New car choice could be affecting residual values

May 21, 2013 | By | In News

Motorists currently benefit from one of the widest, most exciting and most technologically advanced choice of cars since the four-wheeled mode of transport was invented.

But CAP, the automotive industry data experts, believe that new car buyers are paying a heavy price in depreciation as new models go out of style quicker than they did 30 years ago.

Industry insiders refer to this as a vehicles ‘lifecycle’ and it denotes the time between a model’s release, any significant ‘facelifts’ and its eventual replacement. This time period has shrunk from around 10 years in the 1970s and 80s to around 3-4 years today, CAP’s analysis reveals.

CAP new car expert David Saville said: “As Ford roll out their latest generation Fiesta – and Volkswagen bring out their latest Golf –you can’t help feeling like it’s only 2 minutes since the previous generation was introduced in each case.

“The outgoing Fiesta was produced between October 2008 and October 2012 and the previous Golf ran from November 2009 until November 2012.

“Looking back into history the first generation Fiesta was introduced in 1976 and ran until 1983. The Golf was introduced in 1974 and remained substantially unchanged until 1983. Therefore, over 3 decades these popular models have gone from a lifecycle approaching 10 years, with minimal technical changes, to around 4 years with quite often substantial technical changes under the skin each time.”

CAP believes that multiple factors have lead to this decrease in shelf life, including the influence of far eastern manufacturers, who adopted a policy of refreshing their offerings more rapidly than the competition, as they worked hard to  crack European markets.

Also, the ever-tougher European emissions standards have had an adverse effect, with manufacturers constantly working to meet rapidly changing rules.

Saville argues that while motorists benefit from constantly refreshing choices, they also pay for the ever shorter shelf-life of today’s cars.

He said: “On the face of it the new car consumer really benefits by always having a choice of bang up-to-date models to choose from. But this can also have a negative effect because most buyers have a car that they need to dispose of when they come back into the market. If their existing model isn’t the latest offering from that manufacturer, what the industry calls ‘lifecycle depreciation’ kicks in and makes their car less attractive as a private sale or a trade-in.

“CAP analysis consistently shows that greater depreciation is a particular issue for manufacturers who have adopted model lifecycles below the standard 3 to 4 year ownership pattern,” he added.

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