Is resale value a myth?

Submitted: Thursday, Jul 01, 2004 at 21:54
ThreadID: 14301 Views:1866 Replies:11 FollowUps:16
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Consider this. People often purchase a far more expensive vehicle because it will "hold its value better". There is no doubt some makes have better resale than others. But at what cost?

Consider the medium sized 4 wd market.

A premium brand with the fruit will cost $60k, whilst a similarly equipped budget brand with the same level of fruit, will set you back $40k.

Assume premium will be worth 70% ($42k) after 4 years and budget just 50% ($20k) .

Leasing, and you have to finance it some way (over 4 years with 40%residual) will cost you $49,968 for the premium and the budget will set you back $33,312.

At the end of 4 years you have $16 equity in the premium and only $4k in the budget. However it has cost you $16,656 more to finance the premium. Net effect is that the budget has saved you $4656 over 4 years.

Then of course there are the various taxation issues, sure you can write off a portion of the extra leasing costs with the premium, but also have to pay a tax bill on it when you get $42k for something that only owes you $24k.

It's a complex issue, but paying extra for something that will be worth more later isn't as simple as it sounds. It also depends on personal circumstances, tax advantages, personal tax rates, business deductability if you're self employed et al.

And before some of you say I didn't need to finance it, cosider what that money could have yielded you in a decent investment portfolio, you'll find it would earn you more than you lost in finance costs.

Jim.
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Reply By: Member Eric - Thursday, Jul 01, 2004 at 22:07

Thursday, Jul 01, 2004 at 22:07
Simple rule in the car game . Forget stats forget graphs ect ..

The more you spend ,the more you loose

my experiense you ask , 15 years auto wholesaler
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Follow Up By: Member - Jiarna (SA) - Thursday, Jul 01, 2004 at 22:36

Thursday, Jul 01, 2004 at 22:36
I agree. Vehicles are not assets, they are liabilities. I'd be very reluctant to buy a new vehicle for that reason. Not that I can afford one anyway LOL.

Cheers
John
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Follow Up By: Michael - Friday, Jul 02, 2004 at 09:38

Friday, Jul 02, 2004 at 09:38
Eric, that is true. I know if you buy a Merc 600 now $350,000, in 4 years is value is less than half. Who wants a four year old vehicle thats expensive to service and maintain for $150,000 thats already the previous shape. A bloke with $150,000 to spend, would probably buy a new 545, extremely fast V8 BMW and look the part instead of looking like a faded millionaire in the old Benz... Michael
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Reply By: Member - Ken - Thursday, Jul 01, 2004 at 22:51

Thursday, Jul 01, 2004 at 22:51
Jim

There is not a vehicle thats been made that has not lost the original owner/purchaser a sh$t load of money.

There are a multitude of factors and variables of same that impact on the price obtained at the second sale of a new vehicle.

You can influence some of these factors such as condition of vehicle, current roadworthy cert. etc etc and some you can't like amount of Kms if leased, age if leased. etc etc.

So in essence I agree with Eric, forget the what ifs and stats, buy what you want/ need, use it, enjoy it and when it arrives at YOUR use by date, flog it off and move on to your next dream machine.

I tend to ignore the rtd for your $ where vehicles are concerned as I now accept that it doesn't matter what I buy, It's going to cost me money, not make me money.

Just a case of 'show biz' I am afraid.

Have a good one and check a new vehicle out on the weekend.

regards

Ken Robinson
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Follow Up By: Leroy - Friday, Jul 02, 2004 at 10:14

Friday, Jul 02, 2004 at 10:14
I tend to agree. I've bought a new vehicle and I will use it will get a few scratched and maybe the odd dent. I accept it costs you to have a vehicle and that's just the price you pay Also you loost money on the condition of the car. People are horrified that you take a new car to the bush and get a little damage etc. In the grand scheme of things I got the same tradin as if it had no little dents or scratches to I just use my car and don't worry about anything. No point in keeping it new for the next bloke only to 1 or 2k more over 3-4years of ownership. But don't get me wrong, it is well looked after and always serviced.

Leroy

Leroy
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Follow Up By: srowlandson - Friday, Jul 02, 2004 at 13:19

Friday, Jul 02, 2004 at 13:19
A classic exception to this rule.

The 80 Series Turbo Diesel (later model, 95-98)
When i was looking for a 80 in 2000, these models held their value well. Most were 30-60,000kms on the clock, and new these beasts were $71,000

Second hand, 68,000... not a bad price after 4-5 years.

These were also the car toyota employees were buying with their 21% off, selling them a year later and pocketing large sums of cash.

Toyota buys are currently buying Prado Grane and Corolla Sportivo, as these are the 2 models that are holding value and net a good return.

Steve
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Reply By: Truckster (Vic) - Friday, Jul 02, 2004 at 01:10

Friday, Jul 02, 2004 at 01:10
Ask the bloke on Overlander with the Lexus, if I remember correctly when he wanted to trade it in, they offered him less than 50% of value of the car within 4 yrs.
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Reply By: Wombat - Friday, Jul 02, 2004 at 01:13

Friday, Jul 02, 2004 at 01:13
It's luck of the draw Jimbo. I bought a one year old Mazda MX5 in 1991 for $21000 on a five year lease, couldn't sell it after five years (why would I want to) because its market value was $19500 and I would have incurred capital gains tax. I had to keep it for seven years but parted with it after ten and still miss it. Sorry can't keep typing my tears keep getting on the keyboard. . . . .
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Follow Up By: Voxson (Adelaide) - Friday, Jul 02, 2004 at 07:53

Friday, Jul 02, 2004 at 07:53
Why would you have to pay CGT??... You would have lost $1500......
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Follow Up By: gonebush - Friday, Jul 02, 2004 at 09:38

Friday, Jul 02, 2004 at 09:38
Because the car would have been depreciated each year and claimed on tax. At the end of 5 years, at a depreciation rate of 22.5%, the car would be valued at ~ $5870. If it were sold for $19,500 then there is a CGT liability for the difference i.e. $13,630.
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Follow Up By: Voxson (Adelaide) - Saturday, Jul 03, 2004 at 19:24

Saturday, Jul 03, 2004 at 19:24
Ar Hah.... Very good...
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Reply By: pelbo - Friday, Jul 02, 2004 at 08:29

Friday, Jul 02, 2004 at 08:29
Two years ago I decided to trade in my Holden Statesman for a 4WD (life-style change). It was the supercharged V6 model. I had purchased the Holden new 5 years previously for $50,000. At trade-in time, it was still like new and had only done 57,000k's.

Holden offered me $9,000 for the vehicle.

I walked out in disgust. The saleman tried to call me back, saying the trade value for the Jackaroo would be great when it came time to sell. I wont repeat here what I told him.

I will NEVER buy another Holden product again. Neither will anyone in my familly.

I call it legalised theft.

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Reply By: steve - Friday, Jul 02, 2004 at 08:55

Friday, Jul 02, 2004 at 08:55
Many people, myself included, consider quality above most other features with any purchase. If by your calculations a GXL Prado costs $1000 p.a. more to own than a Hyundai or Mazda etc, then I'm happy with that. Money well spent I reckon.

Steve.
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Follow Up By: Jimbo - Friday, Jul 02, 2004 at 21:06

Friday, Jul 02, 2004 at 21:06
Mazda don't build a quality car?

And Hyundai's quality is so scheissenhausen they back it with a five year warranty?

You've been duped by marketing hype. No offence but Toyota are just another Asian car maker (apologies to Honda who actually compete with the Germans).

The good European manufacturers produce a quality product, but again the price doesn't justify the marginal increase in quality. The Koreans are doing what the Japs did 35 years ago. They are putting up a quality product at a fraction of the price of the competition. Who can remember the Datsun 1600 launched in about 1968. People are still rallying them because you couln't kill them with a sledge hammer, but in 68 they were considered "Jap Crap".

There is nothing wrong with the Korean product; it is simply produced with cheap labour as the Japanese did years ago. That's why they are so cheap.

Don't get me started on cheap labour and exploitation, it's a crime and that's why I support unionism; without it kids would still be dying, stuck up chimineys.

Jim.
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Follow Up By: steve - Friday, Jul 02, 2004 at 21:35

Friday, Jul 02, 2004 at 21:35
Do you work for hyundai? Your telling everyone that if you put a Terracan and a Prado side by side the only difference is the price tag? Dont think too many people would agree with that.

Steve.
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Follow Up By: Jimbo - Friday, Jul 02, 2004 at 21:58

Friday, Jul 02, 2004 at 21:58
Steve,

Silly insults are not necessary and do you no credit.

Enjoy your Toyota as much as Greg Norman and John Laws are enjoying the money they got for telling you to buy it.

No, I work for an Australian company that has nothing to do with the car industry.

How foolish of you to suggest I work for Hyundai when I clearly (see above) admonish their exploitation of cheap labour.

God Luck,

Jim.
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Follow Up By: steve - Monday, Jul 05, 2004 at 13:42

Monday, Jul 05, 2004 at 13:42
I've figured it out now. You dont work for Hyundai, you own one (see overlander forum). Nothing wrong with that. Was not trying to be smart, and yes I agree, the big makers spend a hell of a lot on advertising to try and keep their market share. No doubt you get more for your money, but possibly not your moneys worth, just depends on how much you are willing to spend/lose. To each their own.

Steve.
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Reply By: Nudenut - Friday, Jul 02, 2004 at 14:03

Friday, Jul 02, 2004 at 14:03
aaahhhh its all too hard...maybe we should just go back to riding push bikes and horses
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Reply By: jackablue - Friday, Jul 02, 2004 at 14:09

Friday, Jul 02, 2004 at 14:09
I agree with Leroy. I always had cars & kept them in top condition seat covers etc. only to find that all I have done is kept it in top nick for someone else. I could have driven them & saved the amount of time & money tending to it, & the price would not have made much difference.

It's only worth what you sell it for.
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Reply By: Willem - Friday, Jul 02, 2004 at 18:39

Friday, Jul 02, 2004 at 18:39
I am up to car number 99 over a period of 40 years. I started buying cars on tick when I was a youngster and always ended up paying heaps for them. Later in life I was self employed in a variety of businesses and used the taxation advantage writing off against the value of the vehicle. But in the end I paid too much for my transport. Twenty years ago I had a sea change and stopped buying 'flash cars' on HP or Lease as I saw no advantage to it. I went back in time and bought old vehicles for cash. I paid $2000 for a 1979 LC FJ 55 and sold it six years later for $1500. Clocked up 260,000km with it. I now drive a 26 yo 4x4 which clocks up around 15,000km a year, a classsic car which gets driven occasionaly and a run of the mill Commodore Wagon which does around 40,000km a year. Paid cash for them. Cars are reallly just recycled earth. They get you from A to B just like the more expoensive luxury cars do. The difference is that I now have more disposalble income whereas I would have been cash strapped if I had 'luxury' vehicles in the garage.
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Follow Up By: Nino & Kerry (VIC) - Friday, Jul 02, 2004 at 21:36

Friday, Jul 02, 2004 at 21:36
Well said, and food for thought.
Cheers Nino.
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Reply By: cokeaddict - Friday, Jul 02, 2004 at 22:15

Friday, Jul 02, 2004 at 22:15
Hmmm interesting reading guys,
I will throw a spanner in the works if thats ok....

Purchase 1 x 1971 XY Falcon GTHO cost approx $5300.00 New
Todays price if 1 owner in good nick between 40,000 and 90,000.
Not a bad investment if you ask me.

Now where did I put that "flux capacitor"

What id give to go back to 1971 with 100,000 dollars and a huge storage yard.
Food for thought !
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Follow Up By: Jimbo - Friday, Jul 02, 2004 at 22:59

Friday, Jul 02, 2004 at 22:59
Unique and not expected.

How many XY's do you own?

Hindsight is a wonderful thing.

And just quietly,, they're not WORTH anything like that. People may pay it, but they are are not worth it. An old clanger that quarters in 14.3 for $90k opposed to a current vehicle that will do it in comfort and cost $45k with a warranty and be refined is a sensible option.

Still, market value determines value and passion has a lot to do with it. Why the Old Man sold the HK GTS 327 and didn't put it away for me still breaks my heart. A classic traded in on an HQ is sad.

Jim
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Follow Up By: cokeaddict - Saturday, Jul 03, 2004 at 15:49

Saturday, Jul 03, 2004 at 15:49
Again Jimbo,
It come down to what one regards as WORTH it ! I understand your point, But I for one would definately pay top dollar for a genuine GTHO, if i could afford it that is. Wouldnt think twice.
HAve anice day mate.
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Follow Up By: Jimbo - Sunday, Jul 04, 2004 at 09:47

Sunday, Jul 04, 2004 at 09:47
Yeah, I've gotta fess up, so would I.
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Follow Up By: Joe - Thursday, Jul 08, 2004 at 22:26

Thursday, Jul 08, 2004 at 22:26
Just cruising thru older posts, and find this one interesting. I agree the GTHO is a rare one that,s made money.

I bought an ELGT 30th anniversary GT in 1997 @ $75,000 on road and leased it through my business and now own it.

I would be pressed to get $50,000 for it, but as it now seems it is last run of limited edtion GT'S, who knows what might happen in future.

By comparison a Fairmont Ghia in 1997 would stuggle to bring $10,000. So the ELGT miniumized my loss, but certainly is not an investment.

Regards
Joe
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Reply By: cokeaddict - Friday, Jul 09, 2004 at 08:32

Friday, Jul 09, 2004 at 08:32
Hi Joe,
Well there is only ! real GT ! As far as your ELGT goes, its not a GT at all. There is NO history behind it. Thats the difference between your GT and a GTHO.
The ElGT was just a sales ploy for FORD to see how many people would go out and buy one to increas what was at the time dangerously low sales on FORDS. Nothing more than that. They needed sales and they always had the "GT" bagde to use in an emergency.

I personaly was disgusted when ford decided to put a GT badge on the EL. I thought at the time it was a slap in the face for all ford fanatics of the 70's era.
Dont get me wrong here Joe, I am not trying to offend you in any way ok, but there were many people that fell for the GT badge comming back in 1997.

Remember this mate, the GTHO was nothing really at the time of production, nobody knew how good it would be.Not even FoMoCo. The fact that history has been made because of it is the only reason why the XY GTHO can fetch up to $90,000.00. Personalloy i think well worth the price tag. I wouldnt hesitate to pay that IF i had money to play with.
But the ELGT, well there is no history there im affraid. Ask yourself this....
What did the ELGT do on the track that amazed everyone? It didnt!

Im just glad i have fond memories of the Bathurst races of the late 60's and 70's. Nothing comes close these days.
I remember watching the GTHO's and the XU1's lap after lap doing a carbon copy lap. Brocky would blitz the fords heading up the mountain, then they were heading down conrod straight, brocky in front, moffat and another ford behind him, they get to the first dip and vanish. Back in sight at the top of the second hill and there r all 3 cars side by side vanishing back into the dip, then once again, 2 fords sandwich brocky and fly past him towards the end of conrod.....all to be repeated lap after lap.
Thats one thing that will always stick in my mind, Truly amazing racing.
AnswerID: 67073

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