How not to lose 30% the first year!

There are many sayings along the same tune: full of joy you pick up your new car at the dealership, and by the time you reach the street, it’s lost 30% of its value. With very few exceptions that used to be the case for more or less all new cars, and depreciation would then continue to eat into the remaining value like rust does to an old 70’s Opel, until some day you reach a bottom where values stabilize and if you’re lucky, even start to rise. You could say that my modest garage consisting of my beloved BMW 650i convertible 2014 and my no less loved RR 5.0 SC 2015, both bought in the last two years, were very much purchased along that logic (and if I dare say, pretty much at the bottom).

At least in some cases, what used to be true isn’t anymore, and we can of course thank the moving parts of the global mess we currently find ourselves in for that. The combination of broken global supply chains, the European energy crisis and inflation are starting to change things. I’ve written previously about prices for used cars being on the rise especially in the US. That trend seems to be softening, although it’s a bit too early to say. It’s still the case that delivery times have in some cases gone bonkers, but here as well things are looking slightly better for most cars, as the stress on delivery chains of certain parts have improved slightly. You’ll still have to wait far longer than used to be the case though. But lately, and the topic of this week’s post, is what is perhaps another logical consequence of the current situation, namely that certain new cars barely lose any value during the first few years.

The chip crisis is slowly easing, which is really good news for manufacturers!

It’s still perfectly possible to lose lots of money when buying a new car. An old man’s sedan is for example an excellent way to go about it, especially if you order it in a color scheme that may seem fun at the time of ordering, but far less a week after the car being delivered. Large Mercedes coupés with big engines are also pretty hopeless. Actually, with everything everywhere being about EV’s and with prices at the pump going only in one direction, you’d be forgiven for thinking that buying anything with a big, thirsty engine would be just as good (or bad). That’s not the case though, at least not yet, and it’s also not the case that all EV’s hold their value in the same way the best ones do.

Given that, and if we except the small series hypercars that live in a world of their own price-wise, what should you be looking at if you want a cool, everyday car and prefer buying new, but want to minimize the initial value loss? I’ve taken a few examples below from the SUV world which continues to be the preferred car segment everywhere, and which is therefore a relatively safe bet in this regard.

There’s three different body formats now, from 90 to 130 to choose from

New Land Rover Defender

It was no easy task that Land Rover took on when they decided to build a new version of one of the most legendary cars of all times but in my view, they did an excellent job with the new Defender. I think it balances references to the original car with modern features in just about the right proportions, and apparently the market agrees – not only do you see a lot of new Defenders around, their resale values are excellent. In Europe, when the car was introduced in late 2019 in a version called the First Edition, these 2019 cars today trade only around 10% lower than their original price of around EUR 100.000, in spite of a minor upgrade having just taken place on the 2022 Defender. For now at least, the car that’ll take you anywhere seems to be a safe bet economically as well!

The G63 could also take you most places – it’s just that it never does…

Mercedes-Benz G63 AMG

If Land Rover’s task with the new Defender was daunting, arguably what Mercedes had to do to turn the G-wagon to a modern car (as much as possible) was no less so. It was a year earlier in 2018 that the new G was introduced, and still today you need to look twice to see the difference between old and new – at least from the side. Absurdly enough, the vast majority of new G’s are in the G63 AMG version, that an article I recently read described as “Kardashianesque”, a description as good as any. Few cars have the same street presence though, and 585 hp in car looking like a fridge will keep you laughing all the way to the petrol station. Provided you still see the road that is, because with its completely flat front window, the G63 kills bugs at a speed making you fear bug extinction. Still, should you for some reason want to sell your G63, you’ll be happy to learn that even cars from the first year with moderate km’s on the clock sell for within 10% of their price as new of around EUR 220.000.

The only SUV that looks good in yellow – and many other colours!

Lamborghini Urus

If 585 hp in an SUV isn’t enough for you, then Lamborghini are happy to give you another 65 hp, rounding it off to 650 from the Urus’s 4-litre, 8-cylindre engine. Its looks take more or less getting used to depending on your taste, but the Urus is one hell of a car and no doubt the SUV that drives the most like a sports car. And of course, being a Lambo, it delivers in terms of sound like few others. The Urus was also introduced in late 2018 and costs a bit more than EUR 300′ as new. 2-3 years later without too many kilometres on the clock you will have lost no more than 10%, and it will have been worth everyone of them!

Three examples out of a selection that could clearly have been wider and that illustrates that at least right now, you can buy at least some new cars and not lose much in terms of value even after 2-3 years. If you’re interested in any of these or for that matter other cars with a similar evolution, then the recommendation is of course to buy new, provided the car you’re after can be delivered within a reasonable timeframe. A discount that isn’t larger than 10% doesn’t compensate for neither the compromises in equipment you may have to make, nor for the typically much shorter guarantee you’ll have on the used car.

The Model X hardly sells anymore in Europe, but has fantastic residuals!

What about EV’s then? Isn’t that a safe bet when it comes to resale values? With everything happening in general in terms of clean energy, and in the EV market in particular with new models both from new and old brands, you’d certainly be forgiven for thinking so, but actually the picture is a mixed one. The champion in resale values is no doubt Tesla where the 10% value loss discussed above goes even further in terms of mileage or even age. Had you bought an Audi E-tron instead, perhaps convinced by the fact that in everything except for the range it’s a better car, well, then you would have lost almost 50% in the last 2-3 years (making the E-tron a really great bargain today!). Mercedes’ EQC EV SUV doesn’t fare much better, and there are other EV’s in both camps. At least for now therefore, value preservation seems to be more brand-related than depending on the drive train, and part of Tesla’s strong resale value probably also relates to the Apple-like image the brand has among many.

Where does that take us? Well, if you’re after a SUV and you’ve been looking at one of the three mentioned above, it looks like a relatively good investment even if you’re changing cars now and then. However, as the disclaimer says if you buy a financial product, “past performance is no guarantee for future returns”, which is of course especially true now with an energy crisis in Europe and a general trend towards electrification. Remember though that this will take time, and there will conventional cars around for many years to come. If you’re looking for an EV, the resale value and the range speak strongly for Tesla, but it will require you to compromise in build quality compared to some other EV’s, and the competition is no doubt heating up. Personally, I still think a good bargain beats anything presented here, and if I were after an EV, I think I’d go and look closely at that bargain Audi E-tron!

The E-tron – impressive or not?

The E-tron is becoming an increasingly frequent sight on the streets of Zurich and elsewhere. I had the opportunity to study the car in detail at the recent Geneva Salon (check out my video here) and found it a bit difficult to get my mind around: sure, impressive in build quality and good-looking, but that has nothing to do with it being electric and everything to do with it being an Audi. But for the rest?

If you’re a bit cynical, but only a bit, you could say it’s taken Germany’s leading car manufacturers (Mercedes will join the electric SUV party in the coming months with the EQC, a car very similar to the E-tron) seven years since Tesla’s first Model S, and four years since the Model X, to bring out alternatives in the form of cars with less range, less room and, especially critical, far less charging points at present.

Starting with the range, Audi claim an optimal value (also called WLTP range) of 417 km, but are honest with the fact that it’s a distance you’ll only achieve with the AC turned off and ideally neither passengers, nor speed. A more realistic range – in optimal conditions, meaning neither too hot, nor too cold – is, according to multiple tests, somewhere around 300-350 km, and in winter, you can deduct around 30%, bringing you down to as little as 200-250 km per charge. This still supposes driving very legally. The Model X in its latest configuration has an unrealistic WLTP range of 505 km, probably meaning around 400 km in reality, and thus 300 km in winter. Not great, but around 1/3 better.

A short range means you will be charging quite often. Audi will tell you that the E-tron has the mechanical ability to charge up to 350 Kwh, which is more than twice as fast as a Tesla Supercharger (150 Kwh). That’s however in the future, as such chargers are not around yet. Audi is a member of Ionity, a collaboration of leading European car manufacturers currently building charging stations with charging power of up to 150 Kwh across Europe, power-wise on par with Tesla’s supercharger. But in all of Europe, there’s currently not more than 20 such stations. That leaves you with the other 90.000 or so charging stations which are part of the European electric car “roaming” network and that E-tron owners can use (against payment by an E-tron credit card), but the vast majority of those have a charging power of 22 Kwh at most, in many cases even less. Charging an E-tron to 80% at a rate of 22 Kwh means three hours charging time. Taking as example a 600 km holiday drive from Zurich to the French Riviera, there are seven Tesla supercharging stations along the way. With an E-tron, it would mean at least one three-hour stop, and thus more than 2 hours longer travel time – for a six-hour drive.

In terms of interior space, the advantage of Tesla’s swollen egg form is that it offers lots of room, and that its luggage compartments back and front are both roomier, as is the passenger space. An Audi Q7 is much roomier than an E-tron, which more resembles a Q5 space-wise.

So where does this leave us? If space, range and charging times are all irrelevant, then the E-tron is probably the better car – as it should be, given Audi is an established, leading manufacturer and not a Californian startup. But all else is not equal, meaning it’s taken Germany’s leading car brands more than five years to bring out a car that is only almost on par with Tesla, but with a charging network that is comparable to what Tesla offered more than five years ago. That is not very impressive, to say the least.

Tesla Model 3 – yes, it does exist!

Having spent the last weeks in the US, I’ve seen quite a few of the long-awaited, long-delayed Tesla Model 3, that is now finally being produced and delivered (with delivery times in the US as low as 4 weeks), but still has to make it to Europe. If you haven’t seen it, it’s quite a good-looking car, probably the best looking in the Tesla line-up. The side and rear are similar to a (smaller) Model S, the front has a bit of Panamera over it.

Model 3 front
Same two luggage spaces as on the Model S, both a bit smaller in size. 

The interior however if very different, I guess you could say more futuristic, but as in the S and X characterized by the giant screen that in the Model 3 is however not integrated to the dashboard but rather stands out of it like a big laptop screen. Feels a bit cheap and the interior is in general a bit simpler than in the S and X.

Model 3 screen
This is the only screen in the dashboard, which is basically free of buttons and switches as well. 

So far only the top version has been introduced to the market and for some unclear reason, Tesla won’t divulge the KwH of the electric engine, only talking about the range of over 300 miles (460+ kms). That would mean that it’s the 90 or 100 KwH engine, and it’s difficult to see why that would be a secret, given it isn’t for the other models. Towards the end of the year, a cheaper version with a smaller engine and a range around 250 miles (400 kms) will be introduced at a cost in the US of around USD 35.000. The top version as shown in the pictures costs around USD 50.000 in the US and both versions should make it to Europe in 2019.

Model 3 rear

The price will probably decide on whether it becomes a success in Europe or not. As always it’s a bit difficult to pinpoint the competition – it’s difficult to imagine someone choosing between a Model 3 and a Prius. You do however get a lot of fun cars for around EUR 40-45.000, so Tesla would probably need to keep the price pretty much in line with the US. The recent introduction of the Jaguar I-Pace and the coming Audi E-tron and MB EQC also illustrate how the big guys are gearing up. Although not in direct competition to the Model 3, it will clearly be far less smooth sailing for Tesla going forward, whether as a private or a public company…