Depreciation, perceptions and a piece of the pie

What is depreciation? To some people the depreciation in value a car suffers during their ownership is notional at best. Outside of the trade do many people really care all that much about the depreciation their car has suffered and the ultimate resale value? Well if the popularity of car buying sites such as and are anything to go by then the answer is a resounding no.

If I go down the high street and spend £800 on a flat screen TV, that’s it I’ve spent my money and I’ll probably keep the TV until it stops working and then I’ll take it down the municipal dump. Or I might decide a couple of years down the line that I want a bigger and better TV so I stick an ad in the local paper and be happy for what I can get for the old one. It’s the same with a house. If I am happy in my house do I really care that property prices in my local area have dropped 10% in the preceding 12 months? Of course not, it is only a concern when I come to sell. But with cars many people will tell you it’s different. They’ll tell you that your particular model loses a whopping 36% of its value within the first year of its life. Well so what? If I’m planning on keeping the car for 4 years it doesn’t matter. I’ve already spent the money on the car and the fact that it depreciates by a certain amount each year is irrelevant to me. Of course when the time comes for me to sell I want the most I can get for my car because, of course it still has some value but while I’m driving it I couldn’t care less.

And when I do come to sell my car what is my overriding concern? Is it the value I can extract from the sale or the speed at which I can dispose of my old car? If depreciation is a notional value then I should be pretty happy with whatever I can get for my old car as, in my mind, I have already spent that money a long time ago and now I just want to get into a new car. This is where sites like come in. They speak to me in a language I can understand. They tell me “you know what? We will take your car off your hands today for you and have the funds in your account within half an hour.”

OK if the popularity of car buying sites is soaring who is missing out? Where would these cars be sold if car buying sites didn’t exist? The truth is it won’t be the likes of Autotrader who’ll be missing out as these cars will all be sold on and will need to be advertised and it’s unlikely many of the original owners would have sold them privately in the first place. So it would seem it is the dealers that are missing out on these cars as people become more reluctant to part-exchange because of the perception that they will be ripped-off on the price. Of course the ironic thing is the valuation they will receive from any car buying website is unlikely to be any better than they would have got if they’d part-exchanged but the thought of cash wired to your account the same day is very seductive.

Something as simple as moving out of an old car and into a new one has become complicated by people’s perception of car dealers. This is compounded even further when you consider that a lot of the cars purchased by car buying sites are re-cycled through the auctions and – because sourcing decent used car stock is becoming ever harder – snapped up by used car buyers for car dealer groups.

It doesn’t take Maynard Keynes to work out that everyone up the chain is taking a little piece of the pie and when the car is eventually retailed the buyer would have no idea how the car was acquired and, perhaps more importantly, what the original seller, a car driver just like them, was prepared to let it go for.

Funny old world isn’t it?

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2 Responses to Depreciation, perceptions and a piece of the pie

  1. Mark Robbins November 13, 2010 at 2:38 pm #

    So So true, but then again, when did the car buying public ever believe a car dealer? we and other’s might not enjoy the best reputation for buying value, but because they are seen to “Buy” and not “Retail” the public will always believe in the perception that that is where they can get the quickest and fairest sale.

    No matter what you seem to offer people on the forecourt nowadays they all pretty much suffer from the “Grass is greener” syndrome, would love a pound for the amount of times our sales team have heard the line ” I can get a better deal from “” when the truth is 9 times out of 10 they cant, however, the general public hate to think of us making a profit on their old car dont they? after nearly 30 years in the business i guarantee the one word to lose you friends on the forecourt and at dinner parties whether buying or selling is “Profit”

  2. Car Sale November 13, 2010 at 5:45 pm #

    Just to echo what Mark said, started a new salesman and he made the cardinal sin of mentioning profit to a customer.

    We corrected him quick, have to learn fast in this game.

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