By on September 7, 2010

When you buy a car new, depreciation is a risk you have to take. So like with any risk, one tries to minimize it. That’s why Toyota and Honda are such perennial favourites. low depreciation. But what cars should you avoid if you don’t want to suffer depreciation that could make you depressed?

The Mirror has the latest skinny on UK  depreciation figures. There were the usual suspects on the list. The Peugeot 407 2.0 HDi 140 Sport loses 55 percent of its value within six months and the Vauxhall Zafira 1.6i 16V Life loses 54 percent in the same time period. They were biggest depreciators by percentage, but the biggest depreciator by real-term price went to the Audi A8 4.2 TDi Quattro SE. Within six months, the Audi can lose an eye-popping £33,700. That’s $51,793 in today’s greenbacks,

So, if you bought a brand new Audi A8 4.2 TDi Quattro SE at MRS, every morning you wake up, you can kiss £185 ($284) goodbye. When this report was put to Audi, a spokesperson replied that the model used for this survey was an outgoing model to be replaced by a new one and was, therefore, less appealing to buyers. Even so, does that justify a loss of £33,700 for six months?

On the other end of the spectrum, the Mini 1.6 only lost £10 a day for the first six months. On average, new cars lost 36 percent of their value within six months. Which gives a lot of credence to buying used. Let someone else take the hit…

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28 Comments on “Lose 185 Pounds A Day!...”

  • avatar

    “Which gives a lot of credence to buying new. Let someone else take the hit…”

    Do you mean “buying used”?

    My impression with many up-scale cars like the A8 is that the new ones are typically acquired by businesses under lease terms so the true depreciation costs are shrouded in a fog of tax pros and cons understood only by accountants and auto industry insiders who have lobbied for the tax advantages to leasing.

    But for an individual consumer buying his or her own private vehicle, buying new only makes sense when the depreciation cost is trivial relative to one’s budget.

  • avatar

    ” buying new only makes sense when the depreciation cost is trivial relative to one’s budget.”

    Or when one has been burned by GM / Crisisler so much that you’ve acquired Stockholm syndrome and believe a 50% new car knockdown is acceptable

    (sorry, has to get my GM dig in early today)

    But yeah, until very recently used was the way to go.  I would be mad at C4C hiking used car prices but I’m selling my 03 Ranger for 55% of what I paid for it, which is unreal.

  • avatar

    However, it’s kind of silly to look at six-month depreciation data — how many people (or companies, other than daily rental fleets) switch cars every six months?  Of the 36% average value lost, probably 25% was in the first day of ownership.
    Three-year depreciation numbers (typically in the 50% range) are much more useful information …

  • avatar

    So Cammy,hows the depreciation on Hyundai/ Kia in the U.K. ?

    Sorry, had to get my Hyundai dig in for the day.

    • 0 avatar
      Cammy Corrigan

      Really bad!
      I knew someone who bought a (relatively) new Hyundai Coupe for £16k. Three years later, he was struggling to sell it for £6k.
      I’ve said it before, Hyundai’s are great at new prices, but the used car market already has Toyotas, Hondas, Fords, Vauxhalls, etc at bargain prices. So the price of a Hyundai has to fall a long way in order to be attractive…

    • 0 avatar

      I like depreciation in cars, so I can buy them cheaper used and keep them until their dead.  That’s why I have a used Hyundai and a used Kia in my driveway.  And the warranty on a second-hand H/K is still better than many cars when new (unless the car is 8 years old, like my Elantra was when I got it).

      And yes, I’ve bought 4 used Chrysler products in the past, and 4 Ford products, among others.  High depreciation on Chryslers makes them very appealing in the used car market.

      The only Honda I ever owned was new, and its depreciation was terrible.

  • avatar

    As a driver of an A8 purchased used, I can attest to the upside of this situation. Through several years and 80k miles the car has been wonderful – with only the expected maintanance items. The paint is bulletproof and being all-aluminum the car never rusts. The high-quality interior is holding up to near brand new levels.

    It’s a bargain – if you buy it used.

  • avatar

    Unfortunately we are running out of people willing to take the initial hit, so used car prices are rising.

    • 0 avatar

      ^^ This.
      C4C had impact on used car prices when it was active, but the bump in used car prices now has much more to do with the economic conditions – people holding on to their cars and more people buying used.

  • avatar

    Depreciation rates in the UK have always been worse than in the US.  I suspect it has to do with the higher cost of owning a vehicle there.

  • avatar

    <i>So, if you bought a brand new Audi A8 4.2 TDi Quattro SE at MRS</i>

    Did anyone pay MRS for that car?  I often hear people compare the used price to the MSRP on vehicles no one has paid sticker on in decades.

    Also, in the UK can’t you tell the year of the car by the plate prefix?  In the US you can buy a 3 yo BMW and depending on the model year, few would  know.  In the UK, all your friends in neighbors would know you’re all hat no cattle – as they say in Texas.

  • avatar

    Massive depreciation on high-end cars simply indicates that the cars were overpriced to begin with. Any variance from the median curve can tell you whether a car was underpriced (say, Mini or Accord) or overpriced (most luxury cars) from the start.

    Naturally, a lot of the figures include the future cost of upkeep, which is why a 10-year-old BMW 7-series can be had for the price of cars that sold for less than half its sticker price when new a decade ago.

    Personally, I think car depreciation needs to level out a little, since the intrinsic value in a well-running used vehicle is FAR above its market value. This makes life difficult for people who crash their older cars, then have to take a pittance from insurance to replace it (usually being forced to trade up for something comparable).

    Very few people pay much attention to depreciation, since it’s not a cash cost…but I’ll keep a vehicle longer, paying the upkeep, since the depreciation eventually flattens–or occasionally reverses in the short term!

    • 0 avatar

      My daily driver is almost 15 years old now and I see no reason I can’t continue to drive it for years to come but my only worry is that it wouldn’t take much of a fender-bender to get it totalled by insurance now and the car is worth much much more to me as a running car than as a check from the insurance company. I ease my concerns by remembering how much money I’ve not spent on car payments and how I got 5 or 6 glorious years of service with basically nothing other than oil changes, tires and a battery or two and even now as it is needing some occasional repairs, replacement parts and refurbishments, they’re still cheaper than a couple months worth of car payments. But, if I had to replace the vehicle outright, it’s going to be painful. I bought it when it was 6 years old for less than 1/2 of what is was worth new and well less than that for what the then current and mostly still identical model was selling for new.
      I agree that the intrinsic value of a decent running car is much higher than the market value, especially today when the random old car on the street is so much better than an old car used to be. Like, orders of magnitude better – it’s hard to remember how bad a 10~15 year old car use to be or even a 5~10 year old car. Today, a 5 year old car is practically as good as a brand new car. People like shiny new things or get tired of their old things, they over estimate the risk and costs of maintenance on an old car or they highly value the security of a new car warranty.

    • 0 avatar

      it sounds like you do your repairs yourself. Not everybody can do that. I doubt a 15 year old car will be cheaper if you do the repairs at a dealership

    • 0 avatar

      I do do a lot of my own repairs although sometimes I let the shop do a job because I don’t have the time or just don’t want to fool with it. It certainly helps to save even more money if you can do a lot of repairs yourself but even if I had taken the car to the shop for all the repairs it’s needed (and is likely to need in the next few years), I’d still be way ahead – I’ve got a long way to go before getting close to the purchase price of a newer used replacement car, let alone a brand new car.
      The trick is to stick to cars that don’t break down much in the first place, are easy to work on (for you and/or your mechanic) and parts are plentiful and relatively inexpensive. There should be plenty of cars that should last for 15 years these days though and the basic drivetrains of most cars should hold up for at least 200K miles without major internal failures. Just stay away from cars with known blow-uppy transmissions.
      Also, don’t take a fifteen year old car to a dealership, except for maybe computerized diagnostic work – they’re going to be much more familiar with the more recent vehicles than ones from the last decade. You need to have a reputable independent shop, ideally run by mechanics who were working for a dealer 15 years ago when your car was still new.
      I admit, it’s not for everyone but if you can stand to live with an old car and can stomach the occasional repair bill then it’s a viable strategy. It’s certainly cheaper than buying or leasing a new car every 3 years.
      If I’d been really smart, once the car was payed off, I would’ve continued dumping that payment into a savings account which would’ve covered repairs and upgrades and I’d be a good way towards having the cash for the next car.

  • avatar
    Steven Lang

    One of my favorite automotive subjects for obvious reasons.
    On the wholesale side, six years tends to be the point where most cars begin to fall off the ‘depreciated’ Earth. Many of my best buys over the years has been at this point where about 75% to 85% depreciation has taken place on a vehicle that still has at least 60% of it’s useful life.
    However the economics of it all are changing quite a bit… especially in the US. It used to be the 7 to 9 year old vehicle that could be had for $3500 or less retail. Now it’s 10 years and older. Even that is not always the case. I recently cleared nearly 8 grand on a 99 Firebird with automatic and a V6. I also had three Grand Marquis models with 41k, 78k and 87k which all went in the $5000 to $7000 range. An older early 90’s Lexus? Easily financeable at over $5000 if it’s in excellent condition.  I had one that was purchased for $8k, driven for 10k miles, and then brought back in. I later sold it for nearly the same price.
    I believe there will be a collapse in used car prices as the economy recovers. Folks will go back to the financing route and today’s ‘sleds’ that are $3500 or less wholesale will be less appealing than the latest and greatest $15k vehicle that can be financed and subsidized by the manufacturer’s risk tolerance for about $50 to $150 more a month.
    There are an awful lot of numbers you can play with… and short-term expectations almost always push executives in this business to pursue the risk laden path.

    • 0 avatar
      Educator(of teachers)Dan

      Thank you for your insights Mr. Lang.  If you believe used car prices will colapse, I’m inclined to believe it too.

    • 0 avatar

      While I agree used car prices will start to go down as the economy gets better, I think this is much further in the future.  The economy isn’t going to recover 8 million jobs for many, many years.  Also, it is doubtful the U.S. will ever be the economic power it once was.  Therefore, in the near term I wouldn’t wait for used car prices to come down before making that purchase.

  • avatar

    I thought all luxury cars lost a great big chunk of cash in depreciation…
    Not surprised with the Mini… the resale on those things is insane!

  • avatar

    The one common fallacy I see in articles on car depreciation is the comparison of MSRP to used car prices.
    If one shops wisely, and waits for the huge discounts that often occur on many models, the actual depreciation is much, much less.
    For example we paid about $31,500 for our 2009 Hyundai Genesis…brand new, but discounted older model (2010’s were out.)  When I look up the private party value on Edmunds and Kelly for an excellent condition Genesis (which ours is) they show between 28-31K, a loss of 10% in the first year, yet the actual depreciation is shown at closer to 25%.
    The same is true with many heavily discounted vehicles.
    Not to pick on Hyundai, but I saw brand new 2010 Sonatas on the lot for about $14K (after incentives)…which is not far from what they are worth a year old, according the KBB.
    You can find similar examples with other domestic and foreign manufacturers. Less so, with Honda and Toyota, which factors into why they command such high resale values…but are those resale values really comparable, without comparing them to the true discounted prices of the others?
    The trick is to know which vehicles get discounted and when and be patient.
    A new car purchase like this makes even more sense if you are going to keep the car over 4 years, when the extra year makes less and less difference on the resale value.

    • 0 avatar

      I know.  I had a friend who went out to help his daughter buy a used Corolla.  Turns out they wanted $500 more for a 2 year old CPO Corolla than the same new Corolla after all the incentives.  What sense does that make?  I guess some people are just set on a used car no matter what the numbers say. 

    • 0 avatar
      Steven Lang

      The answer to that is the customer.
      The used Corolla will be sold to a subprime customer. The dealership may arrange for financing independent of Toyota Motor Credit who may not be willing to finance the customer.
      Then again, it could just as easily be Toyota who is willing to finance a vehicle with lower depreciation risk to a subprime customer who is willing to pay enough for the opportunity.
      This isn’t an uncommon practice. To be frank, I don’t know a single new car store that doesn’t offer this alternative.

  • avatar

    For some mind-numbing numbers, hop into the wayback machine with me to December 2007.  At that point I had an option on a used 2006 Phaeton W12 with 15,250 miles on the odometer for a mind (and wallet) numbing $37,500.
    Yes, a car that new listed for something around $100,000 one year prior was listing for $37,500 used with only 15k on the odometer.  I had the car checked out and it was in perfect condition, no mechanical faults.
    One more time: $37,500. Wow.

    • 0 avatar

      Only if you can get an extended warranty!
      I would be very reluctant to buy any used $100K+ car without an extended warranty.  As cheap as it may look on the lot, the cost of repairs can be astronomical.

  • avatar

    “a subprime customer who is willing to pay enough for the opportunity.”

    It was a prime customer – a newly minted MD.  I just think some people look at the sticker on the Corlla and it says 17,500 and they see the sticker on the CPO that says 14,500 and they think wow I can save $3,000.  What they don’t notice is MSRP at invoice -$500 new college graduate rebate, the $-750 owner loyalty and $1000 factory to dealer incentives. 

    According to Edmunds the dealer retail on my 08 GTI is 22,333 CPO w/36k miles on it.  I paid 24,500 brand new after all the incentives. 

    In what world does that make sense?  If it was 11,333 I’d say it’s a deal.  But, the price for a 3yo car with a warranty is just insane IMHO.

  • avatar

    I really wish Audi would offer the A8 4.2 TDi in the US. It would show all of the LS600hL buyers just how dumb they are.

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