A SELF-MADE “frugal” millionaire has revealed the reason he won’t buy a new car and prefers to opt for banged-up motors.
Jonathan Sanchez is the first millionaire in his family, and to keep his wealth, he refuses to spend money on a new car.
The frugal man has admitted that he’d rather keep his wealth and preserve savings than splash on a shiny motor.
Jonathan says he can’t justify buying a new car for an eye-watering price when it is going to lose its value as soon as he leaves the forecourt.
“Living frugally isn’t just about spending less or buying cheap things.
“It’s about being more intentional and not wasteful,” he told CNBC.
The self-made millionaire has explained that cars typically lose up to 60 per cent of their original value within the first five years of purchase.
And knowing that the price of his motor will only decrease with time, Jonathan cannot see himself splurging a lot.
What is car depreciation?
Like any other goods, car loses some of its value as time passes due to wear and tear.
Vehicles can become worn down through regular use, and the loss in the difference in their price of purchase and sale is called depreciation.
The car’s market value can be affected by factors such as supply-chain disruptions, making a vehicle more desirable and rare.
Or, rising gas prices which would prompt drivers to opt for more fuel efficient models.
Depreciation also costs drivers three times as much as they spend at the petrol pump, according to a study by CAP Automotive.
The report reveals that the typical medium size family car costs more than £300 per month in depreciation alone.
Depreciation rates by year:
- Year 1: 15-35% depreciation
- Year 3: 40-60% depreciation
- Year 5: 60-70% depreciation
- Year 8-10: 80% depreciation
Here’s how to minimise depreciation:
- Keep hold of all service records and repair any damage straight away
- Keep your mileage as low as possible
- Avoid adding any modifications
- Stick to more popular and neutral colours
- Avoid smoking or transporting pets
He also added that insurance premiums will cost you an arm and a leg if you opt for a new car.
The 39-year-old then advises people to buy second-hand as it comes with a cheaper insurance.
He prefers a used car that’s couple of years old and has less than 100,000 miles on the clock instead.
Although Jonathan is from the US, his advice still applies to the UK where the car depreciation typically sees car lose around 15 to 25 per cent of their value in the first 12 months.
And that number can go up to be around 50 per cent by the third year, according to the experts at Leaseloco.
Meanwhile, a motors expert has shared the ten best used hatchbacks that can be bought for under £5,000.
The most popular used cars in the UK of 2023 have also been revealed, with the trusty Mazda CX5 taking the top spot.
And the research has unveiled which used cars are most commonly available on the British second-hand market.
The research, commissioned by car finance refund experts Undisclosed.co.uk, looked at more than 400,000 used car listings from AutoTrader in order to find the UK’s most common second-hand car .