UK car fleet depreciation

[mickle]

As a lunch-time office brain exercise we've calculated that depreciation for the UK fleet of private cars at £30.6 billion pa. Does anyone have a better figure?

We've assumed that the average cost of a new car is £18,000, that 2 million new cars are sold pa and that depreciation is (as a % of original cost)

65% @ yr1
50% @ yr2
40% @ yr3
30% @ yr4
25% @ yr5
20% @ yr6
15% @ yr7 & thereafter

 

[Theseus]

How have you factored in the cars taken off the roads? Would this be a 100% depreciation?

 

[mickle]

How have you factored in the cars taken off the roads? Would this be a 100% depreciation?

Er no, you mean the scrappage scheme?

 

[Theseus]

As a lunch-time office brain exercise we've calculated that depreciation for the UK fleet of private cars at £30.6 billion pa. Does anyone have a better figure?

We've assumed that the average cost of a new car is £18,000, that 2 million new cars are sold pa and that depreciation is (as a % of original cost)

65% @ yr1
50% @ yr2
40% @ yr3
30% @ yr4
25% @ yr5
20% @ yr6
15% @ yr7 & thereafter

Just looking at this again and either I am reading your numbers wrong or I don't understand accounting.

Are you saying that an average car on £18,000 will depreciate by £11,700 (65% of the 18K) in the first year to £6,300 and in the second year it will depreciate a further £9,000 (50% of the 18K) putting it at less than worthless.

Or are the numbers here the residual value of the car rather than the depreciation. So that after 1 year it is worth £11,700 and after 2 years it is £9,000?

 

[Theseus]

Er no, you mean the scrappage scheme?

Nope. You havn't stated how you are taking into account cars that are taken off the road. Some may be by the scrappage scheme, some through accidents, others when the police impound and crush them. Before they are taken off the road, they (may) have followed the depreciation route you have described, but once they hit the scrapyard, they have effectively fallen off the end. No big deal with an older car, but it is quite a hit on the depreciation for a new one.

 

[mickle]

% of original cost.

In addition if we assume that you get nothing for your car when it leaves for the scrappy the cost rises to 36 billion..

 

[asterix]

Really that is Peanuts compared to Bank depreciation..

 

[cycloramageorge]

Nope. You havn't stated how you are taking into account cars that are taken off the road. Some may be by the scrappage scheme, some through accidents, others when the police impound and crush them. Before they are taken off the road, they (may) have followed the depreciation route you have described, but once they hit the scrapyard, they have effectively fallen off the end. No big deal with an older car, but it is quite a hit on the depreciation for a new one.

The revised figure of £36bn assumes cars are coming off the road because they're worn out (rather than trying to take into account the range of new(ish) cars that are written off - not sure where to find figures for that).

I guess you could look at the number of cars written off per year and assume there's an even spread of ages (e.g. 8% will be 1yr old, 8% will be 2yrs etc etc) and work from there... but I wouldn't imagine 1) that there really would be an even spread or 2) that it would make a huge difference to the overall figure. Maybe something to research next lunchtime

Really that is Peanuts compared to Bank depreciation..

But a lot compared to bike depreciation! (Next next lunchtime.)

 

[mickle]

Who the F let you in here??

 

[Over The Hill]

I would go with more than 36 billion. You have 18k x 2 million each year so that is input but that assumes the car does not change hands at a profit.
Each time a dealer buys a car for 5k and sells it for 6k that is another £1,000 to add in.