Two-tiered market blamed for NZ's poor ranking in car value depreciation

New Zealand's worst ranking in a global survey for depreciation in cars has been blamed on the country's two-tiered tiered market structure with new vehicles entering the fleet as well as used imports.

New car values slump 54% after just 56,000 kilometres beating the UK and the US, while cars in China have the smallest drop in value.

The survey by Carspring, an online vehicle trading site based in the UK, showed that not only do cars lose their value fastest in New Zealand but the country ranks well down the field in terms of the affordability of used cars, at 19th.

The US is the cheapest place to buy a used car followed by the UK and Russia, while Singapore ranks as the most expensive. Carspring, launched as a start-up in 2015, didn't provide an explanation other than to note that taxes, tariffs and currency valuations play a part.

But the national body of car dealers, the Motor Trade Association, says factors that affect New Zealand car values include the large volumes of used imports on the market and the tendency for new vehicles to sell below their list price.

"New Zealand is somewhat unique amongst developed markets in that we have a two-tiered market," MTA dealer services and mediation manager Tony Everett says.  

"After many years of considerably higher volumes of used vehicles than new, used imports now make up the larger share of the national fleet. Used imports can be accessed and shipped to NZ and still be a marketable proposition – in effect, they are already heavily discounted at their source".

The Carspring survey covered 40 countries, including "the majority of the largest car producing nations, plus other countries of automotive interest, whilst brands were selected based on global popularity."

But it has some quirks. There is no mention of Honda, Mitsubishi or Nissan and Toyota only rates a mention for pick-ups and hybrid vehicles. Japan is included in the survey, though, ranking 12th in terms of the most affordable country to buy a used car.

Australia ranks better than New Zealand for depreciation, with a drop of 45% in a car's value after 56,000 km but in terms of the affordability of used cars is only one notch above New Zealand at 18th.

If cars are a dud investment in terms of capital gain in New Zealand, that hasn't deterred Kiwis from buying. New Zealand new vehicle sales hit a record in January, signalling no slowdown from three straight years of record sales.

Registrations of new vehicles jumped 16% to 13,823 in January from the year-earlier month, the highest level ever recorded for the month, according to the Motor Industry Association.

Toyota was the overall market leader for the month, with a 17% market share, followed by Holden with 13% and Ford with 11%.

Mr Everett says assessing depreciation can be problematic in New Zealand because sales of new vehicles "are often well below the so-called 'list price'."

"This is not unique to NZ, but does mean a considerable discount is applied to start with which can serve to add to the 'perceived' new vehicle depreciation," he says.

"The majority of new vehicles sold in New Zealand are to business and fleet buyers, so discounts can be significant. It is not unusual to see promotions offering more than a $10,000 discount on selected models during periods like the agricultural Fieldays event, and other occasions."

Some segments of the market held their value better than others, such as diesel SUVs and utes, he says.

(BusinessDesk)