When people talk about cars, they describe them as an ‘investment’ but the word itself isn’t an appropriate description of most peoples’ car-buying habits. In order to be considered an investment, you would essentially have to buy cars that would sell later for a higher price, or a car that you could make money off of. While that sounds ideal for most people, the harsh reality is that a majority of cars on the market are far from an investment.
While car flippers and collectors can boast their ability to turn a profit buying and selling cars, the average consumer often finds themselves losing thousands of dollars in depreciation from the time they purchase their car to the time they sell it. Some people enjoy the new-car experience so much that they are okay with the fact that their car is going to be worth significantly less than what they purchased it for in the future.
Not all car brands are valued equally, however, and some car manufacturers are known to depreciate significantly faster or at a higher rate than others.
Why Cars Depreciate
Cars depreciate for a number of reasons, some more obvious than others. When you buy a car from a dealership, even if it is a dealership specifically for that brand, the dealership is selling the cars at a substantial markup. It may make sense that car companies and dealers wouldn’t be making any money if there wasn’t some markup on the cost, but when you can only buy brand new cars from their perspective dealers, they have almost total control over the market and can inflate prices to as much as they think people will pay.
Maintenance cost also factors into the value of a car and you will find that cars that have a lot of repairs high or frequent repair costs tend to depreciate faster than others. As you drive a car you add miles, and while that might not cross your mind on a daily basis, the car’s mileage represents how much wear the motor and body have experienced. As the mileage racks up on your odometer, the more you have to start thinking about general maintenance, such as oil changes, new tires and other needed check-ups, but it also the chances of needed major repair.
For cars like Nissan and Honda, parts are easy to find and the cars have less complicated systems, making them quicker and cheaper to work on. When you buy a car brand new, you don’t expect there to be any major downfalls. You are typically also covered under a year and mileage warranty that gives you some sense of comfort in knowing that if something goes wrong, it doesn’t have to be all out-of-pocket expenses. Buying a used car, however, typically means that the car is out of warranty and you have to rely on the previous owner to have treated the car well and stayed up-to-date on the maintenance schedule.
What Car Brands Depreciate The Most
In general, luxury cars and luxury sports cars are sold at a premium and their value decreases the second you drive the car off the dealership lot. They have the highest maintenance costs or have a bad reputation for being unreliable or constantly needing expensive repairs. For any combination, these are the car brands that depreciate faster than any others on the consumer market.
Just about any BMW is guaranteed to lose over half of its value in the first five years of owning the car. They are notoriously unreliable and even the more popular models like the 328i are known to have expensive or even catastrophic failures.
Audi is up next on our list, but that shouldn’t surprise you considering they are BMW’s direct competitor. Audi has fewer problems with reliability and more problems with exorbitant dealership markups. Within a few years, cars such as the Audi A7 can drop from a dealership cost of close to $90,000 to less than a brand new Toyota Camry.
Another luxury brand, Mercedes, is one brand even dealers admit you are better off leasing. Considering leasing means you lose almost all of the money you put into the car – just like renting an apartment – it says a lot that most drivers option to just leasing the car. That’s because, much like BMW and Audi, Mercedes-Benz deflates in value incredibly fast.
Companies like BMW, Audi, and Mercedes are the ‘cool kid’ trendsetters of the car world, always trying to improve their technology, power and driving experience. This is a big part of why you can buy used, already depreciated models and still get a lot of the technology and features that new lower-end cars are only starting to adopt. That means if you find yourself checking out an Audi or BMW as your next car purchase, a used option means you won’t have nearly as much depreciation.