Depreciation, not fuel consumption, is the cash killer

Posted on June 2nd, 2014 by Rob Marshall

fuelSavouring every drop of fuel has been an obsession for many motorists for decades, sparked from fuel rationing, during World War Two, the later crises of the 1970s and the petrol shortages that struck the Blair administration. Yet, greater focus on CO2 emissions and stated fuel efficiency figures, both at dealership level and through national advertising campaigns, has led to consumers’ car choice being influenced more than ever before, by a particular model’s thirst.

According to CAP Automotive, an industry specialist, this is wrong. Although motorists hate to see the cash being taken out of their wallets, come fill-up time, the organisation reveals that they are ignorant about the biggest hidden expense, behind running any modern motorcar, depreciation.

According to the organisation’s calculations, a typical medium-sized family car sheds approximately £12,500 over three years but the fuel cost is only £4,000, meaning that depreciation has cost more than three times that of fuel. Last year, CAP revealed that the average motorist is mistaken, by paying a higher purchase for a car, thinking that the extra will be paid back easily, by savings gained at the pump. Similar research, by British Car Auctions, this year, revealed that fuel economy is the biggest concern among its customers.

However, CAP has also revealed that certain ‘eco’ models, which promise to deliver high fuel efficiency figures (and my own research and practical experience reveals that such cars are even less likely to achieve the advertised MPG claims in real-life), are likely to cost more in depreciation, than a ‘standard’ model might achieve.

As an example, CAP picked a Volvo V60 D6 AWD Pure and compared it against a Ford Mondeo 1.6 petrol. It found that the Mondeo would cost £3,500 more in fuel, over 3-years and 36,000-miles but that particular model would shed approximately £10,000 of value, compared to £34,000 of the V60. Yet, the Volvo is a premium-priced car, over the more humdrum Ford, which leads me to think that the example is over-egging a valid point.

Yet, it is possible that both public and trade perceptions of the new technology will have softened in three years’ time, considering that plug-in-hybrids are very recent introductions and that the sums do not take into consideration either very recent, or future government grants, which will make outright purchase a cheaper proposition. It is also impossible to consider future pump prices, which have been creeping up again this month.

Despite the figures not being entirely accurate, they do paint a broad picture that is correct; focussing on fuel consumption (and VED, by association) should not overrule the purchasing decision entirely and the greatest hidden cost of depreciation must be taken into account. CAP’s free calculation tool should go some way towards helping you, should you be considering either a new, or nearly-new, vehicle purchase in the near future.