#value of cars
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Some of Australia’s most popular family cars are proving unpopular when it comes time to trade in. However, lovers of German cars are being rewarded with the highest resale values. Analysis of the Glass’s Guide to car values shows the worst trade-in resale values are for Toyota Aurion and Ford Falcon XR6, both yielding just 37 per cent of their value after three years. That drops to 27 per cent by the fifth year. However, lovers of German cars can breathe a sigh of relief with high retained values. BMW, in particular, has five models with the highest or second-highest yields in their categories: 5 and 3 Series, Z4 sports car, and X1 and X3
While you may be worried about the price of fuel and the rising costs of registration, road tolls and servicing, it’s the rapidly depreciating value of your car that strikes the biggest blow to your wallet. Australia’s auto clubs perform annual surveys of the running costs of vehicles, including cost of fuel, tyres, registration, service, repairs, depreciation and loan interest.
They find the biggest single cost is always depreciation. Even one of the cheapest cars to run, the new three-cylinder Suzuki Alto. depreciates $27.82 a week from its list price of $11,790. A study of the trade-in values of vehicles released in the Glass’s Guide shows that the best performers are made in Germany or Japan, SUVs, performance vehicles and diesel vehicles. But the top honour goes to the Ford F diesel truck which was last imported in 2007, closely followed by the LandCruiser cab chassis turbo diesels (2001-2007).
Glass’s Guide information services research manager Richard Plumb says both of these vehicles, at times, fetch resale values more than the recommended retail price listed in their guide. F truck prices soared beyond the new price when the vehicle was discontinued in 2007 while the Toyota six-cylinder turbo-diesel was replaced by a V8. The payload and towing capacity of these models made them very popular, particularly with farmers needing to tow horse floats or grey nomads with large caravans. “It is only now that high-torque versions of the Navara, Ranger and BT-50 are coming on to the market,” he says.
These vehicles have high resale because of their stable pricing and model lines, says Plumb. “For many years the increasing new prices for these models ensured strong demand for high-quality, second-hand models,” he says. “This trend has recently started to reverse with recent models from all these manufacturers coming in at prices below that of the previous model, sometimes significantly so.
“Examples are the recently announced BMW 535i and 535d which are about $14,000 cheaper than their direct predecessors. Mercedes-Benz C Class has also recently dropped prices while increasing specification.”
Cars built in Japan continue to have a strong following for their quality but the recent trend to lower-cost manufacturing sites such as Honda in Thailand and increasing price competitiveness are expected to affect their future resale values. “As with the German luxury models, newer models are coming on to the market at prices below their forbears,” Plumb says. For example, the Japanese-made Honda Jazz hit Australia in 2002, costing $22,990 for the VTi with CVT. They are now made in Thailand and arrive with better equipment for $19,790.
There is a mixed story from the South Korean peninsula with Kia and Hyundai improving in resale value, while Ssangyong remains low. Plumb says resale values of Hyundai and Kia have improved significantly in the past two years “mainly due to better styling and performance which have made them more acceptable to a wider range of purchasers, whilst still retaining their competitive pricing”.
Ssangyong has not fared anywhere near as well because its styling remains “different”. “The challenge for the Koreans is their desire to move their range, image and pricing up-market where they will be in more direct competition with Japanese and European models as well as the local product, particularly Cruze – ironic given the model’s origins,” says Plumb.
The Chinese are in the position the Koreans were in 20 years ago. While some models are selling reasonably well, they are an unknown quantity in terms of durability and have fared poorly in crash testing. The lack of automatic transmissions is also a hindrance to sales of some models and limits their appeal in the second-hand market. “The general performance of most models is only just acceptable,” says Plumb.
SUVs These multi-purpose vehicles perform well on resale mainly because they are not a common fleet choice. This ensures the vehicles do not return to the second-hand market early in their life, leaving buyers with little choice but to opt for a new vehicle. “Whether this continues to be the case depends on the market’s ability to absorb the eventual influx of these vehicles,” says Plumb.
Until recently, diesel engines have been more likely to be found in SUVs but there is an increasing market for diesel passenger vehicles with some importers heavily biasing their range toward oil-burners. The extra purchase price for a diesel can be reclaimed through the life of the vehicle if taking into consideration high resale values as well as low running costs. Also, the price premium between diesel and petrol models has decreased as diesel popularity increases and as some luxury diesels with fuel economy under 7.1 litres per 100km avoid the Luxury Car Tax.
The resale values of popular family cars are often affected by the high proportion of these cars in business and government fleets. Fleet sales adversely affect resale value as a result of their rapid return to the second-hand market in large quantities. “These vehicles are generally still covered under factory warranty and available at very significant savings compared to a new vehicle,” plumb says. “It is this saving that makes these popular family cars; they are rarely purchased new privately.” Some car companies offset this by releasing limited-edition or extra-value models not available to fleet purchasers to attract private buyers. Plumb says this can be quite effective. “It can also go seriously wrong as with the Falcon XR6 limited editions which were not sufficiently differentiated from the standard model and dragged down resale values significantly,” he says.
LIGHT AND SMALL CARS
These segments are not only strong performers in new car sales, but also used sales because of the relatively low purchase price, low running costs, good safety and high equipment levels. Limited supply of used cars also ensures good prices to sellers, although as more cars come on to the market, this could change.
High-performance vehicles tend to be in short supply, do relatively low kilometres and are often well-maintained, making them highly valued on the second-hand market. “This tends to set them apart from the mainstream, however recent financial changes associated with the seemingly never-ending global financial crisis mean some very expensive models have fallen dramatically,” says Plumb.
HYBRIDS AND EVs
Like plasma TVs, the prices of these hi-tech cars have come crashing down and will drop even further with further technological advances. The Toyota Prius hybrid has a low resale value of 44 per cent after three years and 31 per cent after five years. “These were a very expensive car on introduction and several price reductions later they are still well ahead of the average price for a vehicle of this size,” Plumb says.
“They originally sold to government departments in large numbers, possibly to salve the consciences of politicians and bureaucrats using our money to set an example for us. “There appears to be significant buyer reticence towards taking a risk with this technology second-hand.” And the resale future doesn’t look good for electric vehicles, either. Mitsubishi electric vehicle product manager Ashley Sanders told the third annual Australia Electric Vehicle Conference in Brisbane recently that rapidly dropping battery prices (down 70 per cent by 2015) would cause a drop in resale values of EVs and hybrids.
LOW VALUE 3yrs – 5ys
Toyota Aurion 37%, 27%
Ford Falcon XR6 37%, 27%