A Tesla Model S holds 82.5% of its value after three years

author-avatar By on March 09, 2020
A Tesla Model S holds 82.5% of its value after three years

Photo by Matt Henry on Unsplash

According to the NRMA and Glass's Guide, as reported by CommSec, the Model S lost just 17.5% of its value since 2017.

CommSec's luxury car sales index has now risen for eight straight months, even as new car sales have plummeted for nearly two years.

In February 2020, CommSec found luxury vehicle sales rose 0.4% to 88,855, while the Federal Chamber of Automotive Industries last week reported overall new car sales fell 8.2% based on the same time last year.

CommSec's report also analysed data from the NRMA and Glass's Guide to determine what models of cars took the least amount of a hit in depreciation over the past three years.

The cars that held their value the best over three years were:

  • Fiat 500 Lounge - 91.9% of value held
  • Toyota LandCruiser - 90.7%
  • Volvo XC90 - 86.5%
  • Jaguar E-pace - 84.6%
  • Porsche Cayenne - 84.1%
  • Haval H9 - 83.6%
  • Tesla Model S - 82.5%
  • Porsche Macan - 82.4%
  • Honda Odyssey - 82.1%
  • Tesla Model X - 80.9%

This generally correlates with Savings.com.au research, which looked at popular models of cars and found the Landcruiser, which is popular with enthusiasts, holds its value better than many others.

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Why are luxury car sales up?

While luxury car sales are down on December 2016's volume of 106,658 units, they have risen every month since July 2019.

CommSec has attributed this to the 'wealth effect', which states that as home prices increase, people feel more inclined to upgrade their vehicle.

"When home prices were rising strongly from 2013-2017, sales of new vehicles were similarly rising," CommSec's report said.

"Australian home prices started easing in November 2017.

"Annual new vehicle sales peaked in March 2018 and have been falling in the period since."

The CommSec index found it takes a worker on average earnings less than 40 weeks to buy a new BMW 320i, compared to 44 weeks a decade ago. 

However, this result is down on the best levels of just over 35 weeks seen in the September quarter of 2017.

Similarly, it takes a worker just under 15 weeks to buy a Toyota Corolla, down from 19 weeks a decade ago.

CommSec's report said despite recent sluggish wage growth, wages and wealth had been 'rising solidly', with average weekly earnings rising by 35% in the past decade, versus a 23% increase in consumer prices.

"Wage earners had been looking to upgrade their rides over time, pushing more sales into the luxury vehicle category," the report said.

According to the Reserve Bank (RBA), a number of factors contribute to the purchasing decision, with one being the wealth effect.

One of the RBA's studies "identifies a positive and stable relationship between household wealth and consumption, largely reflecting changes in spending on motor vehicles, durable goods and other discretionary spending".

Other factors such as interest rates, the Australian dollar, vehicle pricing, warranty periods and availability of finance also affect purchase decisions.

CommSec also reported loans to buy cars in December were up 6% on a year ago, representing the fastest gain in almost three years.

In one month alone from January to February, home prices rose more than $4,000 on average, marking a 6.1% rise year-on-year.

Market wide, however, January 2020's car sales results marked the worst January result since 2009. 


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2019. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $30,000 loan over 5 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison is passionate about breaking down complex financial topics for the everyday consumer.

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