On Depreciation

This is an issue that causes some conjecture out here. Personally, I’ve never been in a position to purchase a brand new car, though I’d love to. One of the big fear factors with doing so is the depreciation factor. Take a look at these figures below, and you’ll see why.

The interesting thing though, is that Saab is commonly perceived as having way worse depreciation than other Euro brands. I managed to catch hold of a site today that allows you to compare different types of vehicles and their depreciation after 1, 2, 3 and 4 years. It’s on the UK-based car site, WhatCar, and is available here. Obviously it’s going to reflect UK conditions, but I’d be willing to perform the same analysis if anyone can post a link to a US site of a similar nature.

Have a look at the following diagram. I’ve done the depreciation schedules for 3 roughly similar cars, all of German extraction:

Saab Depreciation 1.jpg

Now, as you can see, the argument against buying new is pretty much confirmed by this. You lose a fair chunk of the price you pay in just the first year’s depreciation before it levels out to a slower decline over the following years.

So where do you think a comparable Saab might fit in amongst these German behemoths? Say, a 9-3 Vector Sport for example? Saabs, remember, have this reputation for being huuuuuuuuuuuuge depreciators. Far more than their German counterparts.

Well, adjust your thinking, folks…..

Saab Depreciation copy.jpg

The 9-3 Vector Sport is remarkably similar to the other models examined. It’s still at the bottom of the group – the Saab retains 40.17% of it’s value after 4 years, the Audi 43.95%, the Bimmer 41.96% and the Merc 44.97% – but it’s nowhere near as far off as I thought it would be.

Compare it then with what some might see as it’s more natural competitor – a Volvo S60 2.0T Sport 4door. You might pay a little less up front for the Volvo, but it’ll lose a whopping 70% of its value over the first four years of its life:

Saab Volvo Depn.jpg

The deficit to the German marques gives Saab some room for improvement. Something to aim at. The benefit over Volvo, along with safety and design, gives them a definite marketing tool to use.

Go to it, lads!!

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I noticed the link to this depreciation schedule in this post at SaabCentral, where a similar analysis was performed. Kudos to SM Harmon for posting it.

4 thoughts on “On Depreciation

  1. Dear Swade,
    The one issue that you wont see mentioned in the depreciation mix is the value (or otherwise) of options. Whereas for their part Saabs ususally come with quite a good level of standard kit this is seldom the case for the German trio. Then if you don’t specify the right options their cars will be worth much less. My colleague who has a Merc E240 with additional bits and pices has a car which started off life at £4k more than mine and he is now being offered a very similar trade in at his dealer against a new one.
    That is why if I ever do find a car to replace my 9-5 with then it’ll have to come ready with most of the toys already on it!!!

  2. As far as depreciation in Hong Kong goes, for Saab’s its brutal. But it’s a small market – using my old zip code (Chicago, IL) in the US and Edmunds.com, here’s some quick insight into how Saab stacks (all over 5 years):

    Total Cash Price:
    2006 9-3 Aero: $36,751
    2006 Acura TSX: $30,091
    2006 Mercedes C Class: $40,568
    2006 Audi A4: $41,208
    2006 BMW 3 Series: $42,093

    True Cost to Own (TCO)/Cash Cost ratio (Higher is worse):

    True cost to own factors in depreciation, financing, insurance, taxes & fees, fuel, maintenance and repairs assuming 15k miles per annum.

    2006 9-3 Aero: 1.39
    2006 Acura TSX: 1.37
    2006 Mercedes C Class: 1.36
    2006 Audi A4: 1.3
    2006 BMW 3 Series: 1.24

    Depreciation expense as a % of TCO

    2006 9-3 Aero: 43.5%
    2006 Audi A4: 43.3%
    2006 BMW 3 Series: 41.3%
    2006 Mercedes C Class: 41.2%
    2006 Acura TSX: 35.5%

    Depreciation expense as a % of cash price:
    2006 9-3 Aero: 60.4%
    2006 Audi A4: 56.2%
    2006 Mercedes C Class: 56.0%
    2006 BMW 3 Series: 51.4%
    2006 Acura TSX: 48.8%

    The TSX is an something of an outlier, costing less then the other candidates by a good margin. That being said, the differences in depreciation seem large enough to notice – I think it adds some credibility to those who worry about Saab depreciation in the US. I would expect the numbers to be better if you took a New England zip code, though.

  3. I’ve been trying to locate used 03+93,95 TiDs in UK,SE,DE and the dealers website $$ don’t resemble the graphs at all. BTW can’t find any cars with sunroofs and why are all the German cars black?

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