Author Topic: New car depreciation statistics seem off  (Read 7147 times)

brian313313

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New car depreciation statistics seem off
« on: October 15, 2017, 01:00:50 PM »
I have just received an out-the-door quote for a 2018 4Runner Off-Road Premium for $42,223.26. I love the vehicle but would be more interested if I could save what the statistics say a used car should be worth. KBB has the 4Runner as a winner on the resale value, which at 3 years should still be 64.3% of its value. (Source: https://www.kbb.com/new-cars/best-resale-value-awards/best-resale-top-10-cars/)

I wish I could find a 2015 one out-the-door at $27,150. I checked EBay sold listings and the prices are averaging around this but that probably doesn't include tax or dealer fees. I didn't dig into the details, just took the average. They are also the more base models which are about 5-10k less new. There were no Trail editions to compare. I put the vehicle into kbb for private-party pricing and it's suggested at $33,000 standard equipment. There are not many options on this as it comes with everything.

I have checked a large number of vehicles and this is the typical case. So where do the statistics come from that say it's 48% average depreciation in the first 3 years? I see very little depreciation. Even at 5 years, this specific example is nowhere near the 64.3% depreciation yet, let alone the 54.5% the above mentioned web site quotes. (Trail edition was not available in 2013 but using the base model statistics as a comparison) Also, those cars probably cost less than the new one I'm being quoted today when they were initially sold so it's probably even less depreciation than that.

The only thing I could think of that explains the statistics are they're using trade-in values but that doesn't make sense either because when you look at the one-year trade-in it would be much more depreciation. Also, I quoted KBB but I'm reading Consumer Reports and their statistics are similar.

Also, if we can please keep this on-topic. I know there are a lot of people here who are passionate about buying vehicles as cheap as possible. I may end up buying something 10 years old. It's seems that depreciation has caught up by this time, which tells me that most depreciation is probably happening between the 5-10 year mark, (year-over-year percentage-wise). Because of model changes adding/dropping it's much harder to compare new against 10 years old so I'm not backing that up with numbers. Just my sampling on a few cars I can remember the approximate original price.

I appreciate if anyone can explain this to me or if there is a flaw in how I'm looking at this. The thing that bothers me is that nobody seems to be quoting the real statistics and I can't figure out why.



nemmm

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Re: New car depreciation statistics seem off
« Reply #1 on: October 15, 2017, 01:16:15 PM »
I had the same experience in car shopping recently-- in my Math, I was hoping for a minimum $1,000 off / 10,000 miles by buying used, which ended up not being true in most cases.  Looking at used corollas and mazda3/6s, often times models with 20-30K miles were selling for 1-2K under the price of a new models.

I do think things are a little bit skewed right now due to the hurricanes and the demand for used cars. I was told by a dealership that they had went to an auction to find used inventory, and there were more out of town buyers present than total cars for auction. I think that puts pressure on private car sales and drives that market higher as well. I do not have any hard evidence to support this though.

It is weird too, when I look at the "private party" value on my new mazda on kbb, it actually shows a higher than what I paid for a new one (not including taxes). Trade in is only about 2K under what I paid.
« Last Edit: October 15, 2017, 01:19:09 PM by rymmm »

FIRE47

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Re: New car depreciation statistics seem off
« Reply #2 on: October 15, 2017, 03:34:34 PM »
I think it has to do with Japanese specifically Toyota vehicles and trucks/4x4 vehicles.

They really don't depreciate that fast.

I had a truck that depreciated only about 15% over 5.5 years vs Fmv. Even at trade in I only took a 33% haircut 5.5 years and 60000 kms later. This vehicle wasn't even mentioned anywhere as having good resale. So I can only imagine something like a Toyota 4Runner.

I don't think the math has caught up with these new reliable long lasting vehicles.

boarder42

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Re: New car depreciation statistics seem off
« Reply #3 on: October 15, 2017, 03:37:37 PM »
I think you're asking this question on the wrong site as there is 0 reason to discuss buying a brand new SUV on these forums. Regardless of the way you approach it. Who gives a shit about new vehicle depreciation you shouldn't even be holding a quote for or considering one.

ShoulderThingThatGoesUp

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Re: New car depreciation statistics seem off
« Reply #4 on: October 15, 2017, 07:09:12 PM »
You can save even more by not buying a ridiculous inefficient clown mobile.

But, I've also noticed used car prices are higher now than they were a year ago when I bought my Ford C-Max Energi.

bugbaby

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Re: New car depreciation statistics seem off
« Reply #5 on: October 15, 2017, 07:28:22 PM »
I certainly overpaid for my 2014 outback last year, only 10% off vs new. Sucks, but it's what it is.

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brian313313

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Re: New car depreciation statistics seem off
« Reply #6 on: October 15, 2017, 08:24:50 PM »
I'm going to collect some data from Autotrader.com or Cars.com over the next year and see what the depreciation of each year is. Whichever data is easier to scrape. Or maybe even EBay cause I know that data is available. I'm guessing an average 8%/year depreciation is more like it. The prices online are not necessarily the final price, but the proportion is what I'm most interested in so it should be accurate enough. Then maybe I can do a write-up and sell it to Consumer Reports or something.

bacchi

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Re: New car depreciation statistics seem off
« Reply #7 on: October 15, 2017, 09:14:51 PM »
You can save even more by not buying a ridiculous inefficient clown mobile.

Exactly. $27k for a used SUV? Ridiculous.

Quote
But, I've also noticed used car prices are higher now than they were a year ago when I bought my Ford C-Max Energi.

Harvey and Irma are driving used car prices higher in the south and southeast.

use2betrix

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Re: New car depreciation statistics seem off
« Reply #8 on: October 15, 2017, 09:30:33 PM »
FYI - I bought a 2017 TRD Off Road in April for $39,500 OTD. Check out toyota-4runner.org in the 5th gen section and there’s a thread about what people are paying for their new 4runners.

Some people here are hell bent on FIRE ASAP but others don’t need to be in such a hurry. I’m 29 and my wife is 23 and we paid cash for the 4runner. I’ve also increased my net worth a lot this year despite only working 4 months.

We just spent two months traveling 8,000 miles in the 4runner. We did Black Hills, Badlands, Banff, Jasper, Yellowstone, Grand Tetons, about 1000 miles of the continental divide over to Ouray, then the Grand Canyon.

But yeah - apparently I should also put off travel and continue working 24/7 so I can FIRE sooner.. at my current rate I’ll likely still hit a million before I turn 40 no problem.

bacchi

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Re: New car depreciation statistics seem off
« Reply #9 on: October 15, 2017, 09:42:20 PM »
FYI - I bought a 2017 TRD Off Road in April for $39,500 OTD. Check out toyota-4runner.org in the 5th gen section and there’s a thread about what people are paying for their new 4runners.
<snip>
We just spent two months traveling 8,000 miles in the 4runner. We did Black Hills, Badlands, Banff, Jasper, Yellowstone, Grand Tetons, about 1000 miles of the continental divide over to Ouray, then the Grand Canyon.

Wuut? We did the same loop (and then some) with a used vehicle and saved over $25,000. Spending $40,000 for a car is the height of catheter-bedpan syndrome.

A car shouldn't be a signalling device.

use2betrix

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Re: New car depreciation statistics seem off
« Reply #10 on: October 15, 2017, 10:03:42 PM »
FYI - I bought a 2017 TRD Off Road in April for $39,500 OTD. Check out toyota-4runner.org in the 5th gen section and there’s a thread about what people are paying for their new 4runners.
<snip>
We just spent two months traveling 8,000 miles in the 4runner. We did Black Hills, Badlands, Banff, Jasper, Yellowstone, Grand Tetons, about 1000 miles of the continental divide over to Ouray, then the Grand Canyon.

Wuut? We did the same loop (and then some) with a used vehicle and saved over $25,000. Spending $40,000 for a car is the height of catheter-bedpan syndrome.

A car shouldn't be a signalling device.

No you didn’t. No way you could have done that.

bacchi

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Re: New car depreciation statistics seem off
« Reply #11 on: October 15, 2017, 10:13:41 PM »
FYI - I bought a 2017 TRD Off Road in April for $39,500 OTD. Check out toyota-4runner.org in the 5th gen section and there’s a thread about what people are paying for their new 4runners.
<snip>
We just spent two months traveling 8,000 miles in the 4runner. We did Black Hills, Badlands, Banff, Jasper, Yellowstone, Grand Tetons, about 1000 miles of the continental divide over to Ouray, then the Grand Canyon.

Wuut? We did the same loop (and then some) with a used vehicle and saved over $25,000. Spending $40,000 for a car is the height of catheter-bedpan syndrome.

A car shouldn't be a signalling device.

No you didn’t. No way you could have done that.

Well, yeah, we didn't/don't know your exact route so obviously we didn't drive the "same" roads and probably not in the same order. We did camp at all of the parks you visited, though, and also added in some others in Canada including Riding Mountain, which I highly recommend.

Indexer

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Re: New car depreciation statistics seem off
« Reply #12 on: October 15, 2017, 10:29:51 PM »
The difference likely comes down to retail VS trade in pricing.

If you bought a new Toyota 4runner today the KBB article is suggesting you could trade it in 3 years from now and get 64% of the value. When you go to buy a used one you are looking at clean retail pricing. There is always a difference between clean trade in and clean retail prices. You are also comparing a 2018 to a 2015 in 2017. The timing of the new car releases could be distorting the data. I think it would be more fitting to compare a new 2017 to a used 2014.

I used NADA's website to test this because it feels more user friendly than KBB. www.nada.com

New 2017 4Runner, limited 2WD, base price = $43,520. (based on my zip code)
2014 4Runner, clean trade in $30,025, clean retail= $33,250.

2014: Clean trade in= 68.99% of original base price. Clean retail = 76.4% of original base price.

I used the limited 2WD instead of the Offroad 4WD because the Offroad 4WD model didn't exist in 2014 or 2015. The limited 2WD allowed me to do an apples to apples comparison. 68.99% isn't the same as 64%, but it's closer than what you have experienced so far.
« Last Edit: October 15, 2017, 10:31:40 PM by Indexer »

brian313313

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Re: New car depreciation statistics seem off
« Reply #13 on: October 16, 2017, 05:56:47 AM »
The difference likely comes down to retail VS trade in pricing.

If you bought a new Toyota 4runner today the KBB article is suggesting you could trade it in 3 years from now and get 64% of the value. When you go to buy a used one you are looking at clean retail pricing. There is always a difference between clean trade in and clean retail prices. You are also comparing a 2018 to a 2015 in 2017. The timing of the new car releases could be distorting the data. I think it would be more fitting to compare a new 2017 to a used 2014.

I used NADA's website to test this because it feels more user friendly than KBB. www.nada.com

New 2017 4Runner, limited 2WD, base price = $43,520. (based on my zip code)
2014 4Runner, clean trade in $30,025, clean retail= $33,250.

2014: Clean trade in= 68.99% of original base price. Clean retail = 76.4% of original base price.

I used the limited 2WD instead of the Offroad 4WD because the Offroad 4WD model didn't exist in 2014 or 2015. The limited 2WD allowed me to do an apples to apples comparison. 68.99% isn't the same as 64%, but it's closer than what you have experienced so far.

I see where you're coming from. The way I see it though is that if I bought a new vehicle today and sold it in 3 years it would be a 2015. Also, the NADA value for new is higher than I've been quoted. Maybe I got a deal, but I doubt it since it was the first quote they gave. I don't plan on negotiating to get the lowest price since I'm not going to buy it.

If I track data for a year, I should catch every model at balanced periods. I won't be able to track everything because I don't have the drive space. I'm thinking maybe top 5 & bottom 5 models based on KBB. I'm learning R at the moment and this would be a good project for me. I know that the dealers use the NADA guides so that would be better than KBB.

...

We just spent two months traveling 8,000 miles in the 4runner. We did Black Hills, Badlands, Banff, Jasper, Yellowstone, Grand Tetons, about 1000 miles of the continental divide over to Ouray, then the Grand Canyon.

...
I just did a similar trip. I skipped the north parks Yellowstone & Grand Tetons because of the late season & snow was predicted. Went down through Utah parks in addition. It was great. I'd never been to that part of the country before. We took a Prius though to save on gas.

I'm also sort of with you on FIRE. I could retire now if I moved to a rural area & didn't do any travel for the rest of my life. I like my career though and don't really want to retire at the moment.

undercover

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Re: New car depreciation statistics seem off
« Reply #14 on: October 16, 2017, 07:26:53 AM »
Sure, certain brands/models hold their values better and the depreciation curve for a new one of these vehicles is less likely to be as steep for the first few years as the others, making buying new look more appealing, but that's not really the point. The point is that buying a new(ish) behemoth of a vehicle full of additional costs over something much more practical is a really poor financial choice.

Most people don't even spend 10% of their day inside a car so I don't understand how anyone on this planet could possibly justify such a poor choice. And for those that own such silly cars, the full capability of the car gets used probably 1% of the time if at all.

use2betrix

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Re: New car depreciation statistics seem off
« Reply #15 on: October 16, 2017, 07:57:25 AM »
The truck I sold to buy the 4runner depreciated 29% over 4 years. It was bought new, so the average depreciation was 7.5% a year, which isn’t bad (it also had 77k miles on it).

Toyota Tacoma’s, 4runners, Wranglers, and Diesel trucks hold their value way better than the majority of other vehicles.

During our trip, my wife and I camped every single night of the 8-9 weeks except for 3 nights we stayed with a friend during his wedding. We also cooked 90% of every single meal from scratch, on a grill. So not “cereal and sandwiches” - every morning was eggs/oatmeal or eggs/potatoes. Every lunch and dinner was some form of meat/carbs - thus - while we saved a ton on food and housing - we also needed to bring more things. We camped in areas where it didn’t drop below 80, and also areas where it snowed every day/night, so we had a lot of clothes for all weather/activities. Plus - I wasn’t going home before going back to work, so we had a tote of all my work stuff. My dogs 35lb dog food bags take up some room. They are $45, while an 18lb bag is $33, so having extra room for more food helps, same with enough clothes/food we aren’t doing laundry or grocery shopping every other day.

We could’ve probably done much of the route in a $15k dollar stationwagon with car too.

That being said - I don’t think there’s a single more fuel efficient vehicle that could’ve done the trails in Ouray we did. No car, or wagon would’ve had the ground clearance and drive to do them. Much of the continental divide couldn’t be done in a car/wagon either.

Last winter we did 3000 miles of Baja Mexico on a motorcycle. We hope to go back soon ( maybe this winter) in the 4runner. Most of those trails couldnt be done in a car/wagon either.

Also, there’s some comfort to be had when you’re on a non maintained, rarely traveled road, with no service, 75 miles in either way from the nearest town, and being in a more reliable vehicle.


Everything I posted aside, yes - I could’ve done it cheaper. Due to my work I do often spend far more time than most in a vehicle. I’ve also had older unreliable vehicles in the past that have cost me days of work (a day of work at some Jobs is 2 monthly payments if I were to finance) so there’s that issue as well.

Our other car is a 1999 Camry with 125k miles.

TheAnonOne

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Re: New car depreciation statistics seem off
« Reply #16 on: October 16, 2017, 09:19:10 AM »
Used car prices, RIGHT NOW, are at all time highs. This is a blip in time and will return shortly.

http://www.foxbusiness.com/markets/2017/09/07/sticker-shock-for-harvey-victims-used-car-prices-at-record-high.html


Back in 2011, they were also at a high because the "cash for clunkers" program crushed so many of them...

Laura33

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Re: New car depreciation statistics seem off
« Reply #17 on: October 16, 2017, 10:42:24 AM »
Used car prices, RIGHT NOW, are at all time highs. This is a blip in time and will return shortly.

http://www.foxbusiness.com/markets/2017/09/07/sticker-shock-for-harvey-victims-used-car-prices-at-record-high.html


Back in 2011, they were also at a high because the "cash for clunkers" program crushed so many of them...

This.

You also see seasonal blips, i.e., folks want AWD going into the fall; I got a significantly-better-than-kbb tradein on my convertible in May, right before the beginning of the summer season.

And then there are the longer-term economic trends.  E.g., low gas prices = greater demand for larger vehicles, and vice-versa.  OTOH, a tougher economy = fewer people buying/leasing new = huge manufacturer incentives for new + higher relative prices for used vehicles.  I'd think you'd get the best price on a used vehicle when we're maybe 3-4 years into an upswing, with the economy raring and new cars selling like hotcakes and no end in sight; after a few years of that, there should be a glut of newer trade-ins available as folks want shiny new. 

I think the issue recently has been that the bull market of the past however many years has not really trickled down to a large chunk of the population, so even though the market is raging, there are still a lot of people who don't feel flush and so who are really looking for used cars vs. new.  So add in some shortages, like the hurricanes, and the values of the available used cars are going to spike.

I don't know whether places like KBB and NADA can necessarily keep up with all of those kinds of changes.  You might have a better chance with Edmunds and their TMV (though, damn, I really really hate their revised website).

Also, those comparisons are never going to include tax/title/license or dealer fees.  Those are just extra taxes on people who need a new car every couple of years.

Bicycle_B

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Re: New car depreciation statistics seem off
« Reply #18 on: October 17, 2017, 05:54:06 PM »
Excellent comments by those pointing out one-off reasons that the depreciation OP has experienced has been lower than average.  Also, throughout the past 7 years, memory of fuel price spikes has been fading, which increases the relative value of larger vehicles.  Those memories can't fade much more.

The implication is that repeating that relatively pleasant experience is not very likely.  OP, if depreciation in the next 3 years is double what you think it's going to be, would you still feel comfortable making the purchase?

aceyou

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Re: New car depreciation statistics seem off
« Reply #19 on: October 17, 2017, 07:36:57 PM »
I have a hard time wrapping my head around a vehicle that expensive.  I cringed when I paid 5200 for my prius because I vowed I wouldn't spend over 5k till I was a millionaire, and I'm barely half a half million right now.  I'm definitely teetering on the edge of how money I should have wrapped up in a car IMO.

The thing that stands out to me is that depreciation statistics shouldn't be something that merits a thread in your particular case.  For anyone who isn't flat broke, a car should be bought with spare change in your back pocket.  So, if 43k is spare change for you, then what do you care about a few thousand difference in depreciation?  Just cut a check and forget about it.  If 43k is NOT spare change for you, then why are you even considering this vehicle?

I guess that's how I look at it.  Good luck!

boarder42

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Re: New car depreciation statistics seem off
« Reply #20 on: October 18, 2017, 11:17:09 AM »
and if AI takes off at an exponential curve like i think it will continue to, owning vehicles may become a thing of the past sooner than later.  Leaving a large market of used gas non ai cars that no one wants which creates the ultimate form of depreciation. 

aceyou

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Re: New car depreciation statistics seem off
« Reply #21 on: October 18, 2017, 12:20:24 PM »
and if AI takes off at an exponential curve like i think it will continue to, owning vehicles may become a thing of the past sooner than later.  Leaving a large market of used gas non ai cars that no one wants which creates the ultimate form of depreciation.

That's a good point too.  We don't have to be anywhere close to singularity for AI to make pretty much all cars on the road archaic.  In 10 years(and very possibly sooner), it's probably more likely than not that all new cars sold will be self driving at least enough to make current cars seem really shitty. 

And in 20 years(and very possibly sooner), it's probably more likely than not that most cars are electric and completely self driving.  In which case pretty much all other cars could be more or less told to get the F#@$ off the road:)

That's kinda why I bought the 10 year old prius.  I figure I'll have a pretty efficient car, and I can just hang onto it for long enough to see what new technology pops up, and then decide when it's time to make the jump to something really mind blowing.  5-10 years from now could be one of those rare times when it could be worth it to actually just buy a brand new car, because it'll be like a totally different product. 

boarder42

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Re: New car depreciation statistics seem off
« Reply #22 on: October 18, 2017, 02:02:31 PM »
and if AI takes off at an exponential curve like i think it will continue to, owning vehicles may become a thing of the past sooner than later.  Leaving a large market of used gas non ai cars that no one wants which creates the ultimate form of depreciation.

That's a good point too.  We don't have to be anywhere close to singularity for AI to make pretty much all cars on the road archaic.  In 10 years(and very possibly sooner), it's probably more likely than not that all new cars sold will be self driving at least enough to make current cars seem really shitty. 

And in 20 years(and very possibly sooner), it's probably more likely than not that most cars are electric and completely self driving.  In which case pretty much all other cars could be more or less told to get the F#@$ off the road:)

That's kinda why I bought the 10 year old prius.  I figure I'll have a pretty efficient car, and I can just hang onto it for long enough to see what new technology pops up, and then decide when it's time to make the jump to something really mind blowing.  5-10 years from now could be one of those rare times when it could be worth it to actually just buy a brand new car, because it'll be like a totally different product.

yes and if they are self driving you wont need to own one per adult like we do now.  take out the need to pay a driver and it becomes more economical for 3 people that live near and work basically together to carpool.  b/c if one has to leave early or work late they just pay for their own teslauber home which costs pennies compared to what it does now.  It completely changes the way we look at transportation in the poor public transit cities across the US. 

brian313313

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Re: New car depreciation statistics seem off
« Reply #23 on: October 19, 2017, 07:43:20 PM »
I see some good points about depreciation changing. I've been thinking about that since we've been in a rising economy for a while. Perhaps that is what accounts for the difference, although it's been quite a while I've noticed this. It started with Cash for Clunkers but I never noticed it going away.

My opinion is that AI will take off, but adoption will be slower because of the societal attachment that most Americans have for their cars. Could just be that I'm from Detroit though. I know this isn't the same everywhere. Especially in other countries. Also, they'll probably have retrofit kits for existing cars. Running out of oil (gas) is another matter. I guess I should be looking at a Tesla. :-)


Duke03

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Re: New car depreciation statistics seem off
« Reply #24 on: October 19, 2017, 09:59:23 PM »
Used car prices have been crazy high for awhile now.  As long as it's a nicely optioned unit that is low mileage and taken care of it will bring top dollar.  I've seen one year old used cars sell for more than they did new at auction.  It's nuts right now.

 

Wow, a phone plan for fifteen bucks!