RESALE
VALUES
Resale values are very important when buying a car. Everybody
knows that, but most people only hear part of the story. It
is very important when you run a large fleet of new cars, (the
important part here is new) like a rental company would. If
we have a fleet of cars that numbers several hundred and the
vehicles are being turned over every two years or more a couple
of percentage points in resale value can make a substantial
difference at the end of the year.
Let as say we operate 200 new cars, each worth $20,000 that
are replaced every 2 years, and between make A) and B) there
is a difference of 2.5 percentage points in resale value.
If the car A) was worth let us say 50% after two years and
car B) was worth 47.5%, than, in dollar terms car A)would
be worth $10,000 and car B) would be worth $9500. For most
people a difference of $500 over the life of a car (usually
5 years or more) would be of little concern. A fleet manager/owner,
however that operates 200 cars that are being replaced every
two years would look at a difference of $500 x 200, a cool
$100,000 every two years, $400,000 after 4 years and half
a million for 5 years. That is serious money.
Usually the resale value is calculated as a percentage of
the original new car recommended retail price.
Example 1. A car with an original RRP of $30,000 in 2000 that
is worth
$15,000 in 2003, has a resale value of 50% (of it’s
original value)
(The above example is based on an actual car and is an actual
resale value, to simplify calculations prices have been rounded)
Example 2. A car with an original RRP of $30,000 in 2000
that is worth
$12,000 in 2003, has a resale value of 40% (of it’s
original value)
(The above example is based on an actual car and is an actual
resale value, to simplify calculations prices have been rounded)
Question: Which is the better buy.
Answer: Depends on whether you intend to buy a NEW or a USED
car!
SUMMARY:
NEW CAR BUYERS: If you intend to buy a new car you would
want a high resale
value to minimise the loss at the time of sale/trade-in.
USED CAR BUYERS: If you intend to buy a used car that has
a high resale value you will pay more up front and thus nullifying
the benefit of a high resale value that you may get at some
point in the future.
For further information contact www.carsolutions.com.au or
write to info@carsolutions.com.au
April , 2006
|
