Why Do Luxury Cars Depreciate So Quickly

Why Do Luxury Cars Depreciate So Quickly
Why Do Luxury Cars Depreciate So Quickly

When buying a car, you would want to buy one with the best resale value, but this isn’t always the case because most cars depreciate based on their market value. Shipping for a car is a serious business, and we have written a lot of buying guides that would help you through the car-buying process. 

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It is a universal truth that most new luxury cars lose value as soon as they are driven away. Some, however, fare better than others in terms of value retention. What might account for this discrepancy? We examine some of the elements in depth in this blog 

Popular brands like Honda, Toyota, and Hyundai are recognized as offering a significantly higher value in the used automobile market since their models are linked with trust, dependability, and confidence.

Many people who are smitten with Toyota make the lighthearted claim that their vehicles outlive their owners. An automobile will be more valuable, and potential buyers may be more willing to pay more when such a reputation is perceived.

Mercedes-Benz GLE500
These 3 Luxury Cars Have The Worst Depreciation Rate

A conspicuous observation is that well-maintained or well-looked-after cars will certainly fetch a higher resale value compared to those that have started showing serious signs of ageing. Some cars that are built better and engineered with finesse are likely to serve with more allegiance irrespective of the abuse thronged at them and will disparage at a rather meagre rate too. However, it would be advisable to keep the car in scintillating condition by getting it serviced when required and following the owner’s manual with diligence.

Factors That Affect A Car’s Resale Value 

  • Vehicle alterations

When it comes to updating your automobile, there are several things to consider. Automobile enthusiasts yearn for vehicles that are an enthusiast’s delight and will go above and beyond to spice up their vehicles with sporty stickers and vinyl, louder speakers, ECU changes, and other modifications.

Even though such enhancements raise the car’s potential, purchasing them from any aftermarket shop can drastically decrease the car’s worth. Furthermore, not every buyer would be willing to part with his hard-earned cash for such an enhanced vehicle and could instead choose the original model. The value of the car will inevitably decline and become significantly less after a set period of time.

  • Car Aging

It goes without saying that, as long as you drive it, its value depreciates. This is mostly because, as we use it and rack up so many miles on the odometer, it would have lost some of its novelty. The make, model, and condition of the vehicle, among other factors, play a role in determining its value. A car with a better brand and a well-known model will nonetheless sell for a bit more than others.

Top 10 Vehicles With the Lowest Depreciation – iSeeCars Study
RankModelAverage 5-Year Depreciation$ Difference
1Jeep Wrangler Unlimited30.9%$12,168
2Toyota Tacoma32.4%$10,496
3Jeep Wrangler32.8%$10,824
4Porsche 91136.0%$56,133
5Toyota Tundra37.0%$17,020
6Toyota 4Runner38.5%$16,325
7Subaru WRX39.8%$14,192
8Dodge Challenger40.6%$16,303
9GMC Canyon41.2%$16,115
10Nissan Frontier43.5%$12,823
Average for All Vehicles49.1%

Why do luxury cars depreciate so quickly?

  •  High Cost 

Why do premium cars lose value so quickly? One important aspect is that luxury vehicles frequently cost more than their non-luxury counterparts, which results in a higher initial cost and significant depreciation. Additionally, luxury cars are typically leased rather than bought outright, which means that the car is returned to the buyer after a certain number of years and is then sold to another customer as a used car. The value of the car may decrease quickly as a result of this cycle of usage and resale. 

  • Technology 

Luxury vehicles with cutting-edge technology and features can also rapidly go out of style. A luxury vehicle from a few years ago might be equipped with the most recent infotainment system, but newer models might have even more cutting-edge gadgets. That can decrease the value and desirability of the older vehicle. Luxury cars also frequently have features that are exclusive to that brand or model, which might lessen their appeal when equivalent features are made public on more recent models.

  • Does competition frequency matter?

The frequent competition in the luxury car market is another factor contributing to the rapid depreciation of luxury vehicles. There are numerous luxury car brands and models available, and new ones are frequently introduced. It implies that consumers have a variety of options when it comes to buying a luxury car, and newer models with more cutting-edge features and technology could be more alluring than older versions. That might result in a situation where buyers are more likely to select newer versions, which would accelerate the depreciation of earlier models.

  • Maintenance 

Another factor that contributes to the value of premium cars depreciating more quickly is the cost of maintenance and repairs. Intricate systems and components are typically found in luxury cars compared to non-luxury cars, which can raise the cost of upkeep and repairs. Luxury car owners are frequently seen as pickier and more demanding than non-luxury car owners, which may make them more likely to replace their old vehicles with the newest ones. That might potentially hasten the downfall of the market for luxury vehicles.

The highest rate of depreciation is experienced by luxury vehicles over their lifespan, and the amount of value loss can have you second-guess your purchase. The value will depreciate faster after you leave the showroom if the car is more expensive and has more customization options. This illustrates why secondhand luxury cars are preferable because you can purchase them for a small sum and won’t object to their negative connotation.

Written by Carmart Team

Carmart Nigeria allows you to sell your car for the best price from the comfort of your home. Rather than hearing bad offers from dealers or adding a banner of "FOR SALE", let carmart Nigeria do all the heavy lifting for you, Upload the details of the car and get the best offer from interested buyers.

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