Which second hand cars hold their value?

One of our interns Jonathan Jayes asked “Say you want to buy a five-year-old second-hand car with 30,000km on the odometer, drive it for three years (averaging 15,000 km per year) and then sell it again. To minimize your capital depreciation, which is a good car to choose?”

To answer the question he scraped adverts for second-hand cars on Gumtree, for a total of 390 000 different vehicles across South Africa.

In the figure below we show the difference in asking prices for the situation described above for the 15 most popular models on Gumtree. Here, the flatter the line, the smaller the difference between the price you would buy the car for and then sell it on for. There is a surprising amount of dispersion in how much value is held among the 15 most popular makes and models. It ranges from north of 70% for the Kia Picanto, to below 50% for the BMW 3 series – as shown in the table below.

We can see that relatively cheap cars, such as the Nissan NP200 and Kia Picanto hold their value well. Further, makes and models which are very popular, such as the VW Golf and Polo Vivo also can be sold on for more than three-fifths of their purchase price. The VW Golf stands out as relatively expensive (nearly 3X the asked purchase price of the Kia Picanto) but still holds 62% of its value 45,000 km and three years later – a good buy for sure!

It is worth noting that this data shows only the advertised prices on Gumtree. We do not know the final price the cars advertised sell for, or if they sell at all! In addition, ownership costs include maintenance and insurance, neither of which are accounted for here.

If you want to have a look in more detail at the trade-off between price and kilometers, have a look at Jonathan’s website.

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