When selling new cars to Canadians, dealers should keep in mind that most Canadians are concerned about how quickly their new car purchase is going to lose its value. In a new survey commissioned by the online classified site Kijiji Canada, nearly half of Canadian car owners surveyed report they have experienced some form of “depreciation depression.”
To better understand how car owners feel about the loss of their car’s value over time, the Kijiji Canada study surveyed Canadians on costs associated with both new and used vehicle ownership.
Although nine out of 10 Canadians acknowledge that a new car loses value as soon as it’s driven off the lot, many still find themselves depressed over the depreciation, citing a range of emotions from being upset to annoyance and sadness.
“Often purchasing a used vehicle over new makes better economic sense,” said Scott Neil, head of Kijiji Autos. “Our research shows that, all things considered, the cost of new is higher than the cost of used. Canadians who have suffered from depreciation depression in the past should consider making their next vehicle purchase a used one to get the most for their money.”
How serious is Canadians’ depreciation depression? According to the study, nearly one-third of Canadian car owners feel annoyed by the pace at which vehicles depreciate and lose their value, while others report that the issue upsets them (18 per cent), makes them mad (16 per cent), sad (eight per cent), or even downright depressed (six per cent). One in four new car owners reported that they try not to think about the depreciating value of their car.
New vs. used debate
This comes as no surprise. The research reveals that Canadians see new cars depreciating at a faster rate than used cars. For example, survey respondents’ experience indicates that after only one day on the road, a new car loses about 15 per cent of its value, while a used car only depreciates by about nine per cent.
The same came be said for depreciation after a month of ownership (21 per cent for new cars versus 13 per cent for used) and after one year (33 per cent for new cars and 26 per cent for used). For example, between 2010 and 2011 a 2002 Ford Mustang depreciated by only nine per cent, on average, based on thousands of listings on Kijiji.ca, versus a newer 2008 Ford Mustang which depreciated at an average rate of 13 per cent.
The value of used
According to the survey, Canadian used vehicle owners spend significantly less money on their cars, considering costs such as ongoing maintenance, insurance, and vehicle payments. On average, a used car owner saves about $114 a month (compared with what they would have had to spend on a new car) with annual costs reported by new car owners averaging 54 per cent higher than those reported by used car owners. A recent Consumer Reports study also found that buying a three-year-old used vehicle instead of buying a new can save a car buyer thousands of dollars over the first five years of ownership.
Methodology
These are some of the findings of an Ipsos Reid poll conducted between May 24 and 27, 2011, on behalf of Kijiji. For this survey, a sample of 1,013 adults from an Ipsos Reid Canadian online panel (of which 863 have owned an automobile) was interviewed online. Weighting was then employed to balance demographic composition to ensure that the sample’s composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. A survey with an unweighted probability sample of this size and a 100% response rate would have an estimated margin of error of +/-3.3 percentage points, 19 times out of 20, of what the results would have been had the entire population of adults in Canada been polled.
Kijiji Autos is the most visited car site in Canada with more than 4.3 million unique visitors per month (comScore, July 2011). On average, there are approximately 250,000 cars and light trucks listed on Kijiji Autos at any given time and Kijiji users can search for a used vehicle using preferences including: manufacturer, model, year, price range, body-type, kilometre range, colour, and whether a vehicle is for sale by owner or dealer.
