Not all cars are created equal when it comes to resale value
Not all vehicle models and brands are created equal. This is according to an analysis of the actual price a specific vehicle achieved on auction, as a percentage of the original list price for that same vehicle one year earlier.
This is clearly evident from the first study into annual winners in the resale value stakes by True Price, the start-up that initially provided free vehicle evaluations and subsequently entered into a joint venture with Auction Finance to expand into vehicle finance.
The resale value of a vehicle is important because it has a direct impact on its total cost of ownership and the ability of consumers to finance the acquisition of a new vehicle.
True Price MD Darryl Jacobson said on Monday it analysed which 2018 model vehicles achieved the best resale value, measured against their original list price, during 2019 – something never done before in South Africa.
Jacobson explained that True Price is able to produce this data because its team attends bank repossession auctions throughout the year to document the prices achieved. With data from thousands of vehicle auctions on its system, it’s able to provide highly scientific, accurate vehicle evaluations.
He said the major factors that influence vehicle resale values as a percentage of their list price a year earlier (whether the resales are to the private sector or motor trade) include the quality of the vehicle and how well it has been maintained, its mileage, service history, brand and market demand.
Jacobson added that the analysis only included vehicles that had travelled less than 60 000km.
Kriben Reddy, head of auto information solutions at TransUnion Africa, said consumers base their buying decisions on how well a particular brand is represented in the market, and how well that particular model range behaves on the market.
He said consumers tend to be very wary and sift out unpopular brands, resulting in those vehicles’ poor resale values.
Jacobson believes the colour of a vehicle also plays a role, a view shared by Reddy, who said popular colours can increase the vehicle value albeit marginally, as can the rarity of the vehicle.
Optional extras add value to the vehicle while it’s in the first few years of its lifecycle. However, Reddy clarified that when the vehicle is older and technology evolves further, the options tend to be less significant.
For example, park distance control or navigation systems in a four-year-old car today will not add any value, as vehicles are now equipped with 360-degree cameras and older navigation software is outdated.
“Younger consumers do opt for connectivity and will definitely pay a little more if the vehicle is equipped with this option,” he said.
“Many options however are merely selling points at the time of sale and just set precedence over a vehicle that is not equipped with options.”
Reddy added that vehicles that are built to customer specifications with extensive options are priced accordingly, but at the time of sale the seller may only be able to monetise the popular options that were fitted.
However, some popular options not taken up by the customer could have adverse effects on a vehicle’s selling price, he said.
Jacobson said True Price only attends bank repossession auctions because these auctions have a 95% success rate on first-time sales on auction.
“It gives a good gut feel of what is going on,” he said.
Based on this data, True Price came up with the list of the top ten resale value winners for the 2019 calendar year.
It found Volkswagen to be the biggest winner, with three vehicles in the top ten, while Toyota and Kia also performed admirably, each with two vehicles making it onto the list.
Hyundai, Renault and Isuzu each have one vehicle listed.
The top 10 (and percentage of original list price achieved on auction)
- Volkswagen Tiguan (87.07%)
- Kia Picanto (81.27%)
- Volkswagen Polo Vivo (80.42%)
- Volkswagen Golf (80.06%)
- Kia Rio (80.00%)
- Toyota Hilux (78.56%)
- Toyota Fortuner (77.73%)
- Isuzu KB/D-Max (76.41%)
- Renault Kwid (73.3%)
- Hyundai Grand i10 (73.26%)
This ranking differs from the list of top ten selling vehicles in South Africa in 2018. The top sellers then were: Toyota Hilux, Ford Ranger, VW Polo, VW Polo Vivo, Nissan NP200, Toyota Corolla/Auris/Quest, Toyota Quantum, Isuzu KB, Toyota Fortuner and Hyundai Grand i10.
Jacobson admitted that the VW Tiguan was not among the biggest sellers but is very popular and desirable, while a model like the Mercedes-Benz A-Class unfortunately did not do well because very few are repossessed and True Price’s actuaries insisted that a minimum of seven of the same vehicle model had to be sold to achieve a meaningful comparison.
The Volkswagen Tiguan. Image: Shutterstock
Reddy said there are several possible reasons for the difference in the ranking for new vehicles sold in one year and those that achieved the best resale value a year later.
He said the new vehicle price inflation of a specific vehicle year-on-year can influence the trade and retail aspects positively, as can the scarcity of a vehicle and anticipation of the introduction of a new model that is likely to be significantly more expensive.
Original source: Moneyweb