Depreciation

[anxious]

Cars are a depreciating asset. Some faster than others but almost all cars reduce in value over the years. For those who buy new, it can be quite a pain taking into account what they paid when the cars were new. For others depreciation allows us to afford our dreams minus the smell of new leather. Based on "What Car" magazine, in UK cars generally tend to lose half their value after 3 years. In Malaysia, cars tend to hold value better as you can still expect to sell your car at half the value after 5 years ie averaging 10% depreciation per annum. What contributes to the rate of depreciation? I believe that factors that contribute to a faster rate of depreciation in UK are higher maintenance cost after the free service and warranty period expires and relatively cheaper new cars, making the option for a new car always more attractive. Just thinking aloud. Care to share your thots?

 

[mizhan]

people die, cars depreciate. fact of life.

 

[shaifulo]

I always buy what I can afford, and trying to get the best example for the budget...why settle for less? :top:

yes, I do think of the depreciation...but it wont influence my decision when buying

 

[John_Smith]

It is undeniable that the general Malaysian population factor in depreciation when purchasing cars. Certain cars (such as Toyotas and Hondas) are perceived to be better quality, more reliable, cheaper to run and maintain, hence this contributes to better 2nd hand value.

I certainly don't think all Japanese cars are cheaper to maintain. When you buy brand new Jap cars, you've to bring back to service centre (which will usually potong kaw kaw), if you want to keep the 3 years warranty.

As for me, I rather get 2nd hand BMW than brand new Jap cars. You only live once, so, might as well live the ultimate driving machine life.

 

[astroboy]

U felt the depreciation because you are in Malaysia where prices of cars are so expensive, after the 300% taxes and doesn't commensurate to general population income, dollar to dollar.

My 26 month old E90 320i already depreciated RM70k.. tell me about it man! My down payment was RM20k and installment paid was about RM50k.... We would still owe the bank money if we sell the car now, principal sum entirely wiped out, interest portion still outstanding!! ....

Depreciation = RM70,000 / (26 mth x 30 day) = RM70,000 / 780 days = RM90/day !! and I don't even earn that much a day !!

 

[tay]

Agreed with shaifulo.

You do need to think about depreciation, but before that, how much you can afford the instalment is even more important.

Depreciation factor can only make you loss lesser but when come to passion of owning something like BMW, that whould be something you should consider the least.

We are lucky in on the other hand that we do not have COE in Singapore, high labour cost like in UK and US, but on the other hand, we have to treasure and keep our car longer, unless you can always tahan the 300% or pray hard that the government reduce the duty, which might be very very unlikely

 

[BMW9700]

U felt the depreciation because you are in Malaysia where prices of cars are so expensive, after the 300% taxes and doesn't commensurate to general population income, dollar to dollar.

My 26 month old E90 320i already depreciated RM70k.. tell me about it man! My down payment was RM20k and installment paid was about RM50k.... We would still owe the bank money if we sell the car now, principal sum entirely wiped out, interest portion still outstanding!! ....

Depreciation = RM70,000 / (26 mth x 30 day) = RM70,000 / 780 days = RM90/day !! and I don't even earn that much a day !!

and the 'straight line' interest hire purchase should be made illegal....after paying such an extremely inflated price for the car, which is mostly taxes to the govt, you are then passed over to the banks to be raped for whatever you have left...this kind of financing is illegal in many countries...they should have reducing balance..

 

[anxious]

and the 'straight line' interest hire purchase should be made illegal....after paying such an extremely inflated price for the car, which is mostly taxes to the govt, you are then passed over to the banks to be raped for whatever you have left...this kind of financing is illegal in many countries...they should have reducing balance..

Agreed. I recall reading that the Hire Purchase Act is supposed to be amended to remove the straight line method.

 

[anxious]

Tthis difference in depreciation rate b/w Malaysia and Japan/UK is what fuels the recon/grey market for imported second hand cars b/w 3-5 years old.

A 2006 525i E60 in UK last year could be had for say 15000 pounds. Thats say RM90k. Add tax and transport,maybe costs the AP holder say RM200k to import it to Malaysia. If he sells it for RM250k, thats a whopping RM50k profit!

Dont know if my estimates are right,anyone?

 

[kgb]

Depreciation. You can choose to have it, you can choose not to.

Owned Toyota for about 2 years (from new), at some stage decided to sell off, end up loosing about 10%, negligible if you ask me.

Got few old school 4x4 Suzuki, market price has been the same for the past 5 years, don't think it will go any lower anytime soon.

Now got BMW, don't think it will EVER drop below what i've paid for it.

In the mean time, money saved on loan repayment can be spent on maintenance and modifications. If done up well, can even been sold at a higher price, as there is no depreciation to worry about. :top:

 

[blueberry]

If I start to calculate the "straight line interest" + depreciation and think to much about $$$$, I don't think I will buy any car more than 20k. It's all about passion.... Buy as you can afford.

 

[BMW9700]

say for example: on a RM50000 loan @ 4% interest, RM14000 goes to the sharks over 7 years..you are still paying interest for the amount you have paid back...

so for overall depreciation of the car, this has to be factored in apart from market values

 

[mizhan]

play with E30, E32, E34 or E36. lots of fun to be had without needing to lose in excess of RM100k over 3 years..

 

[astroboy]

and the 'straight line' interest hire purchase should be made illegal........they should have reducing balance..

Nowadays, the banks are very creative.. You don't pay 4% interest for brand new BMW la. I am paying about 2% for my E90 and I have calculated if I were to use reducing balance method, the rate turns out to be the prevailing housing loan rate.. like the last year end Toyota promotion of 1.88%, ask yourself when did money market rate ever fell below 2%? Then how the bank make money?

If you know risk factor, hire purchase loans are more risky because the car, which is the collateral for the loan are a "movable" asset. So when it comes to bad debt recovery, locating the car is a big problem! So naturally, interest rate shall be higher than housing loan.. no choice! or you can refinance your house and pay cash for your car, in a way converting the car loan into the house loan, at reducing balance method, if you think you can benefit by avoiding the 'straight line' hire purchase loan.. :wink:

You also can become creative ma.. That's how I creatively "transform" a VIOS budget into a brand new E90.. :listen:

It is not the "straight line" method you should complain, but the way our installments are used to offset the principal and interest portion.. the initial years a big chunk for our installment goes to offset interest and you can hardly see your principal loan sum reduces during the initial years.. that's why selling your car towards end of the tenor, u won't see much interest saving/rebates.. That one is what I hate most! I don't even consider it straight line..

 

[mizhan]

hallo AB.. a VIOS won't make you lose 100k is three years, or even 10 years for that matter

jangan marah aa...

 

[astroboy]

hallo AB.. a VIOS won't make you lose 100k is three years, or even 10 years for that matter

jangan marah aa...

x marah..

Not fair to use 1 VIOS to compare because the "investment" variance too big. I paid RM210k for my E90, so you should use 3 VIOSes to see if the deprecation about the same..

A 5 year old top spec VIOS are sold at about RM40k but bought at RM80k. So 40k depreciation per VIOS x 3 = RM120k.. meaning if I can recover RM90k from E90 at its 5th year.. I'm good! and I think is very likely

Who says a brand new BMW is a bad investment?!

 

[vish]

thats why we have BMW Premium Selection :top:

523ise with only 6k km on the clock at FIFTY GRAND less than original price

 

[kgb]

Who says a brand new BMW is a bad investment?!

new BMW is a bad investment, just like any other car. As for Toyota, depreciation is quiet low, compared to other makes. About 30% over 5 years.

e.g. Toyota Hilux 2005 - 70K++ Price new: 88K
Toytoa Vios 2005 - 50K++ Price new: 70K

 

[mizhan]

many E60 owners will agree with you kgb.. 200k down the drain 5 years after leaving the showroom is no joke to wage earners like myself.

 

[astroboy]

new BMW is a bad investment, just like any other car. As for Toyota, depreciation is quiet low, compared to other makes. About 30% over 5 years.

e.g. Toyota Hilux 2005 - 70K++ Price new: 88K
Toytoa Vios 2005 - 50K++ Price new: 70K

G Spec VIOS cost RM80k back in 2005. Even u can sell at RM50k, its 30k depreciation x 3 VIOSes = RM90k.

So 210-90 = RM120k.. I am pretty sure 5 year old E90 can still fetch RM150k.. so not that bad la..