Why do flagship sedans depreciate like there's no tomorrow?
Jason · Apr 7, 2021 09:00 AM
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Flagship sedans, they are the pride and torchbearers for luxury brands. They display the swankiest interiors, the latest technology, and nothing is left on the table. Captains of industry are regularly seen schlepping around in such luxobarges. They want to be seen in nothing less than the latest and greatest.
The Mercedes-Benz S-Class and BMW 7 Series (replete with gargantuan, unsightly nostrils) are perennial favourites for those seeking an opulent and luxuriant motoring experience, and as such have price tags to match the status. But, if you trawl through the classifieds, you'd see that used examples of these cars depreciate faster than a rock falling off a cliff.
A quick survey shows that, these flagship sedans broadly lose 33% in value over a 2 year period. That means, if you bought a new Mercedes S450L in 2018 for RM 699,888, you'd have lostRM 231k by 2020. You're probably horrified by now. So, what drives this mad occurence? Let's break it down.
Company purchase
More than just being low volume cars, flagship sedans are usually purchased as company cars. This means that, such cars will be driven a lot, racking up high mileages and incurring more wear and tear. And it's almost a certainty that such cars will be driven up until a set expiration date, which is when the car's warranty ends, or when a new model rolls in to make the current flavour obsolete.
Once that happens, companies would usually seek to dispose of these cars like dropping hot potatoes. Why? Because they know, when these cars are out of warranty, maintenance would usually cost an arm and a leg, which brings us to....
Prohibitive maintenance & parts
It's all nice and dandy, being able to show off the latest toys in your latest BMW 740Le when it's new (like adaptive cruise control, autonomous parking or laser headlights). However, a few years down the line, some of these features will start to fail, and need replacing (yes, repairs are not possible most of the time).
Remember, these features are not built to last long. For example, the air suspension is built with ultimate comfort as a priority, not durability. Can you imagine the cost of replacing an entire set of air suspension, especially when the car is out of warranty? What about laser headlights, the radar for your cruise control or even your ADAS cameras? Well, I can tell you it won't be cheap.
Low secondary demand
It's not difficult to deduce that, high cost of ownership will have an impact on resale value and demand. It's simple math. The more expensive a car is to upkeep, the less appealing it is to used car buyers. And this is precisely why the used car market for flagship sedans isn't all that big.
When the secondary demand for such cars is low, the knock-on effect is that prices of such vehicles just can't command a premium. This is because carbuyers are afraid that owning these cars will cost them a small fortune, hence preferring to steer clear of such sophisticated machines.
Conclusion
Make no mistake, luxury flagships such as the Mercedes-Benz S-Class and BMW 7 Series are wonderful cars in their own right. It just doesn't make much sense to buy one used, especially one that is out of warranty. Even someone with deep pockets will curse the ownership costs.
Buying new will be the more appealing option, but then you'll have to worry about the massive depreciation the moment the keys are handed to you. I know, I know, worrying about depreciation is no way to live life, but money is money. Depreciation is a certainty in life, just like death and taxes. Just gotta live with it.
Jason's foremost passion is all things automotive, where he spent his formative working years as a Product Planner and Trainer. An Advanced Driving Instructor by training and an all-round enthusiast, Jason loves going into intricate details about driving dynamics. Will drive anything with 4 wheels and a steering.