Depreciation…what depreciation?

[XCeed]

Sorry if this has been discussed before (I’ve been away awhile!) but I cannot believe the incredible trade in prices for second hand cars at the moment.
Two-and-a-half years ago, I bought my XC40 Momentum for £30,400. Last month, I traded it in for an XC40 Recharge - and the price I got was £29,400.
Depreciation of £1,000 in that period was indeed a shock - of a good kind! That car went on the dealer’s forecourt at £35,500 - £5,100 more than 30 months ago and has already been sold on!
Buoyed by my success, I decided to inquire about trading in my three year old V60 Momentum, which needed a wing respray. My dealer first offered me £22,000, the second dealer (different car brand) offered £23,000, and another Volvo dealer offered £23,750 (not even requiring a trade-in).
In a lifetime of trading in cars (and usually being seriously ripped off!), I have never known such favourable pricing for trading up. Guess the shortage of new cars at the moment is the reason - but I am not complaining!!

[Whippy]

I know someone with a beemer (yes I know) who's had it on that there PCP over three years and after his lump payment the cars value is 10k more. £10k profit on a s/h car. Insane times.

[Jas16]

This is a funny time at the moment with lack of supply and ULEZ forcing some people to change cars as well.

I agree that I cannot believe some of the car values on the second hand market.

I can see this staying until the semiconductor chip shortage is not resolved as well as the cost of global supply chains

[Baxlin]

Because of such tales, a couple of weeks ago, purely out of interest, I got a WBAC.com valuation on my 18-reg Octavia (initial and unseen, of course), which was £1800 more than I paid for it in March.

On Saturday I received an email from them to say the valuation had increased...

(Still not selling though, as whatever I bought would have gone up also, unless I went for bangernomics for a while, until prices stabilised)

[Forg]

We bought my better-half's car new in 2014 for AU$55k, and could easily sell it now for AU$50k ... that's more than a bit ridiculous!

I've upped the insurance on the 242 as well. It's been comprehensively insured since I first got it registered, but I've never been able to insure it for near what it would cost to build again ... same conversation every year with various insurers, technically speaking you are only insured for the current value of the thing you are insuring, which is different to being insured such that you can replace the thing you are insuring. And despite all the queries & being shot-down every year or two, earlier this year I had it bumped to AU$30k from AU$12k without any problem at all (and only about a 2% increase in premiums).

This situation with very low depreciation has occurred in Straya before, although maybe only in certain market segments. My first real job outta Uni was working for a price guide, I was looking into algorithms to predict residual values based on past resale performance so was looking through the history of vehicle values. Due to high inflation & ramping-up of demand, there was a period from the mid 80's through to the early 90's where if you bought a Landcruiser new you'd have been able to trade it back for ~120% what you paid. Mind you new prices were going up pretty quickly too, so you were still forking out a fair bit for the new replacement!
Additionally used prices were VERY different from place to place. If I'd wanted to take the gamble I could've made a VERY good living in the mid 90's buying a Landcruiser at the Tuesday auction in Sydney, driving it to Far North Queensland, and flying back home on Friday to kick-off my long weekend before starting again the next Tuesday ... wholesale values on a 2yo diesel Landcruiser were something like AU$30k higher (around £15k then) at the time, so after airfares & overnight accommodation you could still have been earning around £150k in mid-90's currency ... you could buy a decent house in a convenient area of Sydney at the time for that!

Hmmm, I do wonder though, how are discounts going on new cars at the moment? I assume they don't exist, and the standard of negotiating at least 10% off the new price is currently not a Thing? So the new vehicle is costing effectively ~10% more than it's recommended retail price would indicate.

[Wagon Sailor]

Of course, if you buy your cars at the bottom of their curves, there's no depreciation at all.

[Forg]

Originally Posted by Wagon Sailor

Of course, if you buy your cars at the bottom of their curves, there's no depreciation at all.

But then you have to weigh everything else against the depreciation cost ... repair cost, reliability & the effect on availability, your own comfort & that of other occupants, possible extra fuel costs, safety of occupants (which I think we tend to prioritise higher when that's "other people" - eg. I was happy to drive around in a 240 when it was just me, but when the "family car" was for my wife I was very happy to have her in something 20 years newer & happier again to put her in something 35 years newer).

[john.wigley]

Originally Posted by Wagon Sailor

Of course, if you buy your cars at the bottom of their curves, there's no depreciation at all.

Mmm, those of us who run older Volvos have long been aware of that, 'W.S'.

While 'Forg' makes a very valid point, my own costs pale into insignificance compared with those of a friend who dropped £15k *(in depreciation alone)* on a three year old Solihull product over a further three year period. *(Her running costs were also much more than mine - she spent over £1000 on tyres alone!)*

I am more than content with the comfort, reliability and safety of my 21 year old V70, which I bought five years ago for £550!

Regards, John.

[XCeed]

Originally Posted by Wagon Sailor

Of course, if you buy your cars at the bottom of their curves, there's no depreciation at all.

We all know that, but that’s a different point. To get best advantage of the current situation you need to trade in for dealer/manufacturer stock because these list prices are fixed - for the time being (they’ll soon be going up!).
Because I was downsizing from my V60, I was always going to be quids in, but I couldn’t believe the ridiculously high trade in price, £1,000 dealer contribution, five years FREE servicing, five years warranty and 60+ mpg!
On the XC40 deal, I got first three services free too and a supposedly 100 mpg. In fact, since I did the deal on 21st August I haven’t put in a single gallon of petrol!
I feel as if all my Christmas’s have come at once!! And feeling a bit virtuous with two hybrids!!

[john.wigley]

Originally Posted by Baxlin

Because of such tales, a couple of weeks ago, purely out of interest, I got a WBAC.com valuation on my 18-reg Octavia (initial and unseen, of course), which was £1800 more than I paid for it in March.

On Saturday I received an email from them to say the valuation had increased...

(Still not selling though, as whatever I bought would have gone up also, unless I went for bangernomics for a while, until prices stabilised)

And therein lies the rub, 'Baxlin'. There appears to be no middle ground. The best buys - depreciation wise - would seem to be at the extremes of the market - high and low.

The difference, I think, lies in your last three words. The volatility in prices of sub-three year old cars will hopefully be just a short-term blip in the market, whereas (although I do not think of my V70 as one), 'bangernomics' is a proven strategy that, for us at least, has stood the test of time!

Regards, John.

P.S. Hope that you are still enjoying that three-wheeled motor-bike of yours! J.