This article was first published in the second quarter 2017 edition of Personal Finance magazine.
What’s in a name? Quite a lot, actually, particularly if you’re in the market for a used car with iconic status. It may be something as exotic as a Ferrari 308 GTS (you might remember it from the Magnum PI television series), a ruggedly retro Land Rover Defender (the last one rolled off the production line in January 2016) or even a split-window VW Beetle from 1952 (uncomfortable, unsafe and hugely desirable), but there’s something about these machines that brings a gleam to the most jaundiced eye.
Even die-hard automotive iconoclasts – you know, the kind of people who feel guilty about fossil fuels and insist their cars are merely a means of getting from A to B – have been known to sigh wistfully when they encounter one of these classics. Why? In many cases, these cars are neither safe nor comfortable, and sometimes they are real dogs when it comes to driving dynamics and passenger comfort.
Nicol Louw, the technical editor at Car magazine, the country’s leading automotive title, says brand names tend strongly to influence used-car purchase decisions and resale values. “For instance, a Porsche will always be in demand, no matter what its age, and the GT2 and GT3 models are especially desirable as long-term investments. Interestingly, sports cars hold their value much better than sedans.”
Limited-production vehicles tend to keep their value, Louw says. As an example, he cites the track-focused VW Golf GTI Clubsport S. In late 2016, the official price of this seriously hot hatch was R742 000, representing a premium of R193 960 over the regular Clubsport, itself a pretty mean performer.
Only 400 units of the S model were built, says Louw, and 47 of these were allocated to South Africa. All were pre-sold by dealers, turning the car into an instant collectable.
Says Louw: “I’ve heard of prices well in excess of R1 million … silly money. Then there’s the BMW 1M, which originally sold for half-a-million rand and now fetches prices of R800 000 and up.”
It’s all down to the prevailing ascendancy of head or heart, Louw says. He explains: “Your head may tell you that a Corolla Quest is the most sensible choice, because it’s safe, reliable, relatively affordable and easy to service and repair. But when your heart rules, common sense goes out of the window and your decision is influenced by emotion, vanity, desire, rarity and other factors. If you look at it logically, spending a lot of money on an old Beetle or a high-mileage Defender doesn’t really make sense, but that doesn’t seem to have stopped anyone.”
Okay, let’s focus on the Defender. Why would someone be willing to cough up loads of cash for a (very) used vehicle with a high mileage, no safety features worth mentioning, very little in the way of creature comforts, and – in the case of some derivatives – a habit of burning petrol at a rate that’s frankly scary?
Trevor Clack, new car sales manager for Jaguar Land Rover in Umhlanga, reckons there is no mystery behind the high prices fetched by used Defenders, explaining: “As new-vehicle prices track higher and higher, the prices of used vehicles follow in tandem, and the Defender is no exception. Because production stopped last year, the Defender’s perceived value has benefited considerably. It may sound self-evident, but it’s worth pointing out that the used-car market is what keeps the factories producing. You can’t keep selling used cars unless you keep building new cars.”
Does he agree with Louw that the Defender’s appeal is largely down to head versus heart?
“In some cases, without a doubt. I can tell you about lots of men – women don’t appear to think in the same way – who reach a stage of their lives where life has become a little boring. Then one day, they’ll spot a Defender in a showroom, and suddenly they are galvanised with excitement. They buy it and immediately have it fitted with a rooftop tent, long-range tanks, a winch, branch deflectors, jerrycan racks, a snorkel and every other conceivable accessory. Then, a few months later, the reality of driving a fully loaded Defender around town kicks in, and they beg us to buy it back.
“In the past, most Defenders were purpose-bought. The buyers – including farmers, municipalities and other bodies – knew what they were getting and were in it for the long run … at least five or 10 years. Having said that, trade-in Defenders are like hens’ teeth. For a variety of reasons, people are hanging on to them.”
Land Rover may have stopped producing the Defender, but that’s by no means the end of the story for this classic off-roader. Land Rover’s Heritage Restoration programme will see the Series Land Rover and Defender’s heritage preserved at Solihull, England. There, a team of 12 stalwarts are at work on the restoration and sale of early Series Land Rovers under the banner of Land Rover Heritage, which will be offering “cars, services, parts and experiences for all owners and fans around the world”.
And there’s more. Land Rover has launched an online “Defender Journeys” platform, allowing owners to upload details of their most memorable journeys in a Series Land Rover or Defender. The aim, say its creators, is to crowdsource journeys from Land Rover drivers and plot them on a single online map, thereby “preserving the memories of amazing adventures that have taken place in the iconic 4x4 for future generations”. Enthusiasts can take an online tour of the Defender production line tour by visiting http://defendertour.landrover.com
Meanwhile, figures released by the National Association of Automobile Manufacturers of South Africa show that it’s the best-selling vehicles that tend to retain their value. Louw says there are several reasons for this, among them the fact that large sales volumes tend to be associated with reliable vehicles, a bigger dealership footprint and more extensive parts inventories, whereas manufacturers that sell smaller numbers usually do not derive any benefit from economies of scale when it comes to servicing and parts availability, even though their vehicles may be perfectly acceptable otherwise.
Louw has a point. Toyota, by far the most successful brand in terms of total sales – that is, both trucks and passenger vehicles – sold over 8 000 new cars in January 2017. Volkswagen achieved roughly similar sales, whereas Ford sold about half that number. Overheating issues notwithstanding (the fallout from Ford’s Kuga disaster is likely to resonate for quite a while), all three manufacturers build good, reliable cars that enjoy impressive brand loyalty among their customers.
Buyers’ dilemma: new or used?
Research organisation TransUnion, which sources its statistics from what’s claimed to be South Africa’s largest database of vehicle-financing and valuation records, notes that new-car price inflation increased from 4.6 percent in the fourth quarter of 2015 to 9.4 percent in the last quarter of 2016. Against that, used-car price inflation increased from 1.6 percent in the fourth quarter of 2015 to 3.3 percent in the fourth quarter of 2016.
Derick de Vries, the chief executive of Auto Information Systems at TransUnion, commented in a recent report: “The wake of a volatile economic climate has domestic vehicle consumers continuing to hold on to existing vehicles, or purchase used vehicles rather than buy a new car.”
Aside from the (perfectly human) factors we’ve already mentioned, what influences the resale value of a car? While this will never be an exact science, experts cite such factors as:
• Paint colour (white and silver work best in South Africa, probably because of our sunny climate);
• Engine type and size (fuel costs are becoming increasingly important, so more people are considering diesel options);
• Body type (small 4-door SUVs, co-called “crossovers” and double-cab bakkies remain very popular);
• Brand reputation (aside from occasional glitches such as the Takata airbag recalls, which affected a number of manufacturers, Toyota and VW are among the winners here);
• Niche appeal (if you own a classic roadster or any other small-volume model that makes car nuts sigh with envy, you’re in the proverbial pound seats because their resale value is likely to increase); and
• Transmission (as traffic congestion worsens, drivers who are increasingly frustrated with their daily commute are more and more inclined to switch from manual to automatic).
The top 10 reported passenger car and light commercial vehicle sales for January 2017:
Volkswagen Polo Vivo – 2 951
Volkswagen Polo – 2 734
Ford Ranger – 2 677
Toyota Corolla/Quest/Auris – 2 628
Toyota Hilux – 2 398
Toyota Etios – 2 302
Ford Fiesta – 1 707
Toyota Fortuner – 1 233
Toyota Quantum – 1 192
Nissan NP200 – 1 150
Alan Duggan is a freelance journalist and former editor of Popular Mechanics magazine.