It’s always important to weigh the pros and cons when acquiring a new asset, but particularly large purchases like real estate or a new vehicle require a more thorough analysis. Whereas the value of land may vary over time, you can be nearly guaranteed that a car will only devalue, even when you buy something sensible like a Volkswagen Atlas SUV. This is why it’s crucial that you make a smart decision right from the get-go.
Temptation is all-too-easy to find
Many of us ask to not be led into temptation on a daily basis. But the simple truth of the matter is, we know where to find it, even without the silver screen or lifestyle magazines throwing it in our faces. In the automotive industry, this usually takes the form of sexy sports cars, but there are just as many pricey SUVs and sedans out there, like a Cadillac Escalade or BMW X7. This is without even accounting for the Rolls-Royces and Bentleys in the world.
These are actually the larger temptations since they are attainable and grant a great deal of status while still not looking out of place on the road. You may not regret the purchase at first, since these automobiles are quite easy to live with. Passenger space is generous, and you won’t want cargo capacity, either. The generous list of standard features only helps to seal the deal.
The same is not true for high-tier super- and hypercars. Similarly priced at six figures or higher, they sacrifice all the practicality and liveability for sheer performance. Loads of horsepower and torque from a V8 or W12 engine are trademarks of this segment, along with 0 to 60 mph sprint times that seem almost too good to be true. However seating in the supercar segment is limited to two, in most cases, and trunks can barely hold a grocery bag or three.
In both cases, you can expect to put down an enormous amount of capital to meet the MSRP of these luxury items. But, after a few years of ownership, the resale value can be as low as 40% of the initial investment. Collector’s items may still fetch a decent price, although that usually requires holding onto them for a far longer period of time. As with most indulgent pleasures in life, the joy of these cars is short-lived, and you may not like the after-taste.
Slow and steady wins the race
Though less glamorous, it’s the more everyday vehicles that shine a bit brighter at the end of the day. Cheap sedans like a Toyota Corolla or Honda Accord, or family-focused crossovers such as the Toyota RAV4 will serve you well over the course of their lifespans. Apart from being affordable to purchase, they are generally frugal in terms of fuel economy, and easy to repair in the unlikely event that something should go wrong.
This is in stark contrast to premium vehicles, which are much more high-maintenance, and utterly backbreaking to repair should they be involved in an accident. What would be a write-off incident for a BMW M2, could be a relatively affordable repair job for a Kia Sorento. This isn’t to say you should expect better than a 50%-60% depreciation in value after five to seven years, mind you. However, losing 60% of $20,000 doesn’t feel as painful as 60% of $120k.
Furthermore, if you shop smart, you get a great car in the interim. The top sellers in the USA are not just there because they are affordable. A certain degree of reliability is required to win the hearts and the good opinion of shoppers. It certainly doesn’t hurt that they are almost all Top Safety Picks, based on evaluations from US-based safety organizations. And their overall value proposition is excellent, too.
What to look for, what to avoid
Following this avenue of thought, there are certain brands and styles of the vehicle to avoid. This doesn’t mean that you will regret every Merc or BMW you buy. In fact, quite a few sell well after several years of ownership. The same holds true for certain sports cars, like the Mazda MX-5 Miata, which is among the vehicles that lose the least value over time and remains the most popular roadster globally. Others include the:
- Chevrolet Camaro
- Subaru BRZ
- Nissan GT-R
- Dodge Challenger