New cars don’t break down all that often, but in every other way their owners take a bath. Australian depreciation has traditionally been slow rather than fast, but that’s changed in the last few years: a glut of new cars and a sense of desperation by Australia’s besieged car manufacturers has seen cars dumped onto the market at bargain prices.
Even the vehicles that had virtually guaranteed reasonable resale value in the past have plummeted: a one year old Holden Commodore Omega is now worth around half of what the owner paid for it. Unpopular models do even worse. Ouch.
If you buy a new car you’ll lose between 10-50% in your first year. Whether or not you lose more or less depends on what type of car you own and how you dispose of it. Small cars often keep their value best during times of high fuel prices or economic uncertainty.
Market value is based on two important factors: perception and supply & demand. Vehicles that are seen as naff by the majority of vehicle buyers go for much less even though they may be reliable cars. Holden Commodores, Ford Falcons and Toyota Camrys lose big time for a different reason: they’re all fleet cars – sold new & cheap to a bulk purchaser and dumped, en masse, a few years later.
If you sell privately and buy privately, you’ll lose much less; car dealers generally give less for a trade-in and charge more for the car they sell you.
Depreciation varies from vehicle to vehicle and depends on market conditions, mileage and the like. It’s difficult to fix precisely; it’s important to understand that no ‘one size fits all’ formula will be accurate for every car.
If you really want to get taken for a ride, keep buying new, high-priced luxury cars from dealers, then keep trading them in again a year or so later for the latest model. You’ll be losing a big hunk of your vehicle’s value with each year, in addition to paying high interest and insurance costs.
The only people who’ll be impressed are the car salesmen. If you’d taken a bank loan (as opposed to more expensive hire purchase) and bought the same vehicles privately when they were one year old, you’d have probably saved a heap straight off and they would still look and feel like new cars.