April 09, 2013
Used cars depreciating less in 2013
Used cars have become the mainstay for motor dealers and a shortage of quality stock means that some models values have bucked the depreciative trend and have actually risen in value since the New Year. But before one starts to condemn the motor dealer for chancing their arms at charging more money for similar cars as the months roll on, a few caveats should be highlighted. Firstly, VRT rose in the previous budget, thus making many new cars dearer. This had the effect of rendering fresh used cars (one and two year old cars ie: 2011 and 2010) slightly more valuable. The logic behind this is as follows:
| Pre budget 2013 |
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| Post budget 2013 |
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However this only explains part of the story. It fails to explain why cars have lost such little money during the first quarter of this year compared to the same period last year. For this we need to consider the popularity of new cars. The market for the first quarter in 2013 is down 14% on 2012. With fewer new cars being sold there is inherently a shortage of supply of used cars being traded in to dealers. This means that stock is scarce and the economic principles of supply and demand come to the fore. Used cars are becoming increasingly popular even among those who can afford new cars but do not want the social stigmatism that can sometimes go with it during times of economic woe.
We have provided a breakdown of the average value drop/value increase per vehicle segment and some notes on particular points of interest. As you will see, the graphs are labelled “Year 2”, “Year 3” etc. The reason for this is so that we compare a car of similar ages rather than registration plate. These tables should clarify how to read the graphs.
| 20132012 | ||
|---|---|---|
| Year 2 | 2011 | 2010 |
| Year 3 | 2010 | 2009 |
| Year 4 | 2009 | 2008 |
| Year 5 | 2008 | 2007 |
| Year 6 | 2007 | 2006 |
Micro
car
segment:
In the micro car segment which features cars such as the Ford Ka, Kia Picanto and Toyota Aygo, two year old values (2011 cars) fell by an average of just €60 since the beginning of the year compared to €190 this time last year for 2010 registered cars. As well as that, the average four and five year old values in this category have remained largely unchanged from the beginning of the year. Owners who have bought a car in this class (commonly referred to as “credit union cars” in reference to the finance used to purchase them) since the start of the year will be pleased to learn that they have suffered very little if any depreciation so far this year.
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The
Supermini
segment:
The supermini segment has fast become one of the most hotly contested in the market. Customers are very well catered for in this area with recognisable models such as the Ford Fiesta, Opel Corsa, Toyota Yaris and the increasingly popular Kia Rio and Hyundai i20 to name a few. Furthermore, Superminis have grown in size from their diminutive beginnings and so they now represent a viable second car for a family at more affordable prices than the traditional five door hatch back. The most noteworthy statistic from this category is the average rise in value of the more popular models since January. Some individual model’s values have risen by as much as €200 since the start of the year.
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Standard
Hatch
segment:
This segment is one of the most interesting as the performance of the vehicles within it is somewhat erratic. Still, we can clearly see that this year, 3 year old cars (2010) have lost very little of their initial January value compared to last year. Four year old cars this year (2009) have increased in value since January primarily because they are at a competitive price point and generally attract a lower rate of motor tax. Six year old cars this year (2007 vs 2006 in 2012) show a drop and this is again explained by motor tax which is typically higher for these vehicles as they are liable for rates outlined by the old system which places emphasis on engine size instead of CO2. Shrewd buyers who aren’t afraid of paying a notional amount extra tax can pick themselves up a real bargain here.
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Family
Saloon
segment:
Unlike the previous categories of cars, family saloons have, on average, fallen or stablized since January. That said, the amounts they have fallen by are less than they were this time last year. One of the reasons for this is that because the initial starting price of these vehicles is inherently higher than the standard hatchback segment. Therefore, family saloons take a little longer to reach a more broadly attractive price point. Still, with falls of less than €150 since the beginning of this year compared to €350 this time last year, there are few buyers who have any cause for complaint.
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Compact Executive segment:
Two year old compact executives seem to be quite highly sought after in comparison to previous years. Values since January for 2011 registered vehicles like the BMW 3 Series, Audi A4 and Mercedes C Class have fallen by almost half the equivalent 2010 registered cars fell by last year (€220 in 2013 versus €420 in 2012). There is a shortage of quality used cars in this segment so some dealers have had to quench the demand by importing vehicles from the UK. Usually, this has the effect of hindering used residuals but such is the scarcity of stock that values remain strong.
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Executive segment:
Despite cars in this segment being less affordable than the compact executive models, the rate of depreciation since the beginning of this year is very similar to the cheaper alternatives. This highlights the strength of the used car market as a whole. Values, in this category, last year fell from January to April by as much as €700 which is twice as much as the drops being endured this year. The older executive cars are also highly performing with 2008 and 2007 values falling on average by just €160 and €100 respectively.
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Conclusion:
The research carried out by Vehicle Management System, for MyWheels.ie breaks from the negative reports of the underperforming new car market and highlights the intensely popular used car arena. In some vehicle segments, the rate of depreciation is significantly reduced on last years pace but there are some instances where nominal values have actually increased since the beginning of this year. Customers seeking to purchase a used vehicle this year are advised to be cognizant that motor dealers are actively seeking vehicles to be traded in. Any previous perception of this route being the most costly might not be totally accurate this time around. If you have bought a car so far this year, your exposure to depreciation has most likely been helped by the continuing scarcity of stock. Although the argument can be made that cars thus far in 2013 are generally more expensive on a like for like basis in comparison to this time last year, the high performance of these vehicles in the used car market means that the extra cost is protected and not immediately lost once the car leaves the forecourt. A similar report featuring SUVs will follow.
