routesixtysixer

With every new GM model over the last several years I've seen vast improvements. Unfortunately, rate of depreciation is not one of them. I post this example here for what it's worth.
My wife and I purchased a new Cadillac CTS Sport in July 2006. MSRP of $40,240 (Sport model with luxury package, sunroof and auto). After all incentives and discounts, we paid $33,600 (not including tax/tag), which I felt was much more representative of the cars' value than the ridiculous $40K sticker.
Fast forward seven months. Wife decides the Caddy isn't going to cut it for her daily driver (she is currently driving a 99 Intrigue with 135,000 miles and was supposed to switch to the Caddy next year; the recent snow/ice has changed her mind and she has decided she wants a FWD car). We visit the Saturn dealer yesterday to look at a new Aura XR. Very nice car, really well done interior, drives nice. They also happen to have a new Outlook crossover that we wander over to. Wow, what a nice vehicle. We drove it and were very impressed. Perfect ride/handling compromise; quiet; great brakes. The interior looks nicer than the Caddy (materials, design and assembly). Outlook XR with leather package MSRP of $31,600... with 275 hp 3.6 and 6-speed auto; epa 18 city 26 highway (Motorweek said they got 22 mpg average with theirs). Now the bad news.
Saturn dealer sales manager (who just happens to be the same guy that sold me the CTS last summer; Cadillac dealer and Saturn dealer owned by same outfit and he transferred back to Saturn since last summer) offers me $24,000 trade-in on the CTS. I knew it would be bad (not that clueless), but geez. I did approximately the same trade time-line with two BMW 3-series and lost about $3,500 on each (and I paid MSRP for one of those). Caddy depreciates $10,000 to $16,000 in the same period (depending on whether you go from sales price or MSRP). Needless to say, we'll be keeping the Caddy for the foreseeable future.
My wife hates BMW's (don't really know why) but, for whatever reason, they sure hold resale. Caddy seems to be the opposite end of the spectrum. When will this change?

guionM

It shouldn't surprise you at all. Considering what you paid for it (and it's probally the ballpark figure most everyone is paying) and who's offering it, that's actually very good resale value!



First, incentives play a huge role in resale value just as the number of vehicles and demand does. Just because a vehicle "lists" at 40 grand doesn't mean that's it's selling price.

Second, dealers will NOT give you fair market value for your car. They have to sell your car at fair market value and make a decent profit. What you get offered on your car at a dealer is the "wholesale price", essentially what the going price is at an auction.... since in effect, those are the prices your car is competing against.
(dirty little secret: dealers make more margin "per-car" selling you a used car than a new one unless you load it up or they mark it up. )

Finally, all cars grossly depriciate once you drive them off the lot. 2 identical new cars, one titled and used already and not. The used one is going to have substantially less value than the other new one.

Better guage of your car's value is your local "Autotrader" weekly. Kelley's Bluebook is good, but it doesn't make allocations for price differences in different areas or times of the year (convertibles & RWD cars cost less in the winter, even used Mustangs cost more in Northern California than in Southern).

Rare, or "high intrest" cars are the exception. SRTs & SVTs are low production high intrest cars that hold far more of their value. The 1st couple of years of the 300C, demand outstripped supply and resale value was almost the same as purchase price. If you had bought a CTSv, you'd probally keep more resale value.


$24,000 dealer trade-in on a 1 year old CTS that cost you $33,000 is actually really good. Means the dealer will probally sell it around $30-32K, which sounds like the real resale value.

rlchv70

My situation is very interesting:

I have 2 vehicles, one for my wife, one for me:

2004 Buick Rendezvous. Sticker $31k. Bought with less than 2k miles for $21k. Currently has 7x,xxx miles. KBB trade-in value: $8.5k.

2004 Pontiac GTO. Sticker $31k. Bought with less than 1k miles for $22k. Currently has 7x,xxx miles. KBB trade-in value: $11.5k.

routesixtysixer

I did forget to mention the Caddy only has 3,975 miles on it. FWIW, Edmunds shows a TMV Trade-in value of $28,383, Private Party value of $30,141, and a Dealer retail value of $31,806 ($34,582 if Certified). I realize a car is only worth what someone is willing to pay for it, but I find it mind-boggling that $16,240/40% from MSRP (or $10,000/29% from actual sales price) depreciation in 7 months and 4,000 miles is considered "really good." If that is what the car is really worth, fine. My point is that, had I purchased a BMW (or several other makes) I wouldn't be taking such a bath. If Cadillac is going to play with the big boys, this is one area they are way, way behind in. Had the dealer offered me $28,000 (especially when I would be paying sticker for the Saturn I'm trading it in on), my opinion would be different.

96_Camaro_B4C

How is it $10k from the sales price? I thought you paid $33k for it...

You sure as heck can't count it as 40% from MSRP, because you didn't pay MSRP.

To me, the sales price is what you actually paid (after negotiating close to invoice and then including any rebates). In my mind, I try to separate the GM card points, because not everyone gets those. But if the sticker is $40k, you talk them down to $36k, then get $3k in rebates (non GM card), then the price you paid is $33k, and depreciation would be measured from there.

routesixtysixer

Okay, I paid $33,600 and they are offering me $22,000 to $24,000 trade-in (that's how he described it to me... as a range, which makes no sense either). $33,600 - $24,000 = $9,600. Yes, since he gave me a range, I rounded to $10,000. I got a better price than most anyone else would have gotten on the CTS in the first place (wouldn't have bought it otherwise) so most anyone else would be looking at a significantly worse screwing than I am. My point is that as long as Cadillac owners have to absorb this kind of depreciation, they (Cadillacs) are always going to be looked upon as an inferior product. I'm not looking for sympathy (believe it or not) just trying to point out a considerable disparity in the market.

Darth Xed

One thing to consider is something that will happen with any vehicle currently in CTS's situation.

Dealers know the current body style is now a "lame duck" with the new 08 due out this fall.

People are going to pay less for the "outdated" style... therefore, they will offer less.

jg95z28

Actually the online version of the Kelley Bluebook ( http://www.kbb.com ) does factor in your location by entering your zip code.

The general rule of thumb is if you want to get the most money out of your vehicle then you need to sell it on your own. However once you factor in the time and effort and costs of selling the vehicle yourself, versus accepting a little less for it at trade in, you may decide its not worth the effort.

Threxx

10 grand in depreciation (price paid minus price sold) in 7 months is good??

Based on the residuals listed from BMW Financial, the lease of a 41k sticker 335i bought at invoice price would net you $8524 in depreciation over the course of 24 months and 30k miles.

I'd say 10 grand in 7 months is terrible. Granted I'm sure the lease depreciation is not nearly as bad because they don't 'screw you' on the back end of the trade.

routesixtysixer

Edmund's also takes location into account. FWIW, Edmund's was the only online guide that even shows a separate Sport model CTS; KBB and NADA only show standard CTS with Sports package option. Not the same car. Sport model has many specific (and exclusive) features not available on regular 3.6 model plus all the features included in the 18-inch wheel performance package option. Sport model base price is $1,200 higher than base 3.6 model with sport package option.

I have it advertised in the local paper for $29,500 (which I think is pretty decent value). The car is absolutely like new, but I'm not holding my breath. I knew when we bought a Caddy it would be very hard to get out of without getting killed. Had I any idea I would be wanting out this soon I never would have bought it. Someone buying this car for even $28,000 would be a steal and that's $4,000 over what they are offering me in trade value. I think that's definitely worth the hassle.

Robert_Nashville

Financially, it NEVER makes sense to buy a brand new car and that goes quadruple when you buy a car and finance it. A radio host I listen to frequently likes to say that “the worst car accidents happen on the showroom floor”!

Yes, some cars hold their value better than others (and many manufacturers gauge how they are doing by comparing how well their vehicles hold their value compared to whatever they consider to be their competition) but the bottom line is, new car values drop like a rock…period.

The only time a person can really justify buying a brand new car is when they can write a check for it and it have no more of an impact on their net worth that what most of us experience when we buy our groceries for the week; that way, the depreciation really doesn’t hurt them financially. it is ALWAYS far better financially to buy a one or two year old, well cared for car and let the “other guy” take the beating on the depreciation.

However, I know (and I include myself in this) that when you love cars you tend to not think about the financial end of things!

Luxury cars, especially American luxury cars have always seemed to be the worst at holding their value and that appears to still be true…I do agree, however, that it’s another “cost of ownership” people ought to consider when they are spending their money. That said, I don’t think there is anything short-term that any manufacturer can do about it…I’d say that improving a make’s residual value can only be raised with decades of efforts (and of course, depends a lot on the perceived value placed on that make by potential buyers).

TTopJohn

You can't really go by what lease residuals are, the in house finance company residuals anway, because frequently they are artificially high. BMW and Mercedes use incentives too, they're just more likely to do it in the form of higher than market residuals and lower than market money factors. Notice that the BMW finance residuals will be a lot higher than the more realistic residuals from leasecompare.com


That said, yes Cadillacs don't have the resale value of a Lexus, MB, or BMW. But there's no quick fix to that. It will take years of building good cars (which they've been doing for a while, IMHO), and cutting back on rental fleet sales. There's no action that GM can take that will fix the resale value problem overnight, it's going to be a long slow process, that ultimately relies on changing the buying public's opinion of the value of a used GM car. For an example of a european brand that is fighting the same struggle, look at Jaguar - poor resale value despite the fact that they've been building fantastic, reliable cars since 1997. It takes a loooooooooong time to rebuild a reputation, and used car values rely a lot on reputation.

R377

I'm in a very similar situation to the OP. I have a 2004 CTS, and according to the redbook wholesale values, after almost three years of payments I'm still very upside down. So much so, that I'm planning to keep the car until things even out a bit more.

Which leads to the problem this causes for GM: people aren't going to buy as many new cars from them. I would have bought a new GM car by now if the residual on the CTS wasn't so awful. But now I'm holding off another year or so. How many other people are in a similar situation? Especially now that cars are more reliable and not prone to falling apart after three years there's less need to get something new all the time. So if all GM's loyal customers start keeping their cars 25% longer, that 20% fewer sales for GM.

As a side note I think this is the last GM car I'll buy. I've never been keen on leasing, but had I leased my CTS back in 2004 the combined payments would have been way less than than my net purchase payments over the same period.

Plague

Cant remember where I heard this, but if you can't pay off the car in 3 years, then you really can't afford it (not trying to offend anyone with this statement). If you only plan on owning a care for 2 or 3 years and then trading it in, leasing may make more sense. But, if you plan on owning the car for 5+ years, buying would be better...

Trying comparing the CTS to a mercedes C class or the low end BMW 3 series. People would be in the same position if they were trying to trade in the cars as well.

Caps94ZODG

could it also be suppy and demand??
But also the stigma of american luxury cars as being sub part of it? Thats why they fall like a rock in the resale?
its not just on Luxury.
You take an Impala and a Camry. same price off the showroom and everything. The Camry will sell for more. More demand or they know it will sell it for that price. With people thinking heck its a Toyota its worth that price. Heck its a BMW its worth that price. Look at the Lincoln LS talk about a train wreck of resale. Almost a shame how much they lose in value for such a nice car.