The truth about car depreciation and the economics of cars

For most of us, the 99 per-centers that is, cars make no financial sense. They depreciate, they are expensive to maintain, they need to be insured, fueled, etc, we shouldn’t own cars. Ideally we would all live in efficient cities within walking distance of our jobs, grocery stores, shopping, schools and anything else we need while the super efficient transportation system would take us to further places at our beck and call. Then all the money that would have been spent on cars would have been spent on housing, which appreciates. For the 1 per-centers, cars are a luxury, the ability to transport yourself any where on a whim in your own private coach.

But we dont live in an ideal world and for most of us cars have become a necessity. To make things worse for the 99 per-centers, cars that dont depreciate are usually super expensive and reserved for the wealthy, ahh the rich get richer. The operative word is usually, fortunately for car enthusiasts the rules of supply and demand also applies to cars and there are actually quite a few cars within reach that hold their value or even appreciate over time. Every car on the top 5 greatest cars ever made appreciates but lets take a look at 6 cars that should appreciate or hold their values very well (all somewhat attainable by most enthusiasts). We will be using Autotrader.com as the primary venue for market valuation (thanks to them for sponsoring this blog post).

  • 1st generation Acura NSX – retailed for $60k brand new in 1991, today the cheapest you can get for a 1991 NSX is $42k, however 2005 was the final year of production for the 1st generation models and they retailed for $90k in 2005, today there are only 2 2005 models listed for sale on autotrader in the country, the cheapest of which is $120k, not bad right? The cheapest price on the newer more powerful 2nd generation NSX is $119k for a 2017, why? simple, enthusiasts prefer the older model, it was more fun and it came with a manual transmission. There are 58 1st generation NSXs currently available for sale.
a 2002 – 2005 NSX, note the exposed headlights
  • Nissan GT-R – they offered incredible performance and bleeding edge tech when they debuted in 2008 for $70k. While still in production as of today the numbers have dwindled and the retail prices have ballooned to $97k for a new one today (arguably they have made improvements to the car since 2008). There are currently 259 listed for sale with the highest priced at an eyewatering $259k for a brand new NISMO version (the dealer is obviously price gouging). With Nissan currently in all kinds of financial problems a new generation is looking less likely and once production stops, prices will go up.
a nismo GTR – the highest priced, note the red trim and high rear wing
  • The C7 Corvette Grand Sport Coupe with the Z07 package – These were made from 2017 – 2019 and while about 1,600 Grand Sports were made per year, just a fraction of them were equipped with the Z07 package, the Z07 package took the track performance capability from BMW GTS levels to Mclaren 570S levels, literally, when equipped as such the GrandSport was quicker than a Mclaren 570S on a track. They retailed for $75k brand new and there are currently 11 listed for sale (with the Z07 package) with the highest going for $99k, although from looking at the pictures some of the ones listed as equipped with the Z07 package do NOT have the Z07 package (the tell tale signs are the brakes, Z07 packages come with carbon ceramic brakes that are drilled and not slotted), caveat emptor.
Grand Sport with the Z07 package, even non Z07 packaged versions sport similar aerodynamic aids so focus on the brakes.
  • Honda S2000 CR – this was a lightweight manual transmission roadster that had the most powerful naturally aspirated 4 cylinder engine in the world when it 1st debuted. The CR models (CR stands for Club Racer, so yeah, this was very much for enthusiasts) were made in only 2008 and 2009 (S2000 production ended in 2009) and totaled 699. They retailed for $35k brand new in 2009 and there are currently 7 listed on Autotrader as available for sale with the highest priced at an absurd $155k and the average price at $52k. However, looking at the pictures, some of those 7 listed are actually NOT CR models, the tell tale sign is that CR models came with a good sized rear wing and a removable Hard Top (so a soft top is an automatic disqualifier no matter what the seller says), again caveat emptor.
note the rear wing and no soft top
  • Mustang Shelby GT350R – It has an unusually high revving 5.2 liter V8 (revved to over 8k rpm) and is without question the best handling Mustang ever made, heck it even beat the mid engined Porsches in several comparison tests and was one of the 1st production cars to have Carbon Fiber wheels (even today less than a handful of manufacturers use such wheels and Ferrari is one of them). They only make about 500 / year and they have been in production since 2016. There are currently 24 available for sale with prices as high as $120k for a new one (they are supposed to retail for $73k new and you will find several at that price), they average $70k. As is a pattern now, not all of the GT350R’s listed for sale are GT350Rs some are just regular GT350s (if you can call a Shelby GT350 regular that is), tell tale signs being the previously mentioned carbon fiber wheels, also the bigger rear spoiler.
the carbon fiber wheels and bigger rear wing (seems to be a pattern) separate the GT350R from the GT350
  • Camaro Z/28 – not to be confused with the Z28, the Z/28 was made in only 2014 and 2015. It was an incredibly competent machine that was quicker than a Lamborhini Gallardo and matched the Ferrari F12 (the latter of which had > 700HP!) around a track, all while sporting a manual transmission, back seats, carbon ceramic brakes (unheard of at that price point) and even rarer multimatic spool valve suspensions (these are used on actual race cars and rarely used on production road cars, the Ford GT has them, except the Ford GT cost $400k and won Le Mans and the Aston Martin One 77 has them, costs $1.87 million if you can find one, not even Corvettes have them). Even the normally snooty Europeans were enamored, Chris Harris, host of Top Gear bought one. They retailed for $70k in 2014, today the prices go as high as $98k for 1 with < 1k miles on it with the average at about $67k. There are only 37 currently available for sale in the country and as that number dwindles, prices are only going to go up over time. This bodes well for it’s even more capable replacement, the bonkers, over achieving, still in production Camaro ZL1 1LE of which there are currently only 35 listed for sale in the country and even then, from looking at the pictures not all appear to be ZL1 1LE’s some are just regular ZL1s (i know, calling a 650HP car regular sounds crazy) so once again caveat emptor. The tell tale signs being (1) the ridiculous, yet fully functional rear wing in the back and dive planes in the front and (2) also take a peek in wheel well and if you see blue suspension components then yes those are indeed honest to goodness race car grade multimatic spool valve suspensions and you are looking at the right car.
the Z/28, should be easy to spot, no other camaro looks like it
yeah the Zl1 1LE looks nuts, however regular Zl1 owners have been known to install the ZL 1LE wing so look in the wheel wells

should look like this

Great, what about me? i am not an enthusiast and will never buy those cars – If you dont care about cars but must own a car your best bet is to buy a slightly used well maintained one (3-5 years old) which minimizes both the depreciation cost to you and the maintenance costs as it is still fairly new.

Lease, Finance or pay cash

As a general rule of thumb, financing and paying interest on a depreciating asset is a double whammy you want to avoid. That being said buying a brand new car opens up financing avenues not available in the used car market, manufacturers routinely offer 0% financing on new cars, that is actually more sensible than paying cash (why pull 30 or $40k out of of your investment account that is currently returning 5-6% a year to buy a depreciating asset when the Manufacturer is offering 0% financing).

What about leasing? – if you dont care about cars and just need one, avoid leasing, you end up paying more in the long run. If you love cars and fancy driving a new model every few years then yeah, this is your best option and if you want even shorter term leases you can jump in and out of there is also leasetrader.com

The future of Car ownership and electric cars

The future is certainly fully autonomous robo taxis coming to pick us up and dropping us anywhere we want 24 / 7. It is exactly like Uber or Lyft except without the expensive human driver (expensive because part of your fare goes to feeding, clothing and housing said human driver). That future however, is still a long way off. What about electric cars? while electric cars will save you from the burden of fuel and most maintenance costs over the life of owning the car, those savings are partially offset by higher insurance and electricity bills. As they are heavier than their gas counterparts tire replacement happens more often as well and depreciation actually accelerates after about 4-5 years as the battery degrades (meanwhile in gas cars depreciation slows to a crawl after about 4-5 years) and they also command a hefty $5k to $15k premium upfront over their gas counter parts. So yeah, despite what Tesla marketing folks tell you, buying and owning an electric car today is still more expensive than a comparative gas car, but you can sleep well knowing you are saving the planet right?…maybe, that is a debate for another day.

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