Proving the Cost-efficiency of Nearly-new Cars
Nearly-new vehicles are a cost-effective alternative to brand-new. When supplied in retail-ready condition, nearly-new are arguably indistinguishable from brand-new and retain the outstanding balance of their manufacturer’s warranty.
The Cost-effective Sweet-spot of Nearly-new - As the pace of market de-valuation slows over time, running costs and contingencies steadily increase to form an operating cost “sweet-spot” at roughly between 12 and 54 months.
By selecting nearly-new and holding their vehicle through the sweet-spot, customers enjoy the least expensive portion of its “whole life cost" saving a considerable amount over the brand-new alternative.
Validating the Sweet-spot - Because nearly-new in retail-ready condition so closely match the style, performance and general condition of brand-new, price becomes a primary determinant in the customer's selection process.
The Mercedes-Benz C-Class saloon is consistently one of the more popular nearly-new cars available. In late September 2020, Mercedes made the C220d Sport Edition available on PCH for £474/month and on PCP for £491/month (both roughly on a 3+36 at 10,000/yr).
A survey of comparable 19-reg cars reflected an average dealer "ask" price of about £23,000 for the nearly-new or nearly 25% less than the lease inception price of the brand-new PCP.
Monthly PCP payments for a 19-reg offered by JCT600 with about 12,000 miles (3+36 on a 13-month-old terminating at 49 months and 42,000 miles) reflected savings of about £90/month despite using a higher demanded yield and a final payment discounted by 20% from the GMVF of the brand-new lease (terminating at 36 months).
Conclusion - In order to move their nearly-new stock, dealers must discount sufficiently to incent customers away from the brand-new alternative. Except in rare cases where the market has not yet incorporated either supply surplus/scarcity or manufacturers' opportunistic discounting, the retail price of nearly-new must always reflect cost-effectiveness over brand-new.