If you’re well familiar with the automobile market, you must have observed or thought of why European cars depreciate faster than U.S. cars, right?
Well, whether you’re thinking of why European cars depreciate faster than their American rivals or you’re just arguing about that fact, you’ll get all the convictions you need here.
Here are 6 reasons why most European cars depreciate faster than U.S cars:
Table of Contents
1. European Cars Have Higher Initial Purchase Price
Amongst the major reasons why European cars depreciate faster than US cars is the initial purchase price. Most European cars have higher initial costs than many American cars, and this often affects their values in the long run.
To better make this clear, let’s compare the initial purchase price of different European cars sold in the US and that of their American rivals.
|EUROPEAN CAR||PRICE (MSRP)||AMERICAN CAR||PRICE (MSRP)|
|2023 BMW 4 Series||$55,500 – $68,250||2023 Chevrolet Camaro||$26,400 – $67,300|
|2023 Audi Q5||$43,500 – $65,300||2023 Ford Edge||$37,945 – $46,485|
|2023 Land Rover Range Rover||$101,000 – $211,200||2023 GMC Yukon||$57,400 – $94,555|
The list above only showcases a glimpse of the huge differences between the initial purchase price of some notable European cars and their U.S counterparts.
Of course, this difference in price can impact the market preferences of these vehicles, especially when you consider the fact that these vehicles are almost similar in functions and specifications.
Moreover, initial cost price often affects the depreciation value of most European vehicles, even when they have an equal depreciation rate with their US rivals.
For example, if a European car and an American car depreciate at the same rate, the European car will still lose more money in absolute terms. Let’s imagine that a brand new BMW cost $50,000, while a brand new Ford goes for $30,000.
If both cars depreciate at a rate of 20% per year, the BMW will lose $10,000 in value, while the Ford will only lose $6,000. So even though they’re depreciating at the same rate, the BMW is still losing more money overall.
European cars are often more expensive to purchase initially than American cars due to factors such as more advanced technology. The truth is, their higher purchase price can make them less attractive to buyers and contribute to a faster depreciation rate.
Still, why are European cars so popular in America? You might want to check that out.
2. European Cars Often Have Issues With Limited Availability of Parts
Most European automakers are notable for producing luxurious and high-end vehicles. This is why you’ll see a huge difference in the price of the Land Rover Range Rover and GMC Yukon, even when they fall into the same vehicle category.
You’ll agree that the appearance of the Range Rover smells high class, and it stands out from most of its American rivals. It’s just quite unfortunate that the parts of most luxurious vehicles of European descents, including the Land Rover, are limited.
While you can easily get the replacement parts for a Ford or Chevrolet ride, you may only have the same privilege at a few authorized stores for most European cars in the US.
The truth is most European brands have a smaller network of dealerships and repair shops in the US, compared to the U.S. cars. While this can make it more difficult and costly for owners to get their cars serviced or repaired, it can also make them less desirable to buyers.
Moreover, this also contributes to the higher depreciation rate of European cars than American rides. How?
Imagine if something goes wrong with your European car, you can expect to pay more to fix it than you would with an American car due to the limited availability of parts.
This factor also contributes to a perception among car buyers that European cars are “expensive to own.” And it can make them less attractive in the used car market, where buyers are looking for a good deal.
Even if a European car is in good condition and has been well-maintained, buyers might still be hesitant to pay a premium for it because they know that its maintenance costs are likely to be higher.
3. European Cars Have Higher Maintenance and Repair Cost
From the foregoing, we’ve established the fact that most European cars are more complex to maintain in the U.S than the American cars. Of course, this is because of the foreign factor involved.
Besides, European cars are often more complex and sophisticated than American cars, as they usually come with more advanced technology and features. This is why they often require authorized dealers to fix or repair them when needed.
Mind you, high maintenance cost could be the reason why most vehicle enthusiasts avoid the European vehicles in the U.S., especially on the used car market.
If American cars come with lower maintenance costs, why the claim that European cars are better than American cars? You may need to also read about that.
You’ll agree that while you can easily get to fix an American vehicle on an American land, fixing a foreign vehicle in the same vicinity may be more complex. So, this factor also has its toll on the depreciation of the European cars.
4. They Have Lower Resale Value
When buying a new car, people often consider the resale value because of the possibility of the need to transfer its ownership in the future.
This is not a good factor for most European cars, as they have more luxury models. And luxury vehicles often attract lower resale value due to factors like lower market demands and higher maintenance costs.
The truth is, European cars often have lower resale values than American cars. This could be because of factors like higher cost of ownership, limited availability of parts and service, and lower overall demand in the US market.
With lower resale values, the depreciation rates of a vehicle tend to move up more quickly.
To explicate this, CarEdge quotes the depreciation rate of the BMW 4 Series to be 44%, and that of the Chevrolet Camaro to be 17% after five years. These are vehicles that are slightly different in price, except from the fact that the 4 series has a higher base price.
Also, while Audi Q5 is forecasted to depreciate by 39% after 5 years, Ford Edge appears slightly lower with 34%. That is still enough to justify that the European cars depreciate the more. And when they tend to depreciate more, they’ll have lower resale values.
5. Their Newer Cars Often Come With Higher Level of Innovation
A notable pride of most European automakers is on their dedication to continuous innovation and development. This is why European cars are always different.
However, newer innovation often creates a shift in people’s attraction towards older vehicles. And when this shift comes more often, it could lead to quicker depreciation in the values of the older rides.
Most American automakers focus more on affordability than embarking on innovation that could fuel up the eventual price of their cars. While this helps them to keep a hold of their market, it also gives their vehicles a better chance of holding their values.
6. European Cars Have Relatively Smaller Market
The European car market is relatively smaller in the United States compared to American and Asian brands, which dominate the market. This means that European cars have fewer customers in the United States than the American cars.
When there are fewer buyers, sellers may be forced to reduce their prices to attract potential buyers, and this can lead to faster depreciation.
In addition, the smaller market may also result in limited availability of spare parts and accessories for European cars, which can lead to longer wait times for repairs and higher costs for replacement parts.
These can further contribute to higher maintenance and repair costs, and it can make a European car depreciate faster.
Different factors often lead to the depreciation of cars, regardless of whether it’s of European or American origin. Most notable amongst these factors are the make and model of the car, how well it’s maintained, and the overall demand for the car in the market.
Generally, luxury cars from European brands like BMW, Mercedes-Benz, and Audi often depreciate higher in the US than many American brands. This is mainly because of their high maintenance cost and lower demands in the US market, especially when compared with the like of Ford, Chevrolet, and Dodge.
However, this may not always be the case, as some European car brands are gaining more popularity in the US.
For example, while Mercedes-Benz appeared as the best-selling European car brand in the United States in the second quarter of 2022, according to Statistica, BMW and Volkswagen are also gaining increasing popularity.
The more these European cars gain more popularity in the US, the more the demands for their vehicle rises. And this will, in turn, lead to lower depreciation rates for the vehicles.