The X Factor.
How do you feel when you start your car? Exhilarated? Proud? In a state of comfort? Bored?
The way your car makes you feel is one of the most important aspects to value retention. How would you feel about your car if it's constantly having new problems? Probably hating it, you would then be more likely to sell it for a cheaper price soon after. The more your vehicle breaks down the less you feel positively about it.
StatsAuto believes that a car's reliability is a fundamental aspect of value retention. Reliability is the overall consistency of a measure which in our case can be considered, car problems. Each year J.D power publishes their Vehicle Dependability Study which examines issues reported by owners of three-year-old vehicles. These issues range from engine and transmission, heating & cooling, controls & features, to the overall driving experience. Okay so what, who cares?
To measure this notion of reliability, StatsAuto has combined 11 years of data published by J.D power from 2005-2016. The corresponding list goes from the most reliable manufacture on average to the least reliable.
Why does this matter? Unless you're a mechanic and/or do not worry about depreciation this fact doesn’t matter. But, for the average consumer, reliability is of the utmost importance. It also translates to less frequent mechanic visits! All of this adds up to a higher level of utility derived from your automobile.
"Utility" is an economic term referring to the total satisfaction received from a good or service. In our case - the good or service would be the auto in StatsAuto! The economic utility of an automobile is important to understand because it will directly influence it's demand.
There is a strong correlation between the reliability of a particular car brand and its deprecation in the used car market.
Now for the fun part! Let’s prove this theory that the more reliable car brands will depreciate less in comparison to the car brands which are less reliable…. on average of course. Using a statistical method called Linear Regressions StatsAuto compares the resale value of Lexus and Volkswagen. Land Rover is dead last but it doesn't have as much volume as Volkswagen, so Volkswagen was chosen for our analysis.
What did we find? Volkswagen automobiles depreciate on average 21.4% more than Lexus automobiles.
Our theory was right! Cars at the top of the list depreciate less then cars on the bottom of the list.
The savvy consumer benefits from the StatsAuto Reliability Table.
Below you can see our regressions results if you are interested. The number highlighted in red is the average amount the vehicles depreciate each year holding everything constant, meaning if they just sat in your garage forever.
Lexus depreciates at an average of 9.55% while Volkswagen depreciates at an average of 11.59% depreciation per year.
To calculate net difference we use Lexus as the base. There for:
(11.59-9.55)/9.55=.2136 or 21.4%