– by Al Duncan –
I get to test a lot of different cars every month and I am also privilege to all sorts of analytics in the wholesale car world.
The numbers are often surprising. A $100,000 car that isn’t part of a limited production run can often be had for half its original purchase price after a mere four years on the street. This sort of high dollar hit can spell bonanza for those looking to get into a lot of car for a modest bit of change. The typical scenario is 20 to 24% depreciation in the first year alone (taxes excluded; you are never getting that cash back). A substantial 20% of the remaining value the second year and 16 to 18% the third year. We can see a trend here. The depreciation curve is very steep at the beginning and then slowly levels off to approximately eight to 10% a year until the car is really not even worth the sum total of its parts and a high school kid is now driving it around with giant speakers mounted in the trunk.
So why would anyone ever consider actually spending their hard earned cash on a new car only to lose a large part of their “investment” (I use the term loosely) in the first year alone? I have heard it all, from “I didn’t want a car that was abused by someone else” to “I didn’t want a car that someone else had sat in.” OK then, spend away.
Here is a great example. So you want a big fancy sedan with all the bells and whistles, but you don’t want to spend a ton of dough and you don’t want a car that looks dated. Enter the Mercedes Benz S class, the big gun in Mercedes’ line-up, built to exacting standards and sashaying off the showroom floor new for upwards of 100K. The new generation was just introduced for 2014 and the last generation was produced between 2007 and 2013. Let’s buy a 2008, for good measure, so we’re sure that all the bugs were worked out after the first year in production. Now, it’s important to note that our 2008 will be out of factory warranty by now so we will want to “invest” in a warranty of some sort to protect ourselves from the failure of hi-tech electronics and expensive components. Warranties can be bought after the fact from just about any licensed motor dealer and are as good as a factory warranty is. So we hunt around and find a nice 2008 for $43,000 with low mileage. The S class is built so well that it most certainly will drive like new, look like new with a good detail and treat its new owner to 10 plus years of loyal service without a hiccup. And the best part is that you don’t have to spend that $100K plus to own it; someone else took the hit just for you. That was nice of them now, wasn’t it?
There are countless examples of great deals around; you just have to do a little homework.
