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Car value depreciation or "appreciation"?


Cigarbutt
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Recently had a talk with my two older ones about the declining value of cars, especially new ones.

Showed them the typical curves and talked about opportunity cost.

The goal, I proposed, is to look for appreciating assets. :)

 

But came across this:

https://www.cargurus.com/Cars/price-trends/Porsche-911-d404

 

The data is preliminary but significant nonetheless. For full effect, change the start date to March 1st, 2015 and update chart.

So, contrary to conventional wisdom, if you recently bought a Porsche 911 (2018 model), the value of your car is appreciating!

Not a car type but did not find a model-specific reason for this (unusual model, temporary demand/supply factors etc).

 

Maybe, this is another area where animal spirits are in action.

Or is it one of those unintended consequences that may appear during the transition to electric vehicles?

 

For those with a more than average interest in the Porsche 911, you may appreciate the following:

http://flatsixes.com/porsche-culture/resources/watercooled-911-depreciation/

 

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Ferrari is where the real compounders are to be found.

 

Ferrari's and certain other luxury products are not representative of the general pricing behaviour for cars though, so your talk about cars being declining assets is still relevant from a personal finance perspective.

 

And no, it has absolutely nothing to do with a supposed transition to electric vehicles, it has to do with supply and demand for scarce items.

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I've had two used cars appreciate on me.  One was my wife's old 98 toyota tacoma trd, manual transmission.  She tried to sell it years ago for $6500 and nobody bought it.  Today she still has it and it is worth about $9,000 unbelievably.  Scarcity of low mileage, small pickup trucks with manual transmissions made them more desirable as new trucks got huge and very expensive.

 

The second one was a 1956 Porsche 356A super coupe purchased for $19,000 in 2001.  I remember a Merrill Lynch broker telling me I was making a big mistake selling some General Electric stock to "buy a Porsche"...  so irresponsible they said.  Fired the broker, sold the GE.

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compounding,

The transition question was mostly tongue-in-cheek.

But "absolutely nothing" are strong words.

 

I would bet that how you viscerally react to the second video linked above (seconds 13 to 22) may have a strong inverse correlation with your inclination to buy an electric vehicle. I think that there will persist a fraction of the population who will continue to identify with their cars and the scarcity argument makes sense but my opinion is that cars are likely to become more viewed as simple utility vehicles over time.

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I'm a believer that switch to autonomous / electric cars will make certain mechanical cars appreciate. Not only that, companies like Porsche and Ferrari will still make mechanical cars, even to their purest forms (e.g., no power steering or stability control as long as within legal boundaries) in the future, and market these cars as ultimate luxury items. In fact, we are already seeing this in the used car market.

 

The same analog can be found in the watch making industry - the big come back of luxury mechanical watch markets after the adoption of quartz watches.

 

If you have rare sports cars with low mileage and meticulous maintenance record, I believe you will do very well over time. The problem is that you won't be able to enjoy them as much if you care about their appreciating value. :)

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I've had two used cars appreciate on me.  One was my wife's old 98 toyota tacoma trd, manual transmission.  She tried to sell it years ago for $6500 and nobody bought it.  Today she still has it and it is worth about $9,000 unbelievably.  Scarcity of low mileage, small pickup trucks with manual transmissions made them more desirable as new trucks got huge and very expensive.

 

The supply and demand mismatch on Tacomas is insane. I have 2005 Tacoma Pre-Runner, stick shift, 83K miles. I bought it used for ~16K in 2010. I thought it was expensive back then and was upset the Toyota dealership would not negotiate with me on price. I could sell it for 13K-15K in my area now if I wanted to. If I paid for a high end detail job I could probably sell it for what I paid.

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Collector Cars have had quite the run since 2008, Ferrari especially.

 

https://www.hagerty.com/apps/valuationtools/market-trends/collector-indexes/Ferrari

 

In terms of declining car values, the amount of cars coming off-lease this year has already started to impact car values. 2016 Altima's and Cruze's are coming off lease for less than half MSRP already. Wranglers are 75% which is surprising.

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2016 Altima's and Cruze's are coming off lease for less than half MSRP already. Wranglers are 75% which is surprising.

 

I know you could research this pretty easily for any particular model just by looking at local prices for used cars, but is there a public data source that tracks and aggregates this data for all models in one place? 

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2016 Altima's and Cruze's are coming off lease for less than half MSRP already. Wranglers are 75% which is surprising.

 

I know you could research this pretty easily for any particular model just by looking at local prices for used cars, but is there a public data source that tracks and aggregates this data for all models in one place?

 

Lots of people often refer to Kelly's Blue Book as a good source.  But that is not what my family uses.  They use NADA Black Books.  The 2 brands may be related but I think the Blue Book (and its online presence) is more of a retail channel and the black book is more of the exec channel.

 

From family conversations they use one book when negotiating trade-ins (black book - wholesale) and the blue book when showing what the average guy is paying.

My BIL is a wholesaler who takes calls all day when dealers are trying to move inventory and he said business has materially slowed starting in October and continued.  He doesn't deal in exotics and moves a lot of trucks and regular sedans.

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I bought a 996 (2003) turbo on the basis of it hitting the bottom of the depreciation curve in 2014, with some pricing upsides. It has since then flattened out but I spent on average 2-3k/year on maintenance/expensive one-off parts failing. But it is definitely fun though and rates were low (1.75%). I may refinance the car again now that it is mostly paid off.

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I bought a 996 (2003) turbo on the basis of it hitting the bottom of the depreciation curve in 2014, with some pricing upsides. It has since then flattened out but I spent on average 2-3k/year on maintenance/expensive one-off parts failing. But it is definitely fun though and rates were low (1.75%). I may refinance the car again now that it is mostly paid off.

 

This is what I did back in October. Purchased a 2003 996 with 50k miles - 6-speed manual transmission. While I don't expect appreciation, because I'm driving it as my primary, the expectation is that since it IS at the bottom of it's depreciation curve that I'll be able to sell it in 3-5 years for roughly 80% of what I paid for it with the reduction in value coming from the miles I'm putting on it (modest). It may turn out that buying the 15 year-old Porsche was cheaper than buying a nearly-new middle-of-the-line car. It remains to be seen.

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