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Buying and Selling Autos and Auto Accessories

Why It Pays to Understand How Manufacturers Price Their Vehicles

1 June 2022

Henry Obrien

If you're currently in the market for a set of wheels, you may be torn between buying a new or used car. You may love the idea of buying something that nobody has ever driven before and taking advantage of the latest technology and automotive design. Yet you may be struggling to justify the cost and may be more inclined to go for something second-hand. Still, in this case, you can achieve many of your desires while keeping a lot of your money in the bank. How should you proceed?

How Manufacturers Price Their Vehicles

The price of a new car reflects many different cost centres. The manufacturing company will need to cover the cost of the factory and all its staff or equipment, pay for the dealer network, deal with marketing and advertising and handle other overheads. Much of the price associated with a new vehicle is therefore related to so-called "soft" costs that are not directly related to its intrinsic value as such. This is why the value of that new vehicle drops so much when you first drive it away from a dealer forecourt. This so-called "depreciation" is unavoidable when you buy a vehicle this way.

Almost New

So, it is often better to buy something that is still relatively new but is classified as used. You won't have to deal with the depreciation and can certainly save money there, but you may still be able to get the latest bells and whistles and technological gadgets in any case.

Their Pain May Be Your Gain

Look for a vehicle with low mileage that has been passed back to the used car market for one reason or another. Unfortunately, its first owner will have had to deal with depreciation and won't be able to recover all of their expenditure. However, the vehicle should be in great condition and may also have some warranty, and you will usually be able to get the latest specification at the same time.

The Better Approach

So, pay closer attention to the used vehicle forecourt instead and look for cars that are of the current model year. You should be able to pick up a bargain and save some of your hard-earned money. Crucially, you may well be able to get the technical specification you have always desired without paying for some of those manufacturer soft costs. Certainly, the previous owner may not be too happy, but you could well achieve the best of both worlds. 

For more information, contact a local dealership with used cars for sale. 

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