Fleet News

Gadgets don’t work for residual values

COMPANY executives may demand them but expensive high-tech options fitted to luxury cars will not always prove attractive to used car buyers.

Goodies like radar-controlled cruise control, premium audio systems and television receivers add thousands of pounds at the front end but retain just a ‘fraction’ of their value after a typical three-year fleet contract, according to residual value experts at EurotaxGlass’s.

Richard Crosthwaite, prestige car editor, said: ‘These hi-tech options play an important role in seducing potential buyers of new prestige-brand cars, but weak residual values suggests that used car buyers remain unconvinced.

‘This is partly due to concerns about long-term technical reliability, but more significantly there is the perception that upgrading systems such as cruise control and audio brings limited additional benefit.’

For cars in the large luxury segment, such as BMW 7 Series, Mercedes-Benz S-Class, Audi A8 and Jaguar XJ, the average cost of radar-controlled cruise control is £1,380, but after 36 months they already lose 93% of their value, and so are worth only £100.

In the large executive segment, cars such as BMW 5 Series, Mercedes-Benz E-Class, Audi A6 and Jaguar S-type, the average cost of a premium audio system is £670. Its value three years later would be £90, a drop of 87%.#

In the same segment, the average list price of a television receiver upgrade for a satellite navigation system on a new car is £700, but after 36 months this falls to just £50, a drop of 93%.

Mr Crosthwaite does note some exceptions to the trend, however, adding: ‘Demand for satellite navigation on prestige models – particularly large luxury cars and large SUVs – is such that there is a residual value penalty where it is omitted.

‘We’ve also found other options with improving residuals, such as electric sunroofs. After a period when few new cars were purchased with them due to the ubiquity of air conditioning systems, sunroofs are experiencing a resurgence in popularity in the used market.’

The options lottery

Executive options and percentage retained of list price:

Leather 72%
Satellite navigation (full colour screen versions) 44%
Wheel upgrade (by one inch) 39%

Radar-controlled cruise control 7%
Television receiver upgrade 7%
Premium audio system upgrade 13%

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