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Smart Shopper Smart Shopper-Archives Depreciation: Foreign vs Domestic Vehicles 
70 messages, Last post on Jul 24, 2007 at 9:30 AM
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I understand depreciation values as published by the the "official" people who do such things are based on MSRP compared to resale numbers. My guess is that American makers price their vehicles artificially high so they can offer big discounts and rebates. It might not make much sense unless you realize it allows the money guys at GMAC (and Ford and Chrysler) to finace their highly discounted vehicles and use the rebate as a down payment.......essentially their creating no-down-payment vehicles that qualify way more buyers. Perhaps to their credit, the foreign makers don't seem use this creative financing. Good or bad it makes American vehicles appear to depreciate like crazy. Seat-of-the-pants experience, my two Toyotas (an '00 Solara and an '01 Sienna, both loaded up) were the worst "stinkers" I've owned, re-sale-wise.......both close to 35% below my buy prices after 2 years. My buy price vs resale after 2 years on a '94 Jeep GC....20%, '96 Tahoe....19%, and '98 Expedition....20%. I suggest you watch the bottom line and ignore the hype. |
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Every three to six months, the Wall Street Journal publishes its research on this topic comparing similar vehicles for the depreciation over two and three years. In general, domestic models depreciate faster than certain foreign nameplates (Honda, Toyota, Nissan) and slower than others (Hyundai, Kia). That is not even really arguable. Just to take YOUR example, you are talking ONLY 35% in two years. That is good. The Ford Tauruses that I am selling from my fleet rarely bring more than 50% of their purchase price after 2 years and 40k miles. The Dodge Intrepids are often worse. I would say the same about Dodge Caravans and most domestic minivans. |
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That is worth discussing, esp. since everyone "knows" how cars depreciate so terribly during their first year. I agree with you that the only "depreciation" that matters is residual value relative to street price new. However, you're comparing apples to oranges. The two domestics you cite were popular SUVs during the upswing of that market ('94/'96), and the two Toyotas are a car and a minivan whose buy and sell dates neatly bracket the time around 2001/2002, when used-car values took a pretty nasty hit. You'd be making a different point had you bought a 94 4runner followed by a 96 Land Cruiser -- then turned around and bought an '00 Monte Carlo and an '01 Windstar. I get goosebumps just thinking about it. But thanks for bringing this up, because it does want discussing. Suburbans seem to have come down quite a bit -- just from what I see in the paper; Terry may want to correct me -- but they used to hold their value extremely well. Well-equipped 4x4 fullsize trucks are another example of vehicles that may be better buys new than used on the domestic side. The most expensive vehicle I ever owned, mile for mile, was a '92 Aerostar that I had from '99 to 01. My first new car (97 Nissan hardbody) was among the cheapest. I do agree with jl that 35% in two years ain't bad at all. -Mathias |
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| one other factor that look at is $ depreciation, not just %. Cheaper cars need to depreciate at a higher % rate. For example, if a new Hyundai is $10,000, if it depreciated 30% in 2 years, thats only 3K, not enough to make a difference. But, on a BMW that costs 40K, 30% is a 12K drop (mch more significant and noticable). | |
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I think you all have valid points, here. The market for used cars changes over time, particularly for distinct types of vehicles. The economy, leasing, warranties and redesigns all have significant impact on the supply and demand for new and used cars. Comparing one time period or one vehicle type with another makes comparison very tricky. [My wife's experience with her VW Beetle proved that. This was a model that was "supposed" to hold its value like crazy, but by the time it had been out for four years - and her 2000 was two years old - the demand had been met and the used car values dropped like a rock.] On the other hand, it could be that the domestic makes appear to have more depreciation than they really do if you factor in actual selling prices after rebates. If you look at a percentage depreciation that is based on MSRP, it will be overstated for a GM, Ford or Dodge vehicle that sold at invoice less a factory-to-dealer incentive less a consumer rebate. After owning Fords, Hondas, Toyotas, Mazdas and a VW, I've come to the conclusion that ALL cars suck when it comes to losing value. Some are worse than others, though. |
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.... ** The market for used cars changes over time, particularly for distinct types of vehicles. The economy, leasing, warranties and redesigns all have significant impact on the supply and demand for new and used cars. Comparing one time period or one vehicle type with another makes comparison very tricky. ** Bang.! .. right on the money.! .. great post, great example .. Terry. |
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| dardson--I'm not an expert here, but 35% for 2 years on a Solara seems mighty steep. When you say "resale price" you mean market value and not trade-in value, right? | |
| My point is not to down-grade foreign makes; but a well equipped Honda Pilot lists for $31k+ and sells with maybe a $2k discount. A comparable Tahoe lists for $37k and discounts + rebates to very similar $. I'd bet two years from now they'll have similar wholesale numbers. Depreciation-wise the Chevy will look bad and the Honda will look great.....but the money's the same. | |
I'm talking trade-in numbers (all the numbers I mentioned were trade-in amounts). I was very surprised by the Solara. We traded it after 18 mo. for an 01 Lexus. During the process the sales manager (Lexus) pulled up the auction numbers (Manheim) on his computer and a loaded up '00 SLE V6 with every option with similar low miles was "all the money"  $19.5k. The car lised for $31.9k and bought for $29.5k. I double checked with the Real-World-Trade site here, and was told $19.5k was a deal I should grab.
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...but the market for used cars over $20k might be pretty difficult... When you got $19,5, the store would want to see at least in he $21-22 range and "ask" $23,5... at that figure, a lot of people would go for the new car... esp. with the new model around the corner. I know I would, unless I knew how the car was treated. If you had done this in MI, the sales tax would have been $1800... that is gone immediately. I think you're talking pre-tax numbers, though. Figure a vehicle in that price range has "about" a $2,500 spread between wholesale and retail... the rest is what the car actually lost in value. You probably would not have been any better off had you bought a certified 2000 RX300 for the same money... and those hold their value like crazy. My point is, it's not so much the loss in value your fighting, it's the spread between wholesale and retail on a pricey vehicle, combined with short ownership. You would really be hurtin' had you tried this 18-month exercise with a Cougar, me thinks. Coupes are tough in any case. I'll take your 18-month old Tundra 35% behind street price, though! -Mathias |
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