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Depreciation: Foreign vs Domestic Vehicles

dardson1dardson1 Posts: 696
edited March 7 in General
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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Comments

  • jlawrence01jlawrence01 Posts: 1,828
    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.
  • steine13steine13 Posts: 2,409
    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
  • stickguystickguy Posts: 13,585
    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).

    2013 Acura RDX (wife's), 2007 Volvo S40 (when daughter lets me see it), 2000 Acura TL (formerly son's, now mine again), and new Jetta SE (son's first new car on his own dime!)

  • timadamstimadams Posts: 294
    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.
  • rroyce10rroyce10 Posts: 9,359
    .... ** 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.
  • 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?
  • dardson1dardson1 Posts: 696
    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.
  • dardson1dardson1 Posts: 696
    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.
  • steine13steine13 Posts: 2,409
    ...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
  • you are still comparing a Full Size SUV to a Midsize SUV. Compare a Chevrolet Trailblazer to a Honda Pilot. I bought my Trailblazer for about 29k in (early)sept '01, Retail price was 31k. Traded in nov '02 for 21k. yup, thats a 30% hit in a year. Now they are worth about (guessing) 17-18. that's almost a 40% depreciation in the 2 years. Pilot, say invoice at 29k, you will be hard pressed to find a 2 year old one for less than 20k I would imagine.

    Of course, let's not forget that the 3k rebate on the Trailblazer came out after I bought it. Purchased sept 10, 2001. Which would probably also fit in with your timing on both cars. 'If' I had bought at the right time, I 'may' have lost only 20%(6k) but the rebates weren't being seen, and I am not a fortune teller. On the other hand, I bought my '03 Accord in Nov '02, for 20k and was offered 17,5 on a trade-in after negotiating.... hmm. Try that with any domestic '03.

    As a real-life comparo... there are 2 '01 Sequoia LTD's in the sunday paper. 31k, 32k. '01 Expeditions in the paper(4) are from 20-23k all "loaded" in different arrays.... an '04 EB expedition is on CD.com for about 36k. a Sequoia '04 LTD, 42k. Both are 'base' models, can go up by adding leveling susp, etc. the Sequoia loses about 10k(25%) in 3 years, the Expedition, 14.5k(average 40%) in 3 years. Not even factoring in that cars seem to go up about $500.year.
  • dardson1dardson1 Posts: 696
    OK, I'll bite......In February of '02 I shopped a Sequioia SR5 vs a Tahoe LS. Never found an SR5 with an MSRP less than $39k. All (the Toyotas) were packed with Gulf States Toyota Distributor's (Texas and most Southern states East) low-value, high-dollar, add-ons such as etched glass, road-side assistance, protection pkg (ScotchGuard and exterior Poly-Coat), etc., etc., amounting to $3k
        While I admit I didn't pursue the Toyota more than two sessions, the car was in short supply and the best offer I could manage was $1500 under MSRP or something close to $37.5k. I ended up with a lightly equipped Tahoe LS that listed for $34k+ bought at invoice less the $2k rebate + a very nice 5% APR.......$28,000.
        The estimated trade values determined by Edmunds may or may not be accurate; however, their accuracy should be equally good or bad from vehicle to vehicle. If you use Edmunds to determine a trade value for both cars, a Tahoe equipped like my '02 = $21,800 and an '02 SR5 = $26,100. Had I bought the Toyota I should expect $32k+ to be as good as the Tahoe. Even if I subtract the $3k that Gulf States socks us Southerners with, I ought to expect $29.5k trade value. Tell me where I'm wrong.
  • on the "real world trade in values" thread, the Tahoe, as with a few others of the full size truck family are just as good if not better as Toyota. In terms of the minivans, compact truck, midsize SUV, car, etc.... I think that the foreign will most usually be your best bet.

    The whole 3k package is just wrong... IMO.. sounds like they cornered the market on that one... terrible.
  • jlawrence01jlawrence01 Posts: 1,828
    You may find one or two classes where the depreciation is less on a domestic vehicle vs. the major Japanese name plates (Honda, Toyota). But across the board, it is not the case.

    Personally, I prefer vehicles with rapid depreciation, especially when they are models that have a good reliability record. IMO, a 2000 Buick Century is tremendous value over a similar Honda Accord or Toyota Camry.
  • "Personally, I prefer vehicles with rapid depreciation"

    I assume you mean for you to buy used and not new?
  • jlawrence01jlawrence01 Posts: 1,828
    As I buy only used cars for personal consumption, I prefer cars that depreciate quickly but are reliable. There are a lot of those out there.
  • dardson1dardson1 Posts: 696
    My original point is that American makers (GM in particular) appear to inflate the prices on their vehicles so they can offer deep discounts and generous rebates. It gives the customer the impression he's getting a heck of deal, the bank the kind of ratio they need to make the loan, and the buyer enough cash in the form of a rebate to make the down payment. What an idea! The only loser in the win/win/win situation is the perceived depreciation tumble the American cars take (on paper).
        I agree the Japanese seem able to make vehicles that run a long time with fewer problems than anyone else. From personal experience, I never found that Mercedes, BMW, or Volvo was any more trouble-free than American makes.
        I'm just saying the creative financing practiced by American car makers distort the depreciation picture. In a perfect world it would be more accurate to compare average price paid instead of MSRP to resale x years down the road.
  • eharri3eharri3 Posts: 645
    Sometimes in this argument it really seems like people do compare apples to oranges. It's rather simplistic to take the value of two vehicles in the same segment with the same MSRP, one import, one domestic, and form an opinion on depriciation based their value after a few years without taking into account what they actually sell for new in certain market conditions. On alot of import vehicles you're lucky if you're not being charged MSRP plus an additional dealer markup. So the import may be worth more after 2 years but you also paid MSRP or more at the onset. So how far ahead are you really getting?

    On the other hand, many domestic vehicles with all the rebates and incentives sell for thousands below sticker and in some cases way below invoice cost. Perfect example... I bought my 04 Dodge Dakota Quad for 24K plus tax, tags, and title after 4800 dollars in discounts. The average asking price for 1-2 year old versions of the same model seemed to be in the neighborhood of 20-22K. If I looked back 3 years or more I could get into the high 19s. So I was only looking at at best a 3-4 thousand dollar discount to accept less of a warranty and 20 thousand miles of wear and tear. The first year depriciation hit is huge if you use MSRP in your calculations, but not so bad if you base it on what I actually paid.
  • landru2landru2 Posts: 638
    Were you planning on just walking in and paying the asking price for a used Dodge truck? If not, your analysis is just as flawed as the MSRP vs selling price argument.
  • eharri3eharri3 Posts: 645
    Which goes to show... the waters can be very muddied here because there are too many variables to make a definitive general statement about depriciation in domestics vs. imports. Are we talking below sticker, or above it on the new vehicles? Are we talking asking price or out the door on the used?
  • With all the talk about Toyota recalls, I thought it might be time to resurrect this discussion. Any change in the outlook for depreciation on domestic vs imported vehicles?

    Need help navigating? kirstie_h@edmunds.com - or send a private message by clicking on my name.

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