UK residual values of prestige Sport Utility Vehicles (or SUVs, also known as ‘4x4s’ here) continue to outperform the wider used car market, despite recent increases in availability, used vehicle pricing specialist Glass’s said.
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Although many of these vehicles have experienced modest falls in their residual values over the past year, key models, such as the BMW X5, Lexus RX300, Porsche Cayenne and Volvo XC90, all still retain over 80% of their original cost (as trade-in value) after a year and 12,000 miles.
“Registrations of prestige SUVs have more than doubled since 2001, and manufacturers continue to produce new models in response to high demand,” said Glass’s spokesman Richard Crosthwaite.
“However, the prestige 4×4 sector is still relatively small – accounting for under 2% of the total new car market in 2004 – and their relative rarity helps underpin strong residual values.”
Glass’s predicts that values in this sector will ease back over the next year, but that they will continue to out-perform the market in general.
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By GlobalData“We believe that sales of new prestige SUVs will climb still further, helped by the arrival of new models such as the Audi Q7 and the Range Rover Sport. Nevertheless, so long as the increases in volume are maintained at sensible levels by manufacturers, the impact on values will be relatively modest,” said Crosthwaite.
Seasonality
It was once assumed that UK values of 4x4s were seasonal, peaking in the winter months when their all-wheel drive technology comes into its own. (Unlike in the US, prestige SUVs are not offered in 2WD-only form in the UK.)
“The reality is that the values of most of these cars are no longer influenced by seasonal factors,” said Crosthwaite. “Instead, most people buying cars in this sector are attracted by the internal space, the feeling of safety, the rugged looks, and the commanding driving position. The simple fact is that these vehicles remain very fashionable and, until this changes, most will keep their enviable reputation for slow depreciation.”
Optimising residual values
Values in this sector in the UK remain very sensitive to engine and trim/equipment specification, and colour.
For example, it is taken for granted that the most desirable cars in all model ranges in this sector have diesel engines. A like-for-like comparison of BMW X5 3.0 petrol and 3.0 diesel residual values shows a £3,000-plus premium for a one-year-old diesel compared with a similar premium new.
Automatic transmission is also important to maximise maximum used values for most large 4x4s. Automatic variants are worth about £2,500 more after one year, compared with an average additional cost-new difference of only £1,500.
It has also recently become essential for these cars to be equipped with satellite navigation to optimise residual values. A BMW X5 without the optional COMMS system is likely to be worth £2,500-£3,000 less after one year – about what the system costs when ordered with a new vehicle.
The absence of leather upholstery, desirable metallic paint (silver/grey/blue), as well as certain specification ‘packs’ from the specification can also have a major effect on residuals. In the case of the Mercedes ML, the Luxury and Family (seven-seat) packs are essential to top used vehicle values. An ML without these packs, and in a less desirable metallic colour (such as Titanite Red), is worth about £3,000 less after one year.
There is also anecdotal evidence from other used car pricing specialists that the Sport pack is most desirable on used BMW X5s.
On the subject of used BMW SUVs, Glass’s said there is currently one key exception as to how specification requirements affect residual values in this sector.
Because the price of the new BMW X3 is considered by some to be too close to the X5 when the usual desirable options are ordered, it is much easier to sell a more basically-specified used X3 as buyers regard it as better value for money.
