Car depreciation values

[griffenrider]

I've been really curious about how depreciation rates change with time, so I did a little data-gathering experiment: 10 years, my (and the lady's) past 3 cars (aka very small sample size). It looks like the value at of a car at year X is given pretty accurately by (price of car + scrap price) - [ 0.34 * (price of car + scrap price) * ln(x) ]. And scrap price seems to be approximately 1/10 * the mass of the car. Does anyone else find this interesting? Have numbers to compare?

[johnceggleston]

It looks like the value at of a car at year X is given pretty accurately by (price of car + scrap price) - [ 0.34 * (price of car + scrap price) * ln(x) ].

 

what is "ln(x)", i know x is the number of years.

[Fairtax4me]

Interesting observation. This may be true for some vehicles but it all depends on the market conditions where you live. Scrap value for American cars hasn't changed much over the past few years, but wholesale values have sure dropped like a rock. European cars on the other hand are a whole other story.

 

I've got a 2002 Lincoln LS with 75k on the ticker. Beautiful car, over 40K sticker when new, clean Carfax, but I'd be hard pressed to get $4,500 for it at auction right now. (auction prices generally determine trade values)

We have a 2000 Mercedes Benz C230 on the lot at work, with 76k on the odo, in similar shape to my Lincoln. Clean carfax, no accidents, was around $34k new. Other cars like it easily bring $6,000+ at auction.

Older car, same mileage (which does help but not as much as people think), lower original MSRP, still worth more money than my American car. The market determines depreciation, and it can change at any moment.

 

Eight months to a year ago a 2006 - 2007 Mercedes E350 in average shape with sellable mileage (between 30k and 60K) would sell at auction for between $19k and $24k. Now the same car is selling for 22k - 27k. An average of $3,000 more for older cars with slightly higher average mileage. Those cars have actually appreciated.

[griffenrider]

what is "ln(x)", i know x is the number of years.

 

ln is the natural log function. it outputs a value y such that e (the natural number) to the power y equals x.

[griffenrider]

interesting point fairtax, I haven't owned (or looked into buying) anything besides a subaru pretty much ever, so the comparison with other brands is interesting news. Do you have some numbers from subarus you could compare to that formula?

[Durania]

 

 

I had to break this out.

[Fairtax4me]

interesting point fairtax, I haven't owned (or looked into buying) anything besides a subaru pretty much ever, so the comparison with other brands is interesting news. Do you have some numbers from subarus you could compare to that formula?

 

I don't have any personal experience with Subaru values, but you can get an idea from KBB, NADA, or Edmunds of trade values, which pretty closely reflect auction prices.

Trade value in this area for a 2002 Legacy L sedan with 75,000 miles is between $3,500 and $5,000 depending on condition.

 

An American car to compare to. 2004 Chevy Malibu LT. 50,000 miles. Trade value is between $4000 - $6000.

[GeneralDisorder]

It's going to be brand/location specific such that you will have to match a curve to very small subsets of cars. And even then there are components of the data that can't be predicted. Say if Chrysler were to declare bankruptcy tomorrow - all the values of those vehicles would immediately plummet like a stone - people don't want to own a car that has no support for parts/service. Or if someone like Audi decides to pull out of the US market - same scenario.

 

Then there's random spikes that throw off all the other data - throw the Subaru Brat into the data points you are matching and you'll toss the whole curve out of balance. An '82 Brat might command $5,000 in good condition and lower mileage while an '82 GL wagon in similar condition is worth less than $1,000 - yet the Brat was probably cheaper when it was sold off the lot in '82...... data like that plain and simply can't be predicted - you come up with a forumla that tells car makers which cars will become a cult-classic and you will have some folks interested I'm sure.

 

It's an interesting excersize to plot out the data and match it to a curve, but it works for only very narrow subsets of cars and only for short spans of time. At some point the value will begin to rise again as the car reaches an age where there are very few remaining and it becomes "collectible", then an "antique", and finally a "museum peice".

 

GD

[Fairtax4me]

It's going to be brand/location specific such that you will have to match a curve to very small subsets of cars. And even then there are components of the data that can't be predicted. Say if Chrysler were to declare bankruptcy tomorrow - all the values of those vehicles would immediately plummet like a stone - people don't want to own a car that has no support for parts/service. Or if someone like Audi decides to pull out of the US market - same scenario.

 

Then there's random spikes that throw off all the other data - throw the Subaru Brat into the data points you are matching and you'll toss the whole curve out of balance. An '82 Brat might command $5,000 in good condition and lower mileage while an '82 GL wagon in similar condition is worth less than $1,000 - yet the Brat was probably cheaper when it was sold off the lot in '82...... data like that plain and simply can't be predicted - you come up with a forumla that tells car makers which cars will become a cult-classic and you will have some folks interested I'm sure.

 

It's an interesting excersize to plot out the data and match it to a curve, but it works for only very narrow subsets of cars and only for short spans of time. At some point the value will begin to rise again as the car reaches an age where there are very few remaining and it becomes "collectible", then an "antique", and finally a "museum peice".

 

GD

Agreed. Depreciation can only go so far. If the car is one of the rare breed that grows to collector status. Such as the 96 Chevy Impala, or 03-04 Mercury Marauder, appreciation will kick in for well kept low mileage cars. I've been waiting 3 years for a clean Marauder to drop into my price range. They've hardly budged. There are 03 models with under 30k miles still selling for upwards of $20k. I've seen 04s go for $25K. I'd say average retail value has dropped on those by about $5k over the last 3 years.