I'm looking to buy and sell a few cars in the next few months and that plus a couple threads on here recently have gotten me thinking about depreciation curves.
Has anyone really looked at used car depreciation curves? Made some graphs? What does that curve look like? Are there plateaus? How different is it for enthusiast cars?
ShadowSix wrote: Has anyone really looked at used car depreciation curves? Made some graphs? What does that curve look like? Are there plateaus? How different is it for enthusiast cars?
Yes, Yes, Yes... at the bottom of the curve which typically happens about 15 years after sale. Enthusiast cars are an anomaly in that the curve goes back after bottoming out, but when and how fast and how high is hard to predict because the demand is subject to subjective demand. I have spreadsheets of this stuff going back years for cars that I'm a fan of.
In reply to nderwater:
Wow, so I can see what you're saying about enthusiast cars. Some, like say the Integra Type-R never really depreciate much at all, but others, like the early WRX STi depreciate normal, but then hit some sort of equilibrium and stay at a certain value for a while. And it's tough to impossible to predict that curve ahead of time.
Have you found much connection between the release of a redesign and depreciation? Does a car drop a lot of value when the new model comes out? What if a car is already a generation old and the new, new model comes out, does that have an effect?
One thing that got me interested in the subject is a '95 Ford Contour I had. I paid ~$6k in '99, and for a while it basically kept this value according the NADA, but then they cancelled the model for the 2001 model year and the private party value of the car went from ~$6k to ~$2.5k in about a year and a half. I never could figure out if it was just cancellation that did this or if there was some other factor.
Datsun1500 wrote: ......it's almost impossible to predict.
If I could I would have stocked up a warehouse of the lowest priced, last year TT Supra's, NSX's, last year RX7's, and totally stock 240SX's....
It's impossible to predict, but not impossible to graph. I've done it before to try and estimate a buying sweet spot. It works better on models that have a lot available on something like autotrader. Just doing something simple like pulling up single years at a time and plotting average cost will generally give you a good curve. You can see the aggressiveness of fall off and how it flattens out. What you're really interested in is the slope.
This won't give you a price for a particular year or option package, but it will show you that depreciation is most aggressive over the first four years and then slows for the next five and then goes pretty flat. Some cars reach that point faster, others longer. Some reach 5% of original purchase price (luxury cars) and some stay higher (low production sports cars). It's a fun way to spend an afternoon.
step 1 buy a 50k bmw sedan
step 2 go to top of tallest building in world
step 3 throw a rock, plot course
point A will be new car, top of building. point B will be 15 years out, on ground, equaling around $1,000. depreciation is the line between the two points.
In reply to patgizz: I was in for parts, a new 5 series with a few options was at $67k. In 15 years it will lose 90% of that - so around 15% per year. High production commuters are predictable with a few variables tossed in for condition. While not as linear, the special edition/low production stuff is somewhat predictable. I think folks here have pretty much picked it that e36 m3s are at the bottom of the curve, if not starting up. e46 m3s are still down. Boxsters are still dropping a bit, but people are starting to pick up interest with early cars - even some S models under 10k. Things like MGs (and miatas) keep fairly low values mostly because they made gazillion. Orphan cars might be a good target for an unusual curve with a good rebound - solstice, sky, GTOs come to mind.
Electric and plugin cars have their own set of problems caused by early-adopter owners, product improvement, battery life anxiety, and federal and state tax incentives that are only for new cars.
If the US and CA together give a buyer $10k off a $40k MSRP, you are looking at an apparent 25% hit before the normal "drive off the lot" hit.
The end result is $30-$40k cars selling in the teens two and three years later. The most popular cars hit the market in 2011 and sold on three year leases, so I think this and next year will be interesting times for EV depreciation.
True, and the tradition of BIG rebates across the domestic brands is where the partial-myth of terrible domestic car depreciation came about. The magazines publishing highest and lowest depreciation lists routinely ignore the huge rebates routinely packaged with US brand cars and trucks. At some point there becomes a self-fulfilling prophecy aspect to all that as well.
Some times prediction is possible--we knew the 993 would be the last of the air-cooled Porsches when it was still on sale. There were also some early indicators that the FD RX-7, NSX and Supra Twin-Turbo would not be continued at the end of their model run. Same thing for the Solstice, Sky, GTO & GXP when GM announced it was shedding divisions. In each case, observers could anticipate that values on these cars would only fall so far, then begin appreciating. But to anticipate how low, when, and by how much in advance is all guesswork.
This is a great discussion. Fox body Mustangs are a great example of cars that are on the uptrend. I bought my '92 GT in late 2002 for $3500, now it would be at least a $5-6k car. My '92 notch I bought for $2008 and sold for $4750 two years later (before you get excited, it was the only car I've ever made money on). 94-98 Mustangs are near the bottom of the curve, I expect the New Edge ('99-04) Mustangs will be dropping in value shortly. Early S197 cars (especially the '05s) are now nearing or are in the 10k range (especially for higher-mileage cars)
One thing to remember in all of this is the external market forces also play a significant role in a vehicle's value. Things like gas prices, Cash for Clunkers, etc. have had a significant impact on the prices of vehicles. For example, I couldn't give away my impeccably maintained 1998 Toyota Camry (4cyl) in 2006 at the height of the SUV craze. I see similar cars in awful condition selling for more than I sold mine for eight years ago. Had I kept the car over the past 8 years, I would have made money 
I've been watching BMWs for a while. E30s are already on the uptrend and I've seen non-M E36s are starting to bounce back up. E36 M3s seem to be close to bottoming-out, especially for the early, OBDI cars (1995). Early (non-M), E46s seem to be at the bottom of the curve, they're typically cheaper than the equivalent E36. Later E46s will soon be there, as well. People who own a BMW based on image don't want to be seen in one that's several generations old. That's a good thing for enthusiasts!
I'll second that about luxury cars. In 2007 I bought an '01 Allroad (original price 50K) for $8500.
Then a year later in 2008 on the advice of a British motoring show I had newly discovered I purchased a 2005 Phaeton (original price $73,000) for the princely sum of $24,500. In three years and 32K miles it had taken a 66% hit and cost me as much as a new Camry. When I sold it 2.5 years later I managed to find the right buyer and got payoff for it (20K)
Unpopular cars are the way to go if you want the most bang for your buck IMO.
Hard to predict, I typically lease because the value of the vehicles drops off, but I regret not buying my Kia Soul, I could have paid $9k 4 years ago it was a plus model with a manual which is rare and currently they are selling for $13k-$14k and dealerships sell them within seconds.
As a general rule, high end luxury cars seem to depreciate the fastest, and it makes sense - people who want a status symbol don't want anything but the current model, people who want basic transportation fear the maintenance costs.
Cars with an enthusiast following seem to depreciate a bit more slowly than average. It's kind of like how long people are willing to stand in line for the chance to own one.
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