Car manufacturers and the iPhone generation

596 More

Earning the right to be successful

576 More

Knowledge is power

670 More

Selling cars – it’s all about timing

951 More

Truemag

  • Home
  • About
  • Advertise
  • Archives
  • Contact
  • Subscribe

Let’s talk about the dreaded “D” word

Let’s talk about “residual values”. Yes, we’re talking about the dreaded “D” word – depreciation. Once we know the picture regarding a prospective car’s future value (it’s our money after all!) then it may become an important part of the car buying decision process.

Residual or future value is all about supply and demand, brand popularity and reputation and will very much vary from model to model.

For example, the VW Golf will always have strong residuals because it has been around a long time, usually goes through a five-year change cycle and is sold on the basis of sound German reliability, good aesthetics and safety. Not to mention solid performance. That is not the case right across the VW range, however, as the Passat is generally regarded as a fleet driver’s car and has not enjoyed the same popularity as the Golf. It is considered by many to be somewhat boring, although again reliable.

The biggest losers in value tend to be the expensive, big engine petrol cars, such as the BMW 7 series and VW Phaeton (which will be worth only 26% of their original value after three years of average mileage) and also those where the manufacturers are competing for massive volumes like Ford, Vauxhall, Peugeot and Renault.

These cars, although popular and affordable, can often have terrible residuals because there is:

• so much choice coupled with the manufacturer’s tendency to invest heavily in the rental car sector and
• they are constantly subject to shape change, face lift and heavy duty dealer/manufacturer discounts to shift units.

The best cars for residuals today are usually diesels, 5dr hatchbacks and, in some cases, automatics (because of their rarity). Also the “new kids on the block” can cause a blip in the statistics as supply is starved to whip up demand (as in the case of the Nissan 350z a few years ago).

Running costs, insurance, fuel prices and tax will all now have a dramatic effect on future values and it is best to investigate how residual value affects any potential purchase you make if your own change cycle is to be three years or less.

Remember, new cars are coming to market regularly and there is more choice than ever before. Broadly speaking, unlike 10 to 15 years ago, there is not really a bad car made anymore so it is even more important to choose a car that perfectly (or as near to perfect as possible) suits your needs.

There are too many cars on the used car market from people who bought in haste and who then suffered financially by not taking the time to do their homework and by letting themselves become controlled by a salesman, selling them what he wanted to sell them and not what was right for them!

Now, depreciation is only ever an issue when you come to sell your car but if you are going to keep the car for three years and then move on then it’s a big issue. If you’re buying a brand-new car then, of course, you know we’re going to be hit by depreciation, it’s a fact of life, but how badly hit is where the science comes in. You may hear people in the Motor Trade say that when you buy a brand-new car and drive away from the forecourt the first time you “leave the 17.5% VAT behind”.

Although it sounds pretty sensational, it’s just another way of drawing attention to the fact that cars do depreciate heavily, especially in the first year; VAT has really got nothing to do with it.

Oct 27, 2010MTI
  • Cap and Glasses – It’s good to talk
  • More value in used cars
  • Get in early in the new year as the choice may soon diminish
  • After a turbulent September the hard work really begins
  • Fewer new cars being bought means a heating up of demand in the used car market
  • Look out for VAT busting deals as car dealers turn negatives into positives
  • Ford announces 6th straight quarterly profitSeat and Bentley the losers as VW announce strong 3rd quarter figures
    MTI
    11 years ago Blog, Consumer, Manufacturerscar sales, depreciation, new car buying, new car sales, residual values, Used car buying, used car prices, used cars281
    Most viewed
    Top 100 UK Dealer Groups
    39,437 views
    The car sales process and the “9 point plan”
    11,455 views
    webuyanycar review – They will buy any car but beware of the asterisk
    5,977 views
    Most commented
    Car sales and the power of silence…
    25 Comments
    Car dealers still not prepared to play the “we buy any car” game
    23 Comments
    A Traders Tale – Part Four
    22 Comments
    Win a pre-loaded Ipod Shuffle!
    19 Comments
    Bargain of the Week – StreetKa 1.6i Luxury
    14 Comments
    Bridal Hair Berkshire
    Fox Body to 2018 Mustang Parts
    and Accessories
    About MTI

    Motor Trade Insider
    is written by people working actively in the motor trade for people on the inside and people on the outside.

    Our aims
    Build a bridge between consumers and the trade, create Interesting and informative content, break down barriers and create better understanding, expose bad practices and rip-offs and promote outstanding products and service.
    Have something to say?
    We are always looking for experienced writers who can write good original quality posts on motor-trade-insider.com. Please contact us if you would like us to consider you. Make sure you give us details of your own blog or a link to some articles you have written.
    2017 © Motor Trade Insider
    Truemag theme by StrictThemes