes insurance and servicing they're often better off buying new rather than used."

The failure of most private buyers to take into account the whole-life ownership costs of a car when making their purchase calculations has long been a source of amusement for the motor trade.

"When Top Gear makes cars out to be sex objects, people go along with it and when they come into the showroom they think they're buying a fashion accessory, not the second most expensive thing they'll ever buy," says one BMW dealer.

It's a view echoed throughout the trade. Failure to examine the full financial implications of buying a car often leads people into making a wrong, and expensive, decision.

A new smaller car may look poor value when compared to a used larger and better equipped one for the same price, but three or four years down the line, with current sales incentives, not only will the smaller car have cost significantly less to own and run, but it will retain a much higher used value as well.

Professional car buyers always look at whole-life costs before committing the funds at their disposal. For them the nearly-new car today is a dead loss because it depreciates faster, losing money more quickly.

Current fiscal conditions have made new cars the right route now Used ones, on the other hand, look as dodgy as used cars always have.