How your used car can be worth more than a new car

For decades you could almost always look up car prices and residual values ​​simply in the brochure and on price lists. But nowadays you just have to wait and see when your ordered new car arrives, and the availability of used cars is equally puzzling. The once solid building of ‘the predictable residual value’ is therefore starting to sag. In fact, you hear stories that some used cars and registered cars from a previous year should even yield more than a new one.

Even Gerard ten Buuren raises his eyebrows in surprise, even though he has experienced so much as chairman of the Bovag Independent Car Companies department (and with a wealth of experience in car appraisal, car data and the financing and leasing world). Yet the stories are not so strange, because there is a ‘perfect storm’ raging in the industry. A second-hand car that must yield more than what it cost new, you wouldn’t think of that, would you? “That’s right, but there are just examples of it,” says Ten Buuren. “The main player is often the government. I sometimes say: the government is the best car seller in our country. With fiscal and addition promotions, it regularly causes a run on certain models in December. After the turn of the year, with their lower addition, they are extremely popular when they come on the market as stock cars on license plate. The Dutch business driver thinks very carefully about his wallet and that is understandable.”

Parking lots full of Volkswagens ID.3

With this story, you should think of examples such as huge parking lots full of low-addition Volkswagen ID.3, which were certainly not all delivered before the turn of the year, but were supposedly worth their weight in gold. “There are many examples to think of, such as the Mitsubishi Outlander PHEV, the Volvo V60 D6 Hybrid and a few years ago also the Tesla Model 3,” says Ten Buuren. “In December they were registered by the thousands, but when did they really start driving? And in January about 36 were regularly registered.

Skoda Enyaq of ’21 worth more

A current example is the Skoda Enyaq, the just crowned Business Car of the Year. It is only available in limited quantities, which means that last year’s copies have become more valuable. The driver is fine with it, because he has a private addition benefit. That will cause a lot of confusion in the industry, you can assume. “Certainly,” says Ten Buuren with a laugh. “At auto data and value specialist AutoTelex, this regularly raised a lot of question marks. Traditionally there is a predictable depreciation curve, but suddenly there were cars that had a specific addition benefit and were actually worth more and were therefore priced higher in the used showroom than cars from a later year.”

A 2021 Skoda Enyaq has become more valuable because a new one is limited available.

Too few cars

You don’t have to be a specialist to see that there are countless disruptive developments. For example, due to the corona crisis and now the Ukraine war, car factories could not run at full capacity, for example, due to limited available industrial mechanical components in Singapore. At the same time there was a run on affordable cars. Many people wanted and still prefer to travel safely in their own cocoon instead of taking the bus or train. They just often don’t exist or they cost quite a bit. “That is still going on,” Ten Buuren notes. “Cars between €6,000 and €16,000 are highly sought after. The availability of used cars is a major bottleneck anyway. That’s not so strange. If we reach the 300,000 new cars sold this year, that is already quite a lot. That has a domino effect, because it also leads to a shortage of trade-in buyers. To compensate for that, large numbers of cars are being imported, I think about 270,000 this year. These are mainly very young cars.”

Lease periods: looking at 72 and even 84 months

Another major player in that story is the leasing world. “They even have to deal with two blows there. They don’t get the new cars and the lease drivers are becoming more careful because of everything that is going on. As a solution, they drive longer and the lease companies are steadily extending the lease periods. Previously, this was a maximum of sixty months, but now 72 and even 84 months are being considered. That is also easy, because the quality of the cars is getting better and better. As an extension of this, I expect that used car leasing will grow.”

Daily prices for occasions?

The question is, of course, on what basis car companies determine their prices. “More than ever, it’s about demand and availability. The specialists and car companies constantly keep track of which popular models are available and how many. Although the real craziness is over, and there are somewhat larger stocks, cars remain really scarce. Every quarter I hear from importers that there will be more supply, but we are not seeing that yet. Whatever plays a role here: the new cars that are delivered are not the versions that you custom order yourself. Often it won’t be delivered until next year if you order something custom now, that’s just the way it is.” Back to the second-hand showroom, where there are almost daily prices due to the shortage of cars. “Well, daily prices might be a bit strong, but it doesn’t make much difference,” says Ten Buuren. “The very regular adjustment of prices certainly happens. These are different times. Previously, a car stood a little longer and was then reduced in price, but now it may just be that it gets a new price label on the showroom floor and becomes more expensive. Logical if you have a current car of which you as a car company notice that only a few are available in the Netherlands. Nowadays, the customer is quite prepared to drive a long way if you have his ideal car. The Internet plays a major role in this.”

Ten Buuren does not think the situation will change in the short term. “Abroad there is currently also a shortage,” he notes. “I see no reason why used car prices will fall in the foreseeable future. We had already established that due to the shortage, they are often close to the new price and well, those prices have been getting higher in recent years. On average it is already €43,000. I can still remember that it was €19,000.”

Let’s put on the cap of the car buyer for a moment: are there any bargains to be had if you look elsewhere in the country, for example? “No, that is no longer the case. The Internet and sales sites make it all very transparent and, as mentioned, the modern consumer is willing to drive across the country for an interesting car. In fact, it is even difficult internationally, because there are already countless companies that simply import cars from abroad.”

Trade-in easier than ever

Let’s switch the scene to the customer and salesperson in the showroom, not so long ago a good place to showcase your negotiating skills as a car buyer. Folk wisdom then said that you first had to sell your own car to a family member or acquaintance, because you could buy your new one extra sharp without a trade-in. Today, such a transaction is easier than ever because of dealer websites that offer to buy your car from you without any hassle. The Bovag spokesperson for the independent car companies can be brief about it with a broad smile. “Negotiating about the price is a thing of the past with such a shortage of cars, but it is extremely important that you understand how it is a trump card for the car company if you bring a trade-in,” he says. “That gives the car company the opportunity to earn some money from your trade-in car. So the company would like to have it, because many used showrooms are anything but full. That means you can get a good price.”

Small ones disappear from supply new so good for value

What are the gold nuggets that you can hold in your hands as a customer? In other words: what are the popular cars in the buying and selling process and are there developments there that you as a customer can keep in mind? “If you look online, you will find a wealth of information about supply and demand,” says the Bovag man. “An important development is definitely that the small cars in the model range are being phased out by many brands. The prices of used copies are already higher because of this alone. For many people, that means that their Aygo, 108 or Up will hold its value longer, helped by that trend. They are always popular. People find smaller cars and compact SUVs especially attractive. Vending machines are very popular and that is also a trend that influences the price.”

Relatively young car

Is there something for the car buyer to learn about the improved quality of cars and also the recently extended minimum warranty period to one year at recognized car companies? “Consumers are mainly looking for relatively young cars with not too many kilometers”, says Ten Buuren. “Let’s say less than 80,000. It does move, because the year of manufacture used to be the first thing the customer looked at, but that is less and less the case nowadays. The customer is specifically looking for a car that fits perfectly into his picture and the mileage does play a role, but the year of manufacture is less interesting. That is not unjustified, because the bar for that target mileage is currently being raised. Everyone once thought that a car with a ton of kilometers was completely exhausted, but that has crept up to 160,000 and now two tons is almost an upper limit. Logical, because all European requirements make cars more advanced and more sustainable. The reliable service life increases enormously.”

Seen through the lens of the consumer, it would therefore be good if we made that count more when shopping. “Certainly,” says Ten Buuren. “It is not for nothing that Dutch cars are very popular in other countries due to our good roads, the regular MOT and good service registration. Now cars with a lot of kilometers go there quite often, because the consumer here is still shocked by the mileage. That is often really not necessary.”