Can Depreciation Be A Good Thing?

One of the biggest worries for people buying a new car is the depreciation. If you purchase a car that depreciates quickly it is likely that you will not have much residual value left by the time it comes to part exchange or sell it, or you may even be in negative equity. Whilst depreciation on a new car may be something to keep your eye on for negative reasons, can it ever be a good thing? If you’re looking for a pre-owned car that is barely a year old or less, especially if it is an electric car, it may be a good thing indeed.

There has been a lot of press recently about the demand for electric vehicles hitting a bit of a bump in the road, certainly at least for private buyers, and not being as strong as it once was. As a business purchase, they certainly offer a degree of incentives when it comes to salary sacrifice and Benefit in Kind (BIK) tax breaks, yet for private individuals the incentives are no longer there. Earlier government grants and subsidies no longer exist and with the rising cost of electricity prices it means an electric car isn’t quite as cheap to run as it once was.

A fall in demand however, combined with the strict ZEV Mandate brought in by the government, means that not only are manufacturers are offering sizeable discounts on brand new models, but pre-owned examples can be found with a considerable drop in value even after just a year. If you are in the market for a nearly new electric vehicle, you might be surprised at some of the cars available after around 12 months for a fraction of the cost of a new one.

With the majority of vehicles, the largest amount of depreciation is going to be in that first year so why not let someone else worry about the fall in value. Take a look at some of the discounts that can be had on the following selection of cars found on the market for a huge saving compared to when they were brand new.

BMW i7 60 M Sport Pro

BMW’s flagship all electric saloon is a demonstration in luxury, refinement and technology. Sharing a lot of its underpinnings, battery technology and motors with the Rolls Royce Spectre shows just how luxurious and refined the ride and performance is going to be. Whilst the abundance of technology includes things you never even imagined like doors with integrated touchscreens, diamond surround sound speakers and a 31” ‘Theatre Screen’ to enjoy in the executive lounge seating in the back.

Whilst large executive saloons have never been the best at holding their value well, the BMW i7 being both a flagship saloon and fully electric means it struggles more than most. Opt for the i7 xDrive60 M Sport Pro and the base price is a fairly considerable £143,430. Add a few extra luxuries such as satin paint, the big rear screen and more comfortable seating and you can easily make that £160,000. A quick browse on Auto Trader (at time of writing) shows a number of cars available at that trim level that are less than a year old and are priced at under £100,000. One with a particularly extensive specification was £97,500 and was just 10 months old, a drop of around 30% in value since it was new.

Abarth 500e

The Abarth 500e is the Italian brand’s first foray into the electric performance hot hatch market, and one that has received a lot of positive reviews. The Abarth 500e is everything a performance 500 should be, with bigger bumpers, bright colour options, impressive acceleration and a great soundtrack. The latter probably not something you were expecting from an electric model, but the Abarth 500e literally has an exterior speaker that mimics an exhaust noise as you accelerate to give the impression that it has a combustion engine. Sounds a bit odd and perhaps a bit gimmicky, but Abarth were keen to keep the noise aspect of the brand, and it might be something we see a lot more of in performance electric models.

Much has been said about the fact that electric models carry a large premium over their petrol equivalents and the Fiat/Abarth 500e is one of the worst offenders in that respect. A petrol powered Abarth 595 starts at a little over £21,600 in base trim, whereas the Abarth 500e starts at £34,195, a premium of almost 60%. Not a great start. With such a high starting price it is little surprise that an electric Abarth 500e suffers quite the price drop after such a short space of time. At time of writing there were a number of examples on Auto Trader for under £26,000, signifying a 25% drop in value after less than 10 months. With very little competition in the electric hot hatchback market for the Abarth, it is a very tempting buy at less than a year old and for not much more than its petrol powered equivalent.

Porsche Taycan Turbo S

Despite nearing 5 years in production and the abundance of competitors that have come to the market since, the Porsche Taycan remains one of if not the very best electric saloon money can buy. It was widely thought of as the first electric model to drive, feel and handle like a normal car, but not just that, it drove like a Porsche should. High praise indeed for the brand’s first all-electric model and proof that all was not lost despite the venture away from the combustion engine.

At the top of the Taycan range (aside from the very impressive but equally as baffling Turbo GT) stands the Turbo S. Despite obviously not being Turbocharged in any way shape or form, the flagship badge remained for the fastest and most powerful model in the standard range, offering in excess of 750bhp and a sub-3.0 second 0-62mph sprint time. It also came with quite a considerable staring price of just over £161,000, before any of the extensive options list have been added. A 2023 Porsche Taycan Turbo S can currently be found for as little as £95,000 on Auto Trader, a drop in value of 42% after just a year. The example in that case had covered just 4,000 miles and that wasn’t taking into account the very extensive options list it had which would have made the depreciation even greater.

BYD Atto 3

One of the biggest talking points in the electric car market over the past 12 months has been the rise of Chinese manufacturers, and in particular BYD (standing for Build Your Dreams). New to our shores but already the biggest manufacturer in China, the brand currently makes and sells more cars worldwide than Tesla. Expect that number to grow even more over the next few years as the company have only just become known across Europe and other marketplaces. The innovative technology and cutting edge powertrain development means the brand is a serious contender to lead the way in the future of electric car possibilities.

Despite being much more reasonably priced than many of its European or American rivals, the brand hasn’t escaped the depreciation reputation that electric cars have of late. In particular, the Atto 3 model, their compact SUV is their most popular model and starts at a very reasonable (for an electric car) £38,000, and £39,700 for their top of the range Design model. Despite the reasonable pricing, there were a plentiful supply of examples for sale on Auto Trader at time of writing, with even the more desirable Design model found for just under £25,000, and just over 6 months old. A reduction of 37% in value for a nearly new car represents a fantastic saving if you are looking to explore the next big thing in electric motoring.

Audi Q8 e-tron

As you would expect from Audi, their latest line up of electric only models is closely related to its petrol equivalent. Each demonstrates the same level of stylish design, interior quality and innovative technology in a familiar looking package from a brand you know well. Their latest Q8 e-tron takes that even further and offers greater performance, improved range and updated technology in an attempt to lure people out of their combustion engine Q8’s, rather than creating a stand alone model as an alternative.

Being from a luxury German brand, the Q8 isn’t cheap to begin with. The range starts at £71,000, although unusually when compared to other brands, this is actually £5k less expensive than the petrol equivalent. Despite the reasonable pricing however, the Q8 e-tron does not escape the relatively extreme depreciation in such a short space of time. There were a number of examples available on Auto Trader at time of writing that were exactly 12 months old yet prices started at just under £44,000, a saving of 38% over the list price when new for a car that had covered just a few thousand miles.

Polestar 2

The Polestar 2 was one of the very first mainstream compact electric saloons to be launched and still remains one of the very best. A direct rival to the Tesla Model 3, the Volvo sub-brand version offered all the same functionality and technology in a stylish package and comes from a brand renowned for safety and trustworthiness. Its popularity is justified thank to its capability and its variety in the range to offer exactly what you are looking for with your electric car, be it range, performance or functionality.

Being a popular model however also means that there a quite a few pre-owned examples on the market, rather than the demand not being there in the first place. The base model is the Standard Range Single Motor model which starts at just under £44,000, with the sought after Long Range Dual Motor version starting at just under £48,000. A 12-month old example of the former can be found for just £27,000, a reduction of 40% of the list price when new, whilst the latter for a little under £30,000, a saving of 38% respectively.

Tesla Model 3

The Model 3 was the manufacturer’s first venture into a more affordable electric model for the masses. With the Model S and X being out of quite a number of potential customers’ price ranges, the 3 brought the Tesla brand to more people than ever before. Retaining the stylish and incredibly aerodynamic looks of the range, the same minimalistic yet stylish interior and crucially the advanced technology features, the Model 3 has been a huge sales success for the company and rightly so. Its recent mid-life refresh means that it can remain at the very top of its game and be the one to beat for so many forthcoming models from established and emerging brands.

The Tesla Model 3 has the same reasoning as the Polestar 2 when it comes to its relatively quick depreciation, its popularity. The Tesla brand is always a desirable prospect for so many, but the fall in demand for electric cars in general and the fact that the company has sold so many examples means there is a plentiful supply of nearly new examples on the pre-owned market. The sought after Long Range iteration offers impressive capability for a relatively reasonable starting price of just under £50,000. However there are a number of examples for sale at time of writing on Auto Trader around 12 months old that are available for roughly £33,000, a drop in value of 34% after just a year.

Fisker Ocean

Fisker are one of those highly thought of brands who use a combination of ingenuity, clever features and advanced technology to stand out from other electric car companies. Their forward thinking approach enables them to offer something different amongst a crowded market and a genuinely impressive product offering. Despite an initial huge demand for the Ocean model, the company structure and finances seem to have let the brand reputation down just when it was beginning to find its feet. Talks of shutting down the production due to lack of funds, investors having to step in and price reductions have meant that residual values have suffered somewhat due to the speculation.

A brand new Fisker Ocean (at current prices after price cuts and potential offers) has a list price of around £58,000 for the ‘Hyper Range, Extreme, Dual Motor’ version, which when compared to rivals is a very reasonable price for the functionality, capability and ingenuity of the model. On the pre-owned market, despite limited numbers (which could be down to availability or the fact that owners are reluctant to sell their cars if they are heavily in negative equity), examples can be found for around £31,000 even with extensive options added. Many of the available examples at this price have done less than 7,000 miles and were registered new less than 6 months ago. If you can deal with he speculation and the uncertainty of the brand, this represents an excellent chance to purchase a nearly new car at 47% off its initial list price.

Mercedes EQS

Mercedes Benz’ current range of electric cars are amongst the best on the market, with the EQS being one of the stand out models. Built to take on the Tesla Model S yet offer even more technology, range and performance, the EQS is hard to beat at all 3 for the regular production models (Model S Plaid excluded for the performance side of things). The levels of luxury and refinement certainly are hard to beat in the large luxury saloon sector, and the latest model offers one of the largest ranges of any electric car thus far.

Being a large executive saloon however, the residual value after just 12 months or less was always going to suffer, being an electric large executive saloon means the value is always going to struggle even more. The sought after AMG Line Premium Plus comes with all the features you would ever need, and plenty you’d probably never use, starting at just under £120,000 before any additional options are selected. At time of writing, Auto Trader had a number of examples for sale, some less than 6 months old, at a little under £70,000. With 42% off the starting price for a car that is less than a year old, the EQS is the very definition of ‘a lot of car for the money’.

Jaguar i-Pace

When the i-Pace was released it was not only Jaguar’s first attempt at a fully electric model, but was highly regarded as one of the best electric cars on sale at the time. Despite being launched way back in 2018, the car was so far ahead of its time that it remains a genuine alternative to many other models despite minimal model revisions over that time period. However, the product cycle for an electric car is seemingly not as long as a combustion engine vehicle and the lack of enhancements and new offerings may be starting to catch up with the i-Pace. Many motoring press articles in fact claim the model is the fastest depreciating premium model on the market.

So do they have a point? Well the numbers speak for themselves for the popular Jaguar model. A brand new i-Pace costs just under £70,000, quite a reasonable price point compared to its major rivals from BMW, Audi and Mercedes Benz. A number of examples currently on Auto Trader that are only a month or two over a year old however are priced at around £33,000, a reduction of 53% in just over 12 months. With such a large depreciation in its first year, it is unlikely to depreciate at the same rate for a further 12 months. So could the Jaguar i-Pace represent a fantastic way into a relatively new car for a huge saving? It could just be.

Oracle Car Finance

If you are worried about the depreciation in your vehicle, or think you may be in negative equity, speak to your dedicated Account Manager today. Our expertise and many years of knowledge of the motor industry mean we are well equipped with the ins and outs of car valuations and providing helpful information about the equity of your vehicle.

If you are looking at purchasing your next vehicle, at Oracle Finance we have your next car’s funding sorted, no matter how it is powered. Our expert Account Managers use our panel of over 20 specialist lenders to help you to find the perfect package, bespoke to you and your circumstances. Our team are always on hand should you have any questions about arranging car finance and your dedicated Account Manager is ready to take your call today.