How important is residual value when looking for a new car?

A recent survey by the RAA found that the average weekly cost of a typical car increased from $218.58 in 2018 to $228.79 in 2019. Most of this increase was due to rising fuel costs.

The RAA survey looked at the running costs of more than 140 models across 14 categories, including small, medium and large cars, utilities, SUVs and people movers. The cheapest vehicle was a Kia Picanto, which costs $111.49 a week to run. On the opposite side of the scale was the Tesla Model S with a weekly bill of $562.70.

But as the Tesla uses no fuel and doesn’t need as many regular services, why does it cost so much to drive every week? Answer - Depreciation

By far, the largest single weekly car expense is the amount that your car reduces in price every day, week and month. This was acknowledged in the survey, “Depreciation is the biggest budget killer and tends to become painfully apparent when motorists realise how much they’ll get for their trade-in car compared to its price when new’’.

When buying any car but especially new, you must consider all the running costs of the car. But how does the average person work out the future residual value? The easiest estimation is to look at previous models on websites such as Autotrader.com.au and Carsales.com.au and calculate the average price now versus the RRP price when the car was originally sold. This can be a good indication, especially if the model you are looking at has been in the market a few generations and the nameplate is well known. But, if the model is new to the market you a flying blind.

However, this method is not foolproof. Manufacturer offers, dealer discounts and systemic manufacturing defaults can cause the value of a car to drop substantially in the future.

The best way to avoid such uncertainty in the future is to use a guaranteed future value product or through an all-inclusive subscription, such as drivible.

To see a full list of the RAA winners, click on the link