Why do cars depreciate so much?

I just wonder why a car depreciates as much as it does in its first three years or so, and why it varies from model to model - I mean, for most purposes, a Citroen C6 is just as good an executive car as a BMW 5er. Yes, it's wrong-wheel-drive and has all the sportiness of a blancmange, but then the 5er doesn't ride like the Citroen, it's not as relaxed a long-distance cruiser. Yet it holds its value something like 3x as well.

Re: Why do cars depreciate so much?

4 years 3 weeks ago

It all boils down to supply and demand. The UK is oversupplied with new cars, which means not enough people want to buy old ones. I

Re: Why do cars depreciate so much?

4 years 3 weeks ago

I think it is because manufacturers place a price on a car. They spend on marketing etc to convince us we want the car and use cleaver finance to make it look cheap. In essence the new price of a car is set somewhat artificially. 2nd hand cars are open to the market in a way new cars are not. There are now many channels of supply and much more competition. There is often no warranty so consumers place more value and hence pay more for perceived reliability and quality of the product they are buying. In addition the car is an investment so brands which are perceived to have a longer lifespan and hold their value better are valued more highly. Finally cost of ownership is also factor. The costs associated with running a large flash car remain high while some of the benefits of owning (prestige) reduce. The market will therefore reflect this in its valuation of the product. In essence smaller cars with low running costs but a prestige badge tend to depreciate only a little whereas larger cars tend to depreciate faster and the non prestige variety the fastest.

Re: Why do cars depreciate so much?

4 years 3 weeks ago

Like LP says, supply and demand. On the demand side, people have an outdated view of reliability - would you buy a 5 year old Citroen C6? Until recently, people had easy access to cheap money, and hence could afford to indulge our whims to get the latest and greatest trendy cars. And finally the magazines and media depend a lot on advertising revenue from car manufacturers, and hence put a lot of column inches towards exaggerating how much better/cooler/faster the latest car is and how you really ought to get rid of that expensive-breakdown-waiting-to-happen social disaster of a car you currently drive.

Re: Why do cars depreciate so much?

4 years 3 weeks ago

MrTrilby wrote:
People have an outdated view of reliability - would you buy a 5 year old Citroen C6?

Yeah, I probably would. It's a nice car. I have no huge fear of niggly problems, they can be sorted. Anyway, Citroens are quite reliable nowadays - I see more broken-down Mercs than I do Citroens.

Re: Why do cars depreciate so much?

4 years 3 weeks ago

Many cars are still bought by companies and the bean-counters have no doubt worked out that taking cashflow, tax and warranties into account a three year lease is the most cost-effective alternative. I think that this is an excellent system in that not only does it guarantee a good choice of excellent used cars that have only come onto the market for the likes of me because a figure on a spreadsheet says so, but the ripple effect means that cars not normally on company lists can also be obtained for a bargain price.

Re: Why do cars depreciate so much?

4 years 3 weeks ago

There is an upside to this. 3 year old cars are cheaper here than most parts of the world. As relatively few private buyers buy new for anything bigger than a focus, it makes those cars cheaper here than almost anywhere. Just look at how much second hand cars are in places like France or Australia. Far more than here.

Right hand drive doesnt help either. If we drove on the same side as everyone else in europe there would be a cross border trade to even out the prices, but no one really wants to drive on the wrong side do they

Re: Why do cars depreciate so much?

4 years 3 weeks ago

its the ' company car market ' from over 25 years ago, that has begun this skewing of car prices in general. ever been to a car auction. you will see hundreds of cars being shifted everyday.

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Re: Why do cars depreciate so much?

4 years 3 weeks ago

Because they're overpriced when new and loaded with a pile of functionality that most people don't really want and simply represents an (expensive) opportunity for failure as the car ages.

As had been written elsewhere, small, well made, practical cars tend to hold value whereas gizmo laden behemoths tend not to.

Re: Why do cars depreciate so much?

4 years 3 weeks ago

I guess it has to do with supply & demand, as well as how long the car usually lasts. I have a Volvo V70 1998. I believe the bluebook value is about $3,500 & I bought it 2 years ago for $5100. I'm guessing I could resell it for about $4000+. It's a good car, well taken care of & doesn't have many miles on it--its life is about 1/4 gone in that respect.

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Re: Why do cars depreciate so much?

4 years 3 weeks ago

Challenger440 wrote:
As had been written elsewhere, small, well made, practical cars tend to hold value whereas gizmo laden behemoths tend not to.

Which is why stuff like used Jag XJs, Merc S-classes, BMW 7 series and the like make such great used buys. If you're lucky you get a well cared for luxo barge for Mondeo money...

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