Quote:
Originally Posted by calgaryblood
Is this a good thing? So if you paid 50k you only sold it for about 33k? That's a $17,000 loss. That doesn't seem like a good numer in only 3.5 years.
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On a 50k car, $6000 in annual depreciation the first 3 years is excellent.
I have seen cars depreciate 60% in 2 years.
What a lot of people don't realize is that your value isn't dictated by retail, it is dictated by dealer cost.
Say you paid $30,000 for your 6000 SUX in 2012 and financed at 4.9% over 5 years which is $4000 in interest. Lets say dealer cost was $27,000. Your car starts depreciating at $27,000 the second you pull it off the lot. The interest isn't important yet.
Fast forward to 2015 the 6000 SUX is now in it's last model year before a major update. The manufacturer has a rebate of $5000, so the dealer cost is now, $22,000. Every new 6000 SUX is depreciating now from $22,000. Because a really savvy shopper could get this deal. Now, the manufacturer is also throwing in zero percent financing for 84 months. So you can now take $4000 dollars in borrowing costs out as well, because a private buyer will have to finance at 5%.
So now, you have $27,000 - $5000 rebate -$4000 in interest. Which puts you at $18,000. Your 2012 has 60,000 kms on it, so thats going to cost you about $2500/year. Well, your used 6000 SUX is now worth about $10500 to a dealer. Privately? Probably $14-15,000, if you can find a cash buyer. Because Joe buyer who walks into the dealer can feasibly buy the car for 22,000 at 0% over 84 months with a full warranty at $310/mth. Your $15,000 used model that needs brakes and tires anytime, and has an expiring warranty, is now $283/mth over 60 months, because the bank won't finance it longer because it is now 3 years old.
I don't know about you, but I'll pay the extra 27 bucks a month for now, and not have to worry about anything for the next 3 years.
I see this scenario every day, and people cannot grasp that used car values, are mainly dictated by what a dealer pays for a car, not the consumer. In very rare instances where supply is incredibly short, and demand is high, these rules do not apply. But if you are buying a run of the mill, soccer mom mobile, it is the reality of the situation.
I have seen countless internal studies that show that leasing, in almost every single case, is the least expensive long term car ownership option. However, I love people that finance long term, and tell me I am stupid for promoting leasing. Because it is far more profitable for us, when you use traditional financing. Even if, it is 0 percent.
Everyone assumes once they finish paying the loan, they never have to repair anything, or replace anything once they are done paying the loan. Once you hit around 120,000 kms, you will likely be paying a couple hundred a month, in upkeep and maintenance. And now your driving an outdated, tired, gravel rashed Camry covered in door dings with a raging case of shiny steering wheel and shifter syndrome, an airbag light that won't go away, 7 recalls and set of Rallye Master tires you bought at Walmart that were made in Koreikstan out of discarded tennis shoe rubber. For some people, this is OK I guess, but a lot of people take pride in what they drive as well.