Hey Cool Car Fans,
I really enjoy driving European and other luxury brand vehicles, such as Audi, BMW, Mercedes Benz and other high-end cars. Who doesn’t? They often have great technology, handle extremely well on the road and have fantastic performance. However, everyone knows that there is a cost involved in driving these vehicles and so once they are out of warranty they tend to depreciate like a rock.
THE TOYOTA RAV4 VS THE BMW X5
The other day I had a client call me about consigning his 2011 Toyota RAV4 LE, so a base model vehicle with a sunroof, and it had out 60,000 miles on it. I looked up what the trade value would be on his vehicle if we didn’t consign it and I just sent it to the dealer auction. It was $10,000 based on what they have been selling for at auction.
As the conversation progressed, he said that he was thinking that he might want to also get out of his 2010 BMW X5 with the 4.8l motor that was pretty hard loaded. It had more miles than the Toyota RAV4 with around 94,000 miles on the odometer. I looked that one up for him as well and to his shock and amazement it was selling at auction for the same price as the 2011 Toyota RAV4, which was about $10,000 for a trade-in value.
That’s pretty unreal considering the 350hp 2010 BMW X5 4.8l had an MSRP of $56,300 before adding in all the options for the vehicle. It’s more like $60,000 to $65,000 by the time you start adding options on a vehicle like that one. And that’s compared to a 179hp 4 cylinder 2011 Toyota RAV4 LE with an MSRP of about $25,575. So, you have a high-performance german luxury brand that is over twice the amount of money new selling 7 to 8 years later for the same amount of money at auction and at retail as a basic Japanese SUV. Which means that if you’re into European vehicles be prepared to lose money or you can buy them at a substantial discount.
WHY DO MORE EXPENSIVE CARS LOSE THEIR VALUE SO MUCH
It seems pretty amazing that a more expensive vehicle would depreciate more than a less expensive vehicle, but part of the problem is the cost of parts and overall repair costs. Many times people who own a less expensive vehicle will work on vehicles themselves rather than taking it to the dealership for repairs. These people don’t count the time that they are spending fixing brakes or doing oil changes or other repairs into their overall cost of ownership. Most people who own more expensive vehicles don’t tend to work on their own vehicles, so they take it to the dealer at $150 to $200 an hour. They don’t always think about the fact that they could be going to a less expensive repair shop, with a lower hourly rate, for some of their more basic repairs.
For example, I had to replace a radiator overflow in a 2011 BMW 3 Series and the local BMW dealer wanted $500 to do it. I found the part on Amazon for $80 and had a local repair shop install it for me for a half hour of bill time for $50 and a $500 repair turned into a $130 repair. You can’t find after-market parts for most high-line vehicles for the first few years of production, so you have to wait a few years before you can find other options for parts than the dealership. The parts can be very expensive, which is one of the reasons why these vehicles do not hold their value the way the Toyota or Honda vehicles do. It’s a supply and demand issue because people want to have lower repair costs.
Basically, you can thank the dealers and the mechanics for depreciating your Euro luxury vehicles. If you know what you’re doing you can get a great deal on a luxury performance vehicle a few years old. Which is the case for The Cool Car Guy because I like driving vehicles that sold for $65,000 new for $10,000 to $20,000.
Of course, I shouldn’t be telling people this because the more people who figure this out the more expensive these vehicles are going to be and they won’t depreciate as much based on supply and demand. The reality though is as long as the majority of people keep wanting to drive a 7 or 8 year old Japanese vehicle for 50% off, I’ll keep telling my clients that they can be driving the equivalent year high-performance vehicle for 70% to 85% off and laugh all the way to the bank.
Auto Consultant – John Boyd: The Cool Car Guy
John is an auto consultant who owns CoolCarGuy.com that is a licensed car dealership in Lone Tree, CO. He can help you save time and money on any make or model, new or used, lease or purchase – nationwide! Call or email John about your next vehicle! firstname.lastname@example.org or Twitter @coolcarguy