Michael's Speed Zone

Depreciation. It's something that attacks the value of just about every make and model of car - and, sadly, there ain't no cure for it... The effects of depreciation can strike everything from a brand new entry-level Hyundai to a used Nissan Skyline GT-R. It really is a remorseless bastard of a thing. There is only a handful of collector's cars that seem to retain the bulk of (or, perhaps, build on) their initial purchase price. And - even then - some of those supposed "collector's cars" haven't turned out to be as long-term collectable as first thought...

While a car's rate of depreciation is usually the last thing on your mind when you're about to hand over your readies for a new machine, it's something that can potentially end up costing you a truckload. This slaps you in the face the most when it comes time to move onto another new ride - and you discover that after around three years of ownership, your car's lost nearly half of its value. That sure makes it difficult to upgrade to anything decent, doesn't it?

Just take the first 3-litre Mitsubishi Magna Sport as an unfortunate example. From about early '98, these highly underrated cars moved off the showroom floor for $32-ish grand. Today you can scoop one for only around 18 grand - a drop in value of 44 per cent in just over 2 years! Eeeek - that'll sure choke the present one-owner's budget when they want to trade up! Sure, they've enjoyed a couple of years of warranty-covered motoring in a brand new car - but they certainly have paid for it!

On the other hand, take a look at the retained value of most small to mid-sized Mercedes Benz. If you bought a four or six cylinder C-class at about the same time as the release of the Magna Sport, you'll still get about three-quarters of the new price for it today. Pretty obviously, these are the sorts of vehicles that have a prestige that continues to draw people in, long after that new shine has worn off. The excellent retained value of a good middy Merc is also the reason why so many people (relatively speaking) own these cars under a leasing arrangement. With a car that holds its value so strongly, most lease owners don't stand to lose so much money at the end of the term when they want to sell. Makes sense doesn't it?

No doubt, you'd now realise that depreciation affects some cars a lot more than others - but how can you predict a car's future retained value before you hand over your hard-earned cash? Hmm, that's a tough one...

One of the best ways to identify how much a car's price (new or used) is likely to slide is to step back in history. Flick back through old motoring magazines to find how much the car you're looking at was worth new and compare it to how much it's worth now. Then take a look at some other cars from the same era and do some crosschecks. If "your" car's price has fallen away more dramatically, chances are it will keep falling. However, this doesn't apply in all cases - it isn't quite that simple...

Popularity plays a major part in determining the value of a car at any given time. The Subaru Liberty RS was sold new in 1992 for around 40k, and it's only been very recently that their retained value has stopped sliding away into the gutter. Today a good RS is still worth about 18 grand - the same as a year ago! Interestingly, you can thank the popularity of the later-model WRX for that - it's inevitable that the many discussions about hottie turbocharged Subarus brings up the ol' RS, which would have otherwise been forgotten. It's that kind of thing that creates resurgence and keeps a vehicle in demand.

In stark contrast, cars that never generate a buzz or enjoy a following will always be worth chicken feed. That's not to say they're all bad cars though. To pick another Subaru example from the early 90s, present day owners of the swoopy SVX (remember that "fighter-style" AWD flat-six coupe?) might as well just keep hold of them. These things had a considerable new price of 65-85-plus thousand - now people are pushing to sell them even at around 20 thousand. I've seen one mint example offered for sale (and regularly advertised) in Adelaide for over nine months before it was sold!

And then there are the effects of those grey-market Japanese imports to make things really difficult. Be warned - if the car you're looking at buying is Japanese manufactured and locally delivered, there's a fair chance that a second-hand parallel import may arrive on the scene and drag the price of your vehicle w-a-y down. Nissan 200SXs have suffered noticeably with the stream of Silvias and 180SXs that have been arriving on our shores - and the Skyline GT-R? Just ask the Editor about that one! Certainly, any Japanese-delivered car that might find itself in competition with an import will lose you bucks.

Okay, so depreciation can strike in a lot of places - and with little rhyme or reason. However, one way of ensuring that depreciation doesn't completely bust your, er, bank balance is to wait, and then buy a car once it's been used and already dropped its value in a big way. This will, at least, minimise the depreciation that you'll suffer. Let's take our 3.0 Magna Sport example again. The poor sucker that bought this car not even 3 years ago has lost around 14k. If you pick it up now for the remaining 18 thousand, then $18,000 is the absolute most you'll stand to lose (and we all know it'll never be worth nothing - ever). Even an old late-80s Magna Elante is worth about 5-ish grand. So, say - for example - you keep the Sport for another 3-ish years and keep it in good nick, you'll still probably get 10-15,000 for it when it comes time to sell. You'll have done a whole lot better than the last owner did - even taking into account the likelihood of increased maintenance costs.

Obviously, though, this wait-for-the-right-time tactic will mean you'll never ever own a brand spanking new car. That's the big bummer. To me, though, that's a small price to pay for never having to find out first-hand how much money you lose just by taking up ownership and driving a brand new car home for the first time. For those people who will end up finding out, it's just a good thing that - at the time - they're too caught up in all the glamour and excitement of owning a vehicular virgin...

Share this Article: 

Digg this story

Seed Newsvine

Post to Reddit

Save on del.icio.us

Email