I was reading an issue of GT Purely Porsche Magazine on a flight recently and came across a letter written by a reader titled “Cost of Everything, Value of Nothing”. He talks about the downward spiral of car values and specifically Porsches latest involvement in that trend.
Evidently there are people who actually believe (or used to believe) that buying a Porsche was a way of buying into a depreciation-proof sports car experience. Although, in general, a Porsche should have a bit lower depreciation rate given their desirability and comparatively limited production quantities, the fact of the matter is they’re still going to go down in value. Even more so given the economic climate we’re currently faced with. Obviously.
I wonder, though, if some of the mistaken perception isn’t based more on “perceived depreciation” rather than an objective look at values using a formula that leaves emotional perception out of it (yes, I know depreciation is a concrete number and not a subjective perception). After all, when you take a $90,000 sports car and 2 years later it’s still worth $65,000, an example on Craigslist right now, the average mind doesn’t translate that too well. Both figures are out of reach for the average person purchasing a car, even though the vehicle has lost nearly a third of it’s value in 2 years.
Then again, maybe I need to lay off grandpa’s old cough medicine and start making some sense.
What DOES make sense (or perhaps doesn’t make sense depending on how much you paid for your Porsche) is the average depreciation for new cars, especially in that first year. On average, they say a new car loses 20% of it’s value the moment you drive it off the lot. Consider a $126,000 Porsche 911 Turbo Coupe as an example. That new car smell and the luxury of driving it off the lot is going to set you back as much as 28% or $34,000. That’s as nuts as the gibberish I was writing a couple of paragraphs ago.
Year 2 depreciation is darn near as aggressive at around 19% to 20%. Basically, you lose around a third of the value of your car in the first two years. More like 37% for a higher priced car like a 911 Turbo. Here’s an interesting chart from Cars.com:
After the second year, going forward you’re at a more reasonable 7% to 10% reduction of the car’s value per year. At some point, depending on the model, it may start to turn around or at least level off. That’s where the benefit of owning a Porsche comes into play. While other old cars are headed to the junk yard, your old Porsche is likely to end up being worth at least something.
Probably nothing new to most who read this blog, HOWEVER, back to my ramblings earlier on, when I look at the hard numbers rather my initial reaction based on perceived depreciation, it starts to make sense why I see 911s about 2 years old worth 65% to 70% of what they went for new. I had the misperception that due to the economy, we were seeing unbelievable blowout prices on pretty much new Porsches. When in reality, we may indeed be seeing cheaper prices due to not as many buyers, but the depreciation is still inline with generally accepted rates.
What brought all this on is I keep seeing several newer cars (2 to 3 years old) listed on Craigslist. Cars like a 2007 911 C4S Cabriolet for $96890 (new it was $149,610) and a 2007 Carrera S for $65,000 (new it was $90,000). It got me thinking about this whole Porsche values thing and what it’s really worth to be the first person to sit your butt in the owner’s seat of that sweet ride. Do you think either of those owners got $53,000 and $35,000 worth of new car enjoyment out of two years of ownership? For $53,000, you could darn near have your pick of used Porsches for sale in the Portland area at the moment.
After looking at several charts like the one above, I’ve come to the conclusion that unless I have “stupid money” sitting around, my best bet for buying a “new” Porsche would be one that is 2 years old.
So what Porsches stand the best chance of being worth something some day or at least may enjoy a slower rate of depreciation? Here’s what I’ve learned so far:
- Specialty cars like ones that have GT or RS in the model name
- Older Porsches such as 356s, 1960s 911/912s, etc. The older it is, the better chance it will hold value or possibly increase in value over time.
- Limited run models like Turbos, the 1998 Carrera 4S, etc., which also tend to be higher priced cars, seem like they hold more value. Anything that the general Porsche populace doesn’t have.
Bottom line for me, at this point in my life, is any Porsche is special. Fortunately I don’t have to worry too much about depreciation because I can’t afford something with a window sticker in it. My lack of money is solving problems left and right.
Duncan Blackmore in the letter to GT Purely Porsche Magazine summed things up nicely:
…instead of spending hours upon hours surfing the Net tracking values of your car and then logging on and crying about it online…just go outside and enjoy the car parked on your drive that you can no longer afford, whose value has descended into negative equity against the outstanding finance and when all’s said and done, is still one of the most thrilling cars money can buy. No matter how much/little it’s worth.
My sentiments exactly whether you’re buried in the car or have a screaming deal sitting in your driveway. It’s a Porsche…you “own” it…go enjoy it!
Info Sources: Cars.com, Yahoo! Autos, Craigslist, that thing we call the Internet.
Interesting article Ryan. I think you hit the nail on the head with your strategy of buying a slightly used Porsche. But man, wouldn’t it be fun to break a new one in?
My friend that I met at work yesterday had a whimsical look come over his face when he talked about buying his Porsche new. I’m sure it was well worth it for a guy who had the cash to afford it.
The best way to acquire a Porsche, however, is to win one for free online. 🙂
I agree. Just to reiterate your point, it makes a lot more sense to buy a car, in particular a Porsche, “pre-owned”. The depreciation in year 1 is just depressing. I also think most people would be more then happy to drive away in a 2-3 year old Porsche. Its most likely been maintained well, mint condition, low mileage, newer body. Obviously if you’re really well off you’d probably opt for the brand new model. I have a friend however who was in love with mercedes but refused to ever buy a used model. He basically said it was like getting a really worn in women. Ok bad analogy… He is now driving an 08 Honda Civic.
I agree with a lot of your points Ryan. Buying a 2-3 year old Porsche is probably the best way to go right now. Especially with all of this recession specials popping up all over the place. On the other hand I think that it is the leasing industry who is most to blame for such horrible depreciation on our vehicles. They speed up depreciation so that they can charge the highest amount for lease payments on your new car. Yet in the end they expect the residual value to be higher then what they actually set. It has been this structure which has brought on such high depreciation upon all of our vehicles since we have been able to lease cars. I know Porsche does not exactly have the best lease plans, but in general this system effects all automobiles. Any thoughts?
That’s an interesting point, Scott. I hadn’t considered the effects of leasing on the depreciation values. I’ve never leased a car, so I don’t have any first hand experience. I am always intrigued by some of the lease specials though. Especially when you consider the costs in buying a new car and the potential of saving money if you can negotiate a good deal on a lease.
I disagree, when you buy a porsche, its got to be new. It just doesnt feel right if someone else drove it. This isnt a honda or a ford etc…
About depreciation, everything depreciates. But I would rather put my hard earned money into a porsche and watch it depreciate than into another vehicle. Really, I dont think porsches depreciate in the eyes of their owner…they get more special
i would like a new one. but i’ll gladly accept the one you’re giving to me =)
terrific post! The value of a car has always meant what it means to you as an owner, value is a word that is a broad brush of subjectivity!
buy a nice, well cared used porsche. and check it
The most cost effective way to own a Porsche is definitely buy used, maybe 2-3 years old. I have bought cars new and slightly used and the new cars feel like used cars after 6 months anyway, so you might as well buy used and let someone else with more money take the major depreciation.
After test driving a used porsche 911 carrera with 30K miles on it I fell in love with the brand. It truly is a driver’s car. After considering to buy a used one, I opted for a new one. I understood the depreciation value, I also understood the used one was in great conditions. But if I am going to give myself a ~$60K gift that has scratches and other unknowns that will give me headaches I rather opt to spend more and get a new one. After all, if I am working to pay for my car the less time I spend maintaining it the more time I have to make more money and enjoy the car. Regardless of being used or new, a porsche, is still a porsche, and the feeling of driving one is hard to beat. So go with what you can afford.
Wow, those first two years of depreciation are killer, personally I don’t see what the big deal is about brand new cars, you can always find one that is a couple of years old and in amazing condition for much less.
If money is not an issue buy it new, buying a 2-3yr old Porsche makes sense if you want the most value (and reduced risk) for your money Buy a performance model, keep it, enjoy it and if well maintained it may increase in value.
For Porsche Platonist like myself, owning a Porsche was a mystical experience and had little to do with its age, but had everything to do with the companies philosophy, tradition, and the overwhelming aesthetics and performance of the vehicle. Value is liquid and is subject to the law of perception and symbolic exchange. One post got it right, just make sure it is special to you! I Four years ago, I traded in my Porsche for a Volvo SUV– why? A new born. Ironically, when my son was 2, I walked in a Ferrari dealership. The sales associate floored the throttle of a 360 and my 2 year old smiled. Evolution.
Look,
Some people worry about money and whether their friends will still be their friends if they are seen driving an econobox. If you care about how “you” feel and you can afford a used Porsche or other high end sportscar, go buy it. The smile of satisfaction on “your” face doesn’t belong to your “friends”.
Party on Garth !