- Audi A6 (credit: hdnicewallpapers.com)

How does depreciation effect luxury cars?

After looking online at cars, I wondered why cutting-edge luxury cars of their time are so much cheaper today

6w ago
24.5K

I went on to craigslist recently, like I often do for fun. And after browsing through the cars on there, I became curious. There are so many cool cars that were considered to be cutting-edge, and they costed a lot of money back in their day. So, why then do cars that we so revolutionary and amazing back in their time cost so little compared to what they cost back in the day? The answer is simple, depreciation. But what causes depreciation in such good cars, and why does it seem to affect luxury cars over other ones.

Depreciation is a simple concept, it means that over time a car's value goes down, or depreciates. Not all cars depreciate, some cars go up in value, or appreciate. But generally speaking, cars tend to depreciate. And luxury cars seem to be hit harder by depreciation than other types of cars.

Take the 2003 Audi A6 Avant Quattro Wagon linked below, its MSRP at new was $35,850 - $47,950. Quite a larger number than $2,500 it is currently listed below. Of course, this does not take in the average price of the car, as this particular car may have some things in its history. So, after consulting Kelly Blue Book on the average price of this car, I found that it was normally priced between $1,680 - $4,107. The car I found fit within this price and would make sense at how it was priced.

So, I decided to be generous when calculating the depreciation of this car. I took the $35,850 for the MRSP price, and used the $2,500 as the average price. Keep in mind these are my own calculations, not the actual market specifications. After I performed some calculations, I found that the car depreciated $1,853 a year on average. But what does this number mean, and is it bad?

Well according to CarsDirect cars currently depreciate 40.1% over the span of 5 years. Chalking it up to things such as the 11% of depreciation in value as soon as the car leaves the factory and touches the road. Which causes the 15-25% of depreciation that is present in the first year that a car is around. Cars tend to depreciate about 15% a year after that. So, I went back to my calculator, and began looking at how much percentage-wise the Audi depreciated, and it was only a 6% decrease in value a year! Quite a good amount compared to the current average.

But this was still a contrast compared to some other luxury cars I found while looking online. For example, I found a 2012 Rolls Royce Ghost for sale, listed for $159,000. The original value of the car was $380,000. Quite a difference in the price of the car. So over 9 years, the Rolls has depreciated $221,000. This turns into an average of around $24,000 a year. This comes out to 6% of its value. Still a 6% decrease in a year, seemingly contradictory of what CarsDirect estimated the depreciation values at. Although this is still quite a steep depreciation for such an expensive car. And you would expect such a luxurious car to keep its value, especially if you paid $380,000 for it.

This depreciation obviously isn't as bad as the CarsDirect average says percentage-wise. But it does hit hard when you consider how much these cars cost to purchase as new. Take another example, a 2007 Maserati Quattroporte I found online for $12,775. Looking at the MSRP of this car, it cost $110,600 at new. This would lead to $6,988 depreciation a year. Quite a significant decrease. But percentage-wise it is 6% depreciation a year, just like the other cars.

Regardless of this, there is one strong conclusion that can be drawn. Luxury cars that are expensive do not seem to hold their value very strongly. And depending on who you ask, this is definitely something that should probably be considered when buying a car. So, all in all, depreciation doesn't happen at a higher rate to luxury cars, but seems to have a stronger effect.

Sources: Marketplace - 2003 Audi A6 · Avant Quattro Wagon 4D | Facebook and 2003 Audi A6 Values & Cars for Sale | Kelley Blue Book (kbb.com) and What Is the Average Car Depreciation Rate? - CarsDirect and Marketplace - 2012 Rolls-Royce Ghost | Facebook and 2012 Rolls-Royce Phantom Buyer's Guide: Reviews, Specs, Comparisons (motortrend.com) and Marketplace - 2007 Maserati Quattroporte · Executive GT DuoSelect Sedan 4D | Facebook

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Comments (26)

  • if you can't afford it new, you can't afford the maintenance, and should not buy it.

    if you can afford it new, you don't buy it second hand.

    at the end buying an old luxury car isn't good for anyone.

    but I still want a 30k€ Continental GT

      1 month ago
    • I’ve worked for several doctors who were “car guys” and they could definitely afford to buy new cars, but they almost never did. They bought used sporty and classic cars, and leased new cars. Leased. And that is why I think there are so many...

      Read more
        1 month ago
    • Ok I see your point with the fact they were leasing new luxury cars.

      For the maintenance thing they are "car guys" with money so they don't care.

      I couldn't buy my Z4 new and it costs me some significant money to maintain.

      Read more
        1 month ago
  • Depreciation is good for the subsequent owners however subsequent owners need to be acutely aware that running costs are aligned to the original value of the car.

      1 month ago
  • Very interesting. Yep, 6% of $100K is going to be a lot more than 6% of $25K. Depreciation is the reason I have bought CPO the last few times. Much better value.

      1 month ago
  • Initial price is what seems to make it worse. The drop in value each year seems huge, but it’s not.

    The main problem with buying nice cars is maintenance, these are not cheap to look after.

    £250 might get your average car serviced for the year, you might spend another £250 on tyres. Don’t think you’ll get away so lightly with a decent car.

    I’ve owned a few Audi’s and BMW’s and it can be rather pricey.

    Some luxury cars the fuel consumption can be horrendous too. I had a big 4x4 and I got 15mpg if I was lucky, usually 12mpg. My skyline got 24mpg ffs

      1 month ago
  • The depreciation of a car make & model can vary, depending on its history, location, and age. Some old luxury cars can appreciate quite significantly. Again, depending on history, age, and location.

      1 month ago
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