False Economy?

Posted on February 1st, 2013 by Rob Marshall

residualIn the current age of increased belt-tightening, one would have expected the cheapest and most economical cars to retain the biggest slice of their values. I did; I was wrong. Although used car values are complicated to evaluate, the biggest influence boils down to the simple business logic of supply and demand. Yet, the reality is that used car buyers have not felt the need to rush behind the wheels of the most fuel-efficient and inexpensive new models.

In its calculation of last year’s residual values, the motor trade car valuation specialist, Glass’s Guide, reported that, out of the top ten, three years-old cars (with 37,000 miles recorded) that held a highest percentage of their original cost, seven of them were 4x4s. For the second year running, the Toyota Landcruiser, pictured, is the model that retains the highest percentage of its list price, at 73.4%. Interestingly, the report highlights that this might be due to Toyota UK marketing the model subtly and the limited new sales of the big 4×4 has ensured that the used car market has not become swamped.

Audi’s 4×4 Q5 is only 0.2% behind the Landcruiser, mainly because used three year-old examples are scarce and demand is high. Yet, the list is not populated by expensive 4x4s alone. Skoda’s Yeti, a model where demand outstripped supply in 2009, retains 72% of its value, proving that the brand’s compact 4×2 and 4×4 range is highly respected and remains in great demand by the used car scene. The Land Rover Discovery and Range Rover Sport follow the Czech brand, with 66% and 67% retained values respectively.

Low volume, high performance models from respected manufacturers managed to break the all-wheel-drive dominance, because the Volkswagen Scirocco, not the fuel-sipping diesel but in rarer 2.0-litre petrol 265bhp R form, kept 65% of its new list price. The sporting Volkswagen Golf 2.0-litre TSI R 3-door retained 63%. The large 4×4 Audi Q7 3.6-litre petrol V6 retained 64%, just ahead of the Porsche Cayenne, with which it shares the basic platform.

Interestingly, Glass’s Guide reports its experience of compiling the top-ten slowest depreciating models over the last five years has demonstrated that niche market sectors, such as 4×4 and coupé models, tend to retain more of their new list price as they age, because high volume new sales do not translate into high residual values in several years’ time. The only small car to feature in the top ten is the sporting version of Fiat’s 500, holding a 64% retained value.

Despite fuel and insurance costs rising each year, depreciation is still the biggest cost of running a car under three years-old for many motorists but the Glass’s Guide analysis indicates that shrewd new car buyers might want to look away from the (often inaccurate) Official Combined Fuel Economy figure and more towards how much a chosen model will shed its value.

Top ten least depreciating cars for 2012. Courtesy of Glass’s Guide.

RANK MANUFACTURER/MODEL % VALUE AFTER   3-YEARS (37K MILES)
1 Toyota Landcruiser   4.5D auto 73.4
2 Audi Q5 2.0TDI   Quattro SE 73.2
3 Skoda Yeti 2.0TDI CR   4×4 Elegance 72.5
4 Land Rover Discovery 4 3TD GS Auto 67.6
5 Range Rover Sport   3.0TD SE Auto 66.4
6 Volkswagen Scirocco   2.0 TSI R 65.6
7 Audi Q7 3.6 FSI V6   Quattro S-Line Tiptronic 64.4
8 Fiat 500 1.2 (69bhp)   Sport 64
9 Porsche Cayenne   3.0TDi V6 Tiptronic 63.6
10 Volkswagen Golf 2.0   TSI R 3-door 63.5