Depreciation; the hidden cost of buying a 4WD
I don’t often go into the financial side of buying and owning a 4WD, but it is something of great interest to me, and hopefully many others out there.
There’s no doubt that buying and owning a 4WD is expensive, even if you only factor in the costs associated with keeping the vehicle.
However, there’s a little cost that most people don’t really think about, and its called depreciation. Essentially, your 4WD loses value every year, until it becomes a piece of scrap in a wrecking yard way down the track (hopefully in 25+ years from new!).
Depreciation refers to the amount of money you lose over a given period of time as the value of your vehicle goes down. Pretty much all cars depreciate (except a few vary rare ones), and its something people don’t think about until they go to sell their vehicle.
Take a brand new top of the range 200 series Land Cruiser today, which will sting you for about $115,000. In 10 years time, its going to be worth about $60,000, meaning you’ve lost $55,000 in that time, or $5500 a year over 10 years.
That’s $105 a week; hardly chump change. On top of that, you have the cost of owning the vehicle; loan repayments, servicing costs, modifications, registration, 4WD insurance and the list goes on.
If you want to know how much we spent on our Isuzu Dmax setting it up for touring Australia, you can check it out here – Isuzu Dmax build cost. Hot tip – this vehicle build was relatively cheap compared to what you’ll see many others do!
Now, not all 4WD’s depreciate at the same rate, and there are some weird phenomenon’s going on out there too.
I’ve always believed that price normally reflects the overall perception of a vehicle. 200 series Land Cruisers are insanely expensive, because a large majority of buyers perceive them as the top of their class.
With this thought pattern, it makes sense that the 80 Series and 100 Series Land Cruisers running the factory turbo diesel motors have retained insanely high market prices. These motors are some of the best ever put in a 4WD, and for this reason they are still very expensive.
A basic, unmodified factory turbo diesel 80 series that is 15 years old will still sell for around $15,000 to $20,000 in WA, with about 350 – 450,000km on the clock. Any other 4WD with no modifications and the same kilometres would be lucky to sell for $8000.
Why do I mention this? Your choice of vehicle will dramatically affect how it depreciates. Some brands depreciate much faster than others, and while you can’t always tell what is going to happen, it is a pretty good indication. Toyota has exceptional resale value.
Holden’s and Fords tend to be on the lower end of resale value. Whether this is due to them being a lesser quality vehicle is up for debate, but the fact is they depreciate very quickly!
Next time you are looking at buying a 4WD, have a think about what its going to cost you in depreciation. If its a very expensive 4WD and you keep it for a long time, you’ll get stung badly. However, some 4WD’s also retain their value a lot better than others, and it can be worth paying extra in the beginning for this.
Its worth noting that like all cars, 4WD’s depreciate the most in the first 5 years, so buying a 4WD that is older than 5 years can save you a bucket load of cash.
How do you reduce 4WD depreciation?
Asides from picking a vehicle with a low depreciation rate, there are lots of other things you can do to keep your 4WD at its maximum value
Service it well, and have the log book filled out
One of the most important factors when it comes to buying a second hand car is that it has a solid and complete log book. If there’s pages missing, or services not done then the potential buyer is going to wonder if its worth the purchase.
Make sure your log book gets filled out and that its serviced within its due time and kilometres.
Keep it clean and tidy
People treat 4WD’s in all sorts of different ways. If you are happy with mud coated panels and being lazy off road so there’s scratches down the side you will get a very different resale value than someone who is careful.
Regular cleans, washes and a general respect for your 4WD will pay dividends when it comes to selling it on.
Do sensible modifications
You won’t ever recover the value of the modifications that you put on a 4WD, so pick carefully.
However, it goes further than this; if you install modifications that are extreme (think big lift kits and tyres) you are going to hugely reduce your potential buyer pool, as mods like that reduce reliability, void your legal obligations and are not what the majority of the market are looking for.
Modify your vehicle in a way that suits your needs, whilst not drifting too far from what others would also want (if you are bearing depreciation in mind. If not, go for your life!).
Stay out of salt water
I cannot stress how bad salt water is for your vehicle. You won’t notice it immediately, but in a couple of years the evidence is hard to hide.
Rust is one of the major things that people will look for, and for good reason; its cancer of the car and extremely hard and expensive to fix. Wash your vehicle regularly after beach trips, and stay away from salt water.
Keep your receipts
When you purchase a second hand vehicle, nothing beats evidence that the owner took good care of the vehicle. A pile of receipts showing a solid history of work is a sure fire way to get a better price on your vehicle than one with no paperwork.
Do you consider depreciation in your purchase of a 4WD vehicle, or just accept that its part of life and ignore it?
