Looking to Buy or Lease? A Word of Advice
Live by this axiom: Buy the simple stuff, lease anything complex.
Leading-edge machinery is a blast to sample. LED displays are always getting brighter, their definition more brilliant. Self-piloting and lane-keeping features are great to show off to passengers. Sennheiser, Bose, Mark Levinson, JBL, and Fender are forever improving sound systems beyond the ability of anyone’s ears to appreciate. Turning on a new Audi’s headlights ignites a choreographed dance worthy of a Tony award.
Atop all that, throw in technologies like electronically adjustable suspensions, intricate turbo plumbing, and the computerized waltz of a gas-electric hybrid drivetrain. Then contemplate all that can go wrong, exercising neurons that haven’t fired since your brain stem was in nursery school.
While whizbangery costs plenty up front, it also loses value fast. Some of that’s simply due to the fact that new, complex technology is prone to flaws and failure. Given enough time, everything breaks. Beyond that, the high tech that seems super cool when it’s introduced is yester tech a few years later. Nothing is less fashionable than something that’s been superseded. Vinyl records became lame as CDs took over, and now streaming services rule the Earth and CDs are dorky. When the brain implants arrive, Spotify’s current business model is going to suck. High-end machinery is a fashion statement. If it wasn’t, we’d all be driving Corollas.
Simple cars and trucks, on the other hand, can’t afford to sparkle with glitzy, microchipped wonders. The technology in a Mazda 3, Kia Rio, or Nissan Frontier isn’t that sophisticated, but it’s proven. Simple things are less likely to break or deteriorate over time, those devices that hardly qualify as gizmos because there are so few moving parts. Anvils rarely fail, cast-iron frying pans last a lifetime, and there hasn’t been an update to the basic design of the flathead screwdriver in a long, long time. Not much can go wrong with simple things.
This is how, over time, what were once expensive cars and trucks become cheap ones, while the ones that started out cheap lose less of their value. Think of it as two intersecting lines on a graph. New car prices live on the vertical access, and value over time sits on the horizontal. Expensive vehicles plummet with terrifying speed while the cheapies enjoy a more relaxed depreciation arc. At some point the two lines intersect, and then it costs less to buy the expensive one and the cheap ones become more expensive.
In its first year, the value of a 2019 BMW 7-series plummeted from $96,803 to $67,637. That’s $29,166 in 12 months. A 2010 7-series, which cost $70,635 new, is now worth about $13,743. On AutoTrader there are several 2006 7-series examples with less than 70,000 miles for $10,000 or less.
Meanwhile, to replace my truck that was totaled, I just paid $15,000 for a 2006 Toyota Tundra SR5 Double Cab. I considered getting something new but ultimately got yet another first-generation Tundra. I found what would become my new-old Tundra in Ontario, California, where it had been stored in the owner’s garage for eight years. And it only had 37,000 miles on its clock.
Old Tundras, beasts of burden built to last, hold their value tenaciously. The BMW 7-series? Not so much.
When my Tundra was new, it cost $29,521. It has manual seats, manual adjustment of the steering column, and I added an Alpine head unit, so now it has Apple CarPlay. Do power seats and power columns truly matter? Do you adjust your seats and columns so often that it exhausts you? Are your arms and hands that atrophied?
New luxury vehicles with all their bells and whistles are a blast. Active suspensions work, wafting in silence is soothing, and those turbos mean big power. But they don’t age well, and they pass out of fashion quickly. So, if you want one, lease it for a few years while it’s under warranty. Get it out of your system. Ask your smartest accountant to figure a way for the lease to be tax deductible.
If you’re buying, keep it simple. Toyota trucks hold their value because they’re built around known components that are less likely to break. And it’s not just Toyotas. Anything with a reputation for solid, reliable longevity will hold its value better over time, and those are almost invariably, straightforward, non-luxury machines. They’re boring, but they’ll be boring for a very long time. And, well, today’s connoisseurs of fine music pay premium prices for vinyl records.
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Published at Fri, 03 Jul 2020 19:00:00 +0000