SaltyNZ:
Scott3:
getting hit with excessive depreciation.
Never really understood this sentiment. Unless you're buying one of a tiny handful of extremely rare vintage models (in which case it's going to sit in the garage under a sheet) then the car is no more an investment than a screwdriver is. You buy a car to drive until it's time to replace it, not to make money. You buy it, it loses value. End of story.
Unless you intend to drive a car until is is no longer economic to keep on the road (entire value of the car depreciated over say 20 years), the depreciation curve is fairly important to total cost of ownership.
While there are exceptions, as a general rule, new car buyers (especially fleets) tend not to keep them until they die, preferring to upgrade either at regular intervals, or when their needs change or a new interesting model comes on the market. For these buyers depreciation.
For example, if a buyer spends $150k on a Landcruiser 300 (a vehicle known to depreciate relatively slowly), and they sell it in 3 years for say $90k, it has cost them 20k a year in depreciation, where if they buy a $150k luxury euro sedan which they sell after 3 years for $40k, it has cost them $30k a year in depreciation. Obviously picking the lower depreciating car results in a significantly lower cost of ownership, and is more attractive.
For a person who plans to trade their car in in ~3 - 5 years, the amount it is likely to depreciate is a fairly important factor in their buying decision. This is one reason the likes of corolla's are so popular as new cars. Generally seen as worse than euro equivalents when under warranty, but people know they will be able to sell them for good money when it comes time to upgrade.
There also is another aspect to this, where the depreciation which has already happened impacts trade in / old car sale value, and the value of a new car purchase. In the tail end of the pandemic when popular models were hardly depreciating, and one could flick off their 18 month old tesla model 3 (before the model Y launch), or Rav4 hybrid for within $5k of it's replacement cost, it made absolute sense for people to rapidly refresh their car, and get a new warranty coverage, new tires, new wipers, more recent car etc. Now with 18 month model 3's selling for 20k less than the replacement cost, one would need a different reason to upgrade.
Trusted
ID Verified
