Buy cheaply now, pay dearly later: As K-day approaches, Steve Cropley explains why some new cars that look like bargains aren't, and others are better value than they seem
Saturday 18 July 1992
Now dealers have an even greater fear - that the market's few buyers will hold out for even larger discounts. It is acceptable to sell a lot of cars at a small margin, or a few cars at full whack. But dealerships cannot survive on a trickle of discounted sales.
The customer's thirst for discounts is understandable, however discounts on cars are not always what they seem. You pay less, sure, but the car is worth less when you've finished with it. If the motor trade gives a pounds 1,000 discount on pounds 9,000 cars, it values those cars, ever after, as if their list price was pounds 8,000.
There is only one way to save money on a new car - or, rather, to cut your losses - and that is by buying a car whose value declines more slowly than average. All cars depreciate, particularly in the first two years of their lives, but some depreciate more than others. Put a new, K-registered pounds 20,000 Mercedes-Benz 200E alongside a new pounds 20,000 Ford Scorpio 2.0i, for example.
In difficult times such as these, both cars would probably go on to the road at prices below list, say pounds 19,000 for the Mercedes and pounds 17,500 for the Ford. But three years and 40,000 miles down the road, the gap will be much wider. The Mercedes will probably have a trade-in value of about pounds 12,000; the Ford's will not be more than pounds 7,500. Why? Because the used-car trade knows which models are in greatest demand secondhand, and which last longest.
The upshot is that the Mercedes' first owner finishes pounds 3,000 better off, despite the Ford buyer's much bigger initial
The pounds 3,000 question is this: which cars hold their value? Here are a dozen cars that will out-perform the used-car market on depreciation.
Ford Fiesta: For many years Ford has had the knack of providing an ideal car for the small hatchback class, and the latest Fiesta rewards them by holding its value extremely well. The car is roomy, rides well and is cheap to run. The prices of most models hold firm, but the best are the well-equipped 1.1LX five-door (a favourite with rental companies) and the 1.8-litre diesel versions. Depreciation is higher on the fast and better-equipped Ghia and XR2i
Mitsubishi Colt: This relatively rare Japanese import is well-respected for its excellent build quality and high equipment levels. An all-new model launched earlier this year is just about sold out. List prices are surprisingly competitive for a model in short supply. A strong feature is Mitsubishi's three years/unlimited mileage warranty, much better than the standard offering on a Ford or Vauxhall.
Peugeot 106: Peugeot's new competitor for the Fiesta is the prettiest car in the class and is amazingly roomy for its size. It has zippy performance in all variants and rides like a little limousine.
Rover 200-series: This is the first Rover product which, hand-on-heart, one can say is better than its European and Japanese peers. It is basically the same car as Honda's Concerto, which is also made at Longbridge by Rover. However, the Rover version is softer riding, better equipped and has a much nicer interior.
Citroen ZX: An excellent French all-rounder which has a slightly bland appearance, but is roomy, zesty and fun to drive. Unlike previous Citroens, which have been subject to enormous, rapid price falls, the ZX seems to be holding firm; a somewhat stringent supply has helped. The diesels are best, as usual, for low depreciation.
BMW 3-series: The desirability of this range of executive cars is underlined by the fact that although the latest version was launched almost two years ago, used models are still quite hard to find. The first cars off the production line had a few gremlins, and luxurious versions lose value faster than the others; but stick to the 316i or 320i and you can hardly go wrong.
Mercedes-Benz 190E: This model will be replaced next year, and that is normally a reason for avoiding a car. But Mercedes always hold their value much better than the competition (even BMW), and the 190E remains a safe buy even at this late stage of its career.
Toyota Carina E: The latest Japanese entrant into the Sierra/Cavalier rep's market is in short supply at present, but stocks will increase when production begins in earnest at a new Derbyshire factory at the end of the year. Toyota reliability is in the Mercedes league, and its dealers also tend to be of high quality.
Mercedes-Benz 230TE: In many ways this is the ideal all-rounder. It is long- lasting, versatile and well-respected. What is more, it is at about mid-life, and won't change much for four or five years. Actually, all models from this Mercedes W124 series are sought after, but the roomy, refined 2.3-litre estate is top of the list.
Renault Espace: This car started the 'people carrier' class virtually on its own. Latest models add refinement to style and space, and there still are not enough to go around.
Land-Rover Discovery 2.0Tdi: This diesel version of Rover's latest off-roader is doing extremely well at holding its value. The petrol-engined Discovery loses value more quickly but offers superior performance.
Mazda MX-5: Chosen by one magazine as the lowest depreciating car for 1991, this Japanese two-seater is popular because it recalls the simplicity of cheap sports cars of the Sixties and Seventies. Well-made, reliable, leak-free and surprisingly cheap to insure, the MX-5 seems to hold its value even though first owners traditionally soon tire of roadsters.
These models show up the essential qualities of low-depreciation models. They are widely desired cars, and most are in slightly short supply. Diesels almost always hold their value better than petrol-engined cars, estates better than hatchbacks, cabriolets better than standard versions. Japanese cars, especially those with long warranties and good finish, fare better than their European rivals.
In any depreciation discussion, the marque that must be singled out is Mercedes-Benz. Across the range, its models set the standard for maintaining value. So although Mercedes-Benz cars are commonly thought of as prestige models, they are beginning to look like the best value for money, too.
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