New car depreciation: the winners and losers
Depreciation hits all cars. Some just harder than others. explains why.
People like to joke about new cars losing half the value the moment they leave the showroom. Don’t snort. It happens. A 2017 study proposing potential for a 53.7 per cent devaluation in the first year of ownership alone didn’t go well with the new car industry. Yet, the fact is, depreciation is rarely avoided. Brand-new, ex-overseas used or parallel-imported . . . nothing escapes.
The one saving grace is that there are shades of black. So knowing which vehicles suffer less than others, both in percentage retained value and total value lost, would obviously be handy.
Even though it is largely theoretical because most cars bought new are kept in initial ownership for up to three years or 30,000 kilometres clocked, it seemed like a fun idea to work out which 2019-issued vehicles, if sold now, would be stars and which would be stinkers.
To do this required an accurate measuring device . . . and there’s your first problem, because the industry has lost its religion. By that I mean the independently sorted regularly updated trade guides, called ‘‘Bibles’’, still relied on overseas have disappeared.
Instead, everyone relies on Trade Me. Amazing as a universally accessed buying and selling tool yet, because of that, patently operating to wholly different parameters. Nonetheless, we wondered if it could help on this quest.
Unfortunately, Trade Me didn’t come through. For some reason, the parameters we figured to be important (like, only considering 2019 New Zealand-new product and providing residuals based on RRPs) were not adhered to and, accordingly, the results that came back simply didn’t compute.
Fortunately, contacts working the industry frontline provided more coherent direction, though did not get us to the point where a top 10 of delights and duffers could be compiled with confidence.
It’s fair to say anything in strong demand and less prone to discounting when new, with a desirable badge and good reputation for quality, reliability and safety is more resistant to depreciation than anything less aspirational, with an actual or imagined blemished reputation that is regularly subject to sweet deals.
Even so, different vehicle types express different behaviours. The theory about the less you spend, the less you lose, does hold. But only to a point.
Everything suggests the Suzuki Swift is a resale champ. Despite there being heaps of them around, including a lot of used imports, New Zealand-new examples don’t suffer undue depreciation. Yet you can’t expect all tots to drive so happy. The Holden Spark, though one of the cheapest new buys on the market, doesn’t maintain such strong residuals. In part, because Holden keeps subjecting it to discounting. What you pay upfront that always determines how much you’ll get down the line.
The compact, medium and large car segments are progressively being pummelled by the consumer swing to sports utilities and crossovers. For all that, the Mazda3 hatchback stands out as a safe choice – ‘‘you can never get enough of them’’ for resale, our adviser said. ‘‘It’s good-looking and does everything well.’’ Whereas stuff will seem more worth the extra outlay than others; overall, though, make the most of the experience and, stick with – and regularly drive – your choice for a couple of years because $60k today will likely be $40k traded tomorrow.
As far as SUVs go more broadly, the rules are bendy. Fuel preference and towing ability factor in. It’s why the diesel Land Cruiser 200 Series, after 13 years on the job, remains incredibly resistant to losing dollars whereas its Lexus equivalent, the LX can dive faster than a submarine, particularly the petrol powered version.
One-tonne utes? By and large, it’s hard to pick an utter plonker. But as far as second-hand resonance goes, the Ford Ranger – particularly the Wildtrak – and the Toyota Hilux are way hotter than the Mercedes X-Class.
Sports cars are interesting. The volumes are tiny. Yet, we’re told, residuals are decent because any Mazda MX-5 or Toyota 86 coming up for second-time ownership is generally pounced on.
When it comes to fully posh, unless it’s a true rarity, like a McLaren Senna, those big price tags simply won’t stand. What this business hates most is a repossession; if a lease turns bad, it’s off to auction and potential for a ridiculously lowball price. Great if you’re buying. Imagine, though, how a distributor must feel when a big dollar high status ego-polisher it sent into life a year ago in a climate of sunny smiles suddenly sells, having barely clocked delivery kilometres and still in warranty, for maybe half its list price. We’ve heard of some big names humbled this way.
How about anything with electric involvement? Hybrids of any ilk – those that self-generate (so they’re not really electric) to those that plug in (which are) – shouldn’t do as well as fully electric cars. The latter should conceivably withstand depreciation fairly well because it’s not just new tech but also tech we’re inexorably forced to embrace: so, in theory, an Audi e-tron and Jaguar I-Pace should be a better bet for retained value than a Q8 or F-Pace. In theory.
The thing is, even with this sector now powering up it’s too soon to tell; remove the used imports from the EV population of almost 19,000 units and the sample is too small. With more new EVs arriving this year and next, though, it’s a category worth watching closely.