Monday 10th January 2005

Depreciation story misses the point

Mercs depreciate less but discounts are smaller

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As anyone with a calculator will tell you, the highest cost of running a car is not servicing, petrol or even insurance but depreciation. Carmakers such as Mercedes Benz are keen to point out, as in a release this week, that "Mercedes-Benz cars depreciate less than competitors over a three year period, according to the experts at Which?".

The purple prose highlights Which?'s findings that "the CLK 200 Kompressor Elegance lost only 47 per cent of its value over a three-year period, the best performance of any car surveyed. Similarly, the C-Class C 180 Kompressor with sports package headed up the large cars sector with a retained value of 51 per cent, and the E 200 Kompressor Elegance was top performer among the luxury car segment with the same percentage."

What neither MB nor Which? point out, however, is that discounts are available on most cars -- and they're usually much bigger in percentage terms than those you're likely to get from the average Benz dealer. At most dealers you've got a lot of leverage if you haggle, since there are more cars than buyers. And a cursory examination of any car supermarket ad shows thousands being lopped off new car prices. So quoting retained value by comparing new car prices to those obtained second-hand gives a false impression.

Not that's going to stop Mercedes claiming victory, nor Which? in only providing half the story.

[wedgepilot]

So 'only' losing nearly half it's value in 3 years is a good thing!?

Precisely why I will never, ever buy a new car...

[spnracing]

???

I bought my new E class at a car supermarket and paid £27995, UK list price at the time for a car with leather was £33,500 - a 16% saving.

When we were buying the wife a new car we tried to get discounts at several dealers and managed the following;

Alfa main dealer - 5% off a 147
Alfa independent - 18.44% off a pre-registered 147
Renault - 9% off a Megane 1.9DCi
VW - 4% off a Golf TDi 130
VW Independent - 10.9% off a French import 130 TDi

We bought the pre-registered Alfa. Thus the Mercedes discount was just about as good as any of the other makes.

Discounts are available for any make of car if you look hard enough.

[Globulators]

>> lost only 47 per cent of its value

my god!
.. and they cost twice as much to start with
.. reliability not a strong point

... think I'll stick to the bottom of the depreciation curve!

[heebeegeetee]

spnracing said:

??? I bought my new E class at a car supermarket and paid £27995, UK list price at the time for a car with leather was £33,500 - a 16% saving. When we were buying the wife a new car we tried to get discounts at several dealers and managed the following; Alfa main dealer - 5% off a 147 Alfa independent - 18.44% off a pre-registered 147 Renault - 9% off a Megane 1.9DCi VW - 4% off a Golf TDi 130 VW Independent - 10.9% off a French import 130 TDi We bought the pre-registered Alfa. Thus the Mercedes discount was just about as good as any of the other makes. Discounts are available for any make of car if you look hard enough.

Hmm. I still think that when you come to sell you'll be much worse off than if you bought the Merc.

[toppstuff]

My flirtation with Mercedes proves otherwise.

Got an SLK320 when they were popular, but still took a bath on the thing when I sold it after 18 months. Depreciation was more than 25% in 1 year !

And it was also a heap of crap. But thats another story...

[ninjadave]

If you had bough a new Ginetta G4 3 years ago, with a few option for say £18,000, and you sold it tomorrow, you'd get about £15,000 - assuming it's still in v. good condition. That's less than 47%... Sure this would have beaten the Merc?

[jacko lah]

wedgepilot said:

So 'only' losing nearly half it's value in 3 years is a good thing!? Precisely why I will never, ever buy a new car...

The Last car I sold : Bought for £6.64 - I gave the owner a cheap bottle of scotch. Spent £120 on it in 8 months and sold it for £180.

The Last car I bought : Paid £40 for it, spent 300 quid on head gasket and radiator, have done 7000 miles in it and just had a offer of £325 for it. I turned it down and next week I am spending 250 quid on it (bit of bodywork). When It's done it'll be worth about £450 quid, but I'm not selling so its academic.

I'm now really into Charles Wares Concept of Durable Car Ownership, but fortunately have avoided Morris Minors instead I am applying the methodology to a 1985 Cavalier SRi. Saloon - Rare or wot ?

[jl34]

Depreciation is widely used by Which and Autocar and it's quite ridiculous to quote depreciation rates when a typical Panzerwagen will cost much more than the equivelant Ford/Vauxhall/Rover etc. thats the price of a badge but not value for money. When are these journo's going to wake up?. I would rather know how much a clutch , exhaust ,and major service costs instead.

[stooz]

wedgepilot said:

So 'only' losing nearly half it's value in 3 years is a good thing!? Precisely why I will never, ever buy a new car...

Ive always had an issue with this stat.
Ive bought 3 year old cars. they still devalue 50% in 3 years as well. But its 50% of what I paid for it, and looks rather tame against original RRP.

I may pay less for the car, but half of what I pay is still wiped out, whatever that figure.
and that includes audis and TVR's and shopping cars alike.

I have an old golf run around at the moment, 8 years old, £5000, dont expect to get £2500 in three years.

see what I mean?
If a car is £30,000 new, or you pay £30,000 for a second hand car, it will still be worth £15k in 3 years..

[twister]

stooz said:

If a car is £30,000 new, or you pay £30,000 for a second hand car, it will still be worth £15k in 3 years..

Assuming the rate of depreciation remains steady through the life of the car, as you suggest, then yeah, you're right. But you also need to consider what your 30K (or whatever) is actually buying you - if you can get more car for your money by buying second hand then you're still getting better value for money than buying new.