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Sliding scale of depreciation

Discussion in 'Buy, Lease, Finance & Insurance' started by AlanD, Apr 20, 2010.

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    Since joining the BMW "family" about 6 months ago, I have been enjoying the discovery phase of this "relationship."
    I conduct daily cruises through fan sites and forums... and I comparison shop all the BMW models I would love to have.
    Along the way, I started to notice something that is both troubling and encouraging: the resale value of high-end BMW's
    drops precipitously... case in point, take a 2009 M5 fully loaded. Probable MSRP of 100k... now listed as a CPO on BMW NA
    with about 6,000 miles for 70k. The car was built 01/2009, that makes it 15 months old. The price drop is 30k off original MSRP.
    Divide 30 by 15... $2,000/month in depreciation.
    May I just say, Whew! and Holy S!
    I guess it's good for the 2nd buyer, but when does the depreciation level off?
    (also posted on Local "MotorCity... " site)
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    Depreciation rates are not a hard and fast rule.

    A lot of factors are involved. A depreciation rate has no influence over what a car SELLS for, only an average of what the car is WORTH on the open market. First of all, you can usually get more money from a car by selling it privately vs. trading it in or selling it to a dealer. Trade in value is usually the wholesale value plus a few hundred kicked in to entice you to trade the car. Highly variable and very negotiable.

    Mileage, condition, and for BMWs especially, service documentation. All of these play a big role.

    Different models and bodystyles depreciate at different rates. Convertibles traditionally do very well at holding their value relatively speaking, as do any limited edition or low volume production models (hint: any BMW M-car). In the USA, automatics and air conditioning are important value adders -- enough to decide the sale entirely in some cases. Ditto for power options like power windows and door locks, sunroofs, etc.

    Generally speaking, most cars start to level off depreciation-wise after 5 to 7 years. Mercedes has traditionally been the gold standard when it comes to depreciation, holding its value extremely well. Until recently, so was Toyota. Honda is still a very good value when it comes to holding its original worth. I should also point out that a few cars actually APPRECIATE as they get older (Ferrari, Rolls-Royce, Lamborghini, to name a few). I should also point out though, that those are typically very low production cars and very difficult to acquire new (waiting lists sometimes as long as two years), hence why they're worth so much.

    If you take good care of your car, stay up to date on your service documentation, and keep the car very clean and well maintained, your car can be the exception, rather than the rule, in the money-losing depreciation game.

    The old adage is true: A car is usually worth only what a buyer is willing to pay for it.

    If it makes you feel any better, if you're worried about depreciation, you can do a lot worse than BMW's. Kia is well known for losing 30 percent of its value not just in a year, but as soon as you drive it off the lot! These cars are sometimes worth almost nothing after 5 to 7 years of ownership.

    One more hint: I am not sure if you were alluding to this with your question, but unless you are dealing with an extremely old and very valuable model, BMW's are not a good choice for investment or speculative market options. Part of what makes a BMW a BMW is that its TRUE value is in the hearts and mind of its driver/owners. The collector car market is still a pretty hostile market when it comes to enjoying the vehicles vs. putting the car in a showroom or in a private collection, sometimes limiting enjoyment of these vehicles to 2,500 miles a year. Mileage limits tend to be very strict. There are examples of some extremely rare BMW M1 and 2002tii and 2002 turbo models selling for as much as $30,000. But again, those are exceptions, not the rule.
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    when all you can get for the car is the price of scrap metal, unless it becomes a classic in 30-40 years the value will just keep going down

    cwbiii guest

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    Hence one of the reasons I'm pondering picking up a B7 the next time I plan to buy... a few years old they go for about the same price as a 750. Issue is that there are relatively few of them available so I will have to travel far to actually sit behind the wheel before I buy. But the market for them used seems even smaller then their availability hence their quick depreciation. I'm hoping that they may actually be worth more than the 750 of similar age and mileage a few more years down the road... but if not well I'll just have to suffer with that 500 hp machine at my slightest command. I have no problem driving it until it is worn out unless it turns into a service nightmare. But I know this basic engine from 2 prior 7's I've owned and it is a sturdy beast. Whether it still is such when a supercharger and intercooler is strapped on is still my only real doubt. I tend to learn my lessons one at a time and often the hard way... so I will let providence show her hand when the time to upgrade my ride comes. If one is available that I am interested in and can get to reasonably to take a test drive then maybe I'll jump... otherwise I'll probably stich with what is known and relaible... another used vanilla 7.

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    Alpinas are low-volume collector cars.

    Expensive to acquire and maintain, since Alpina will not sell mechanical parts without proof of Alpina vehicle ownership.

    IF you can find one AND get a hold of one, it will more than likely hold its value better than a regular BMW, PROVIDING you hold onto all documentation and service records with the car. The car's low volume and exclusivity helps the car hold its value, as an AUTHENTIC, original, numbers matching, serialized B7 is not a plain vanilla 750. Alpina-produced automobiles are typically modified to be much higher horsepower versions of the cars they are based on. An Alpina B7 is not just a 750 with a bodykit and stripe job on it.

    But again, what ultimately governs what a car is worth is what the buyer will ultimately pay. There's so many different variables involved that there really are no hard and fast rules what a car is actually worth. The Kelly, NADA, and Edmunds books are only general guidelines.

    Your mileage will vary, as they say.
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    According to studies, most new cars depreciate 40-60% of MSRP in the first 4 years of ownership, then the curve tapers to more gradual depreciation to bottom out at 10-15% of their original price after 10 years, where they level out for the most part (depending on condition and maintenance). The savings after that is often because inflation has made the cost more reasonable. At the 20+ mark, you might get some fluctuation depending on how history views the car: desirable, classic, collectible, money pit, etc.

    In my case, both my cars (Pontiac Solstice GXP, Z4 M Coupe) have lost 46% of their respective MSRPs since 2007.

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