#26 - Depreciation’s a B*tch
For the record, I would rather host a dinner party with Jeremy Corbyn, Diane Abbott and Philip Schofield than purchase a brand new SUV. You may as well start using £20 notes as fire lighters. That said this week, in every automotive market place I turned, I witnessed a sea of people trying to sell me a brand new Audi RSQ8.
By way of summary, the RSQ8 is the poor man/woman’s version of the Lamborghini Urus and Bentley Bentayga. If you find the Urus too loud and the Bentley too Cheshire, the RSQ8 provides a more subtle way of dropping six figures on a car for the school run without raising too many eyebrows. Same engine, same chassis…..the only difference being which designer you believe has done the “better” job at turning a small bus into….well a slightly more sporty looking small bus.
What’s more (that’s right my rant is far from over), in the media crazed world we live in, the RS “Kuwait” (as it has become affectionately known) conducted the obligatory lap of the Nurburgring in a gravity defying time of 7 minutes and 42 seconds…..not bad for a 2.5 tonne kiddy carrier and this week’s SUV Ring record holder. In typical Germanic fashion, the boffins in Ingolstadt have shoehorned all the best tech from their other RS models into the new go fast Q8. Rear wheel steering, anti-roll bars galore, mild hybrid system (not to be confused with a spicy hybrid system) and a 0-62mph time of 3.8 seconds…..all essential for taking little Jimmy to school or conquering the Waitrose carpark. But the best bit of all of this……how much money you will haemorrhage away if you actually convince yourself to buy a new one. Allow me to expand.
Most major car manufacturers have cottoned onto the fact that they can make use of their gargantuan balance sheets and flat lining interest rates to sell new cars……it is the age old trick of the left hand lending to the right. But the implications of this are far more concerning for the new car buyer than anyone is really paying attention to…..and it is only compounded when it occurs in the already depreciation hungry SUV market. If Audi are happy to finance you on a brand new RSQ8 through some fancy financial engineering at 3% APR for example, while a nearly new used example is going to cost you closer to 6%, the actual sticker price of the car becomes somewhat irrelevant. Your cost of borrowing is halved making the new, albeit notionally more expensive car potentially better value for money. The problem with this is that it further obliterates second hand residual values on these cars by creating a pricing no man’s land where you are better off buying a new car over a used one until prices fall to a point at which it makes more sense to revert back and start buying/financing the used examples again.
Which is how you get the following; A brand new high specification Bentley Bentayga W12 (the really fast one) retails new for north of £200k while a 4 year old equivalent can be purchased for less than £90k. A brand new Lamborghini Urus can be purchased for ~£250k while a 1 year old car can be found for £190k. The net result is whether you buy a new one outright or finance the purchase of it, the depreciation and resulting negative equity is crippling. And the same will be true of the RSQ8. Audi will sell and finance a bunch of them making all internal stake holders very happy but it’s you the consumer who gets run over in the long term.
So if I still haven’t dissuaded you from purchasing the latest Chelsea tractor fair enough……I look forward to seeing your smug face driving down the Kings Road blissfully content with the money pouring out of your shiny chromed exhaust pipes.
Happy Motoring,
Greg