Today I was looking through a few Auto Traders and some auto websites to kill singer time. I was struck by how low the resale value appears to be on high end luxury cars such as Rolls Royce, Bentley and even the high end Mercedes and BMW’s. A 3 series BMW seems to command a much higher percent of value than a 7 or 8 series. I am not talking about a car that is only a couple of years old, but rather a car that has aged say eight years or more. It isn’t unusual to see Rolls that are ten years old going for under $15k. This in a car that retailed for close to ten times that new. Hell, my 1984 Mazda RX7 GSL-SE still sells for $4 to $7k, depending on condition and it only cost about $15k new.
My thought is that generally the people who can afford an expensive car like a Rolls generally will purchase new instead of used, thereby limiting the number of people willing to drop big money on a used one. The second reason I imagine that resale is so low is the cost of maintaining these cars. Everything is expensive, when I owned my Porsche every repair was at least $500 and something major was a month’s pay. I figure that must equate into the resale. Of course, this isn’t the case with all high end cars as Ferrari’s and Lamborghini’s, while very expensive to repair and maintain, hold their resale value and even get more pricey to buy three older they get. Honestly these are great values for guy’s like me who can do most of the restoration work ourselves. Over the years I have been able to own and drive quite a few interesting cars that I could have never have purchased new, by buying a used one needing a bit of work, doing it myself and at the end of the day sell it and grab a new project.
So, what’s the deal? Why do these high end luxury cars plummet so much in their resale values?
You basically covered it. The wealthy want to buy new or nearly new, while the poor struggle with the running costs on these gorgeous leviathans. Leads to very limited demand.
Objectively speaking a (well speced) new 3 series BMW will have far more features than a 15 year old Rolls Royce, by the way. Everything the 3 series will be missing is ethereal, stuff like pure quality and workmanship, or dare I say it presence - but again that’s stuff most people want to buy new.
Equally I’m sure a twenty year old Prada handbag doesn’t cost very much, if there even is a second hand market in them.
It is exactly as you said:
-Limited market: rich people don’t want the bother of an old car.Part of the status thing is having a new,shiney car. A 8-10 year old BMW looks beat-no prestige value.
-Cost of repairs: for a lot of high end cars, it is insane. Plus, for many brands, you cannot get parts at all. Take a 2006 Audi A8 (blown engine): a new engine is north of $16,000. Installation and other fixes will come to $4-5,000. Do you really want to spend that much money on a 7 year olod car? Simply not worth it.
Can used high end cars be a good value? Maybe, but a huge risk…when your 10 year old Rolls breaks down, do you have $20,000 on hand to fix it?
You’ve got the basics covered.
For something exotic like a Lamborghini, you are paying for lot of hi-tech parts, and exotic materials. The demand for those things stay high, and 10 years later, the car is still fast.
For a Rolls Royce, what you are paying for is much less tangible. You are paying for the right to own a new Rolls Royce. Those intangible qualities go away much more quickly.
Several years ago I bought a 15 year old Jag for $4500. Original price $62500. The car was in beautiful condition and I was amazed you buy so much car (all leather, power everything, rides like a dream) for so little money. But I did go in with my eyes open. I talked to a mechanic about what to look out for before I bought one, and I fully expected that instead of car payments, I would have some expensive maintenance. I try to be proactive and have the car serviced every year and let them fix anything that looks suspicious. I would have never bought the car if I didn’t think I would be able to afford the occasional $1000 repair.
It is not just the high end luxury cars that have very low resale…Cadillacs, Lincoln Continentals, and other “status” cars can often be had for a song with fairly low mileage. Retiree’s buy them new, then either die or become to senile/infirm to drive them, and there is no status appeal left in a used one. When I was in high school my dad had few-years-old Lincoln Continental that we took hunting and camping as it was great for pulling a camping trailer. It was also a great car to take to the drive-in theater. Of course you have to be willing to fuel those big thirsty engines.
Thanks for the replies. I (still bored today, it’s training so I’m stuck inside),did a little more looking around via Google and I was truly gobsmacked (my new British word!) at the prices to be paid for standard maintenance on exotics. I’m talking $400 to $1400 (Aston Martin) for a simple oil change! What in the hell could possibly be so complicated about an oil change that it could cost more than a grand? Attention all exotic car owners here, next time you need your oil changed, drive your car over to my spotless workshop and I’ll do it for you for the small sum of $20 if you supply the oil and filter and let me take a test drive.
The reason this whole topic got my interest is I have been fortunate enough to have a very understanding wife who has let me build a quite impressive workshop on our property. I have just about everything needed to restore a car, including a home paint booth. My hobby has been buying used cars, fixing them, cleaning them to they shine and turning them for a small profit. Due to my injury, it takes me a very long time to complete a project, but I enjoy the challenge very much. I am looking for a new project and have grown bored of doing the same old Japanese sports cars and thought about an exotic or luxury barge to do next. Nor really sure, my second choice is a Porsche 914, although I am not experienced in welding and most I have seen that could be bought, fixed up and resold need a massive amount of rust removal and I am not sure if I want to take the time to learn to weld. Also, I don’t know if I would want to turn that one over as I have always wanted one.
You are right about the fuel, as a Lincoln Continental never saw a gas pump it didn’t like. But what a ride, feels like you are in a hovercraft while driving one. Also nice to have a hood long enough to launch carrier aircraft from! The Lincolns are great cars and with them being Fords, repairs are fairly simple. Most backyard mechanics can do most any repair on them and the parts are fairly inexpensive.
I remember a while back the Car Talk guys were talking about high-end Euro cars like BMWs, Audis, Mercs, etc. They said that these cars are often relatively inexpensive to maintain early in their lives, because of the quality of the product, but that once they get to around the 90-100,000 mile mark, and things start to need fixing, they can become both unreliable and very expensive.
Both people I know who bought a used ‘prestige marque’ vehicle regretted it bitterly when the repair bills rolled in fairly soon after. Sorry for the small sample but there you go.
I’ve seen this same phenomenon with airplanes. You can get a real-live flying honest-to-god really old fighter jet for like $50k because it’ll cost upwards of a $1,000 per hour to fly the thing.
Ditto Rand Rover’s observation. It’s true with boats, too.
I’m sitting here admiring the small cruiser I bought this week. Almost literally “for a song”. The downside is that I must now pay for its maintenance, storage and care, and will probably pay more per-hour maintenance than the owner of a new craft. The upside is a purchase price less than 20% of its brand-new counterpart.
A couple of years ago my 70+ year old retired father decided that since he’d always wanted to own a Mercedes and had never had the chance, he would buy a used Mercedes.
About a year later he was tired of all the expensive little repairs and got rid of it. Same as above, the price is low because demand is low and maintenance expenses are high.
