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Fighting depreciation: the Volkswagen approach

By raccars Published

As more and more attention is focused on the costs of owning and running a car, motorists are becoming more aware of what is often the biggest single cost of car ownership: depreciation. Depreciation is simply the difference in the value of your car from when you buy it to when you sell it and is usually expressed as a percentage and typically reported over one or three years. It is a factor that has, in the past, often been overlooked. You might think that buying a car for £10,000 is obviously cheaper than buying a car for £15,000, but if after three years you can sell the £10,000 car for £3,000 and the £15,000 car for £9,000, then clearly the ‘cheaper’ car has cost you more money.

The difference in rates of depreciation between manufacturers is pronounced and is dependent upon a number of factors, not all of them entirely logical. Volkswagen is a company that enjoys particularly low levels of depreciation and it goes to great lengths to ensure this is the case. The foundation upon which the company’s reputation is built is the quality of its engineering. Whereas other brands will boast about how quickly they can produce a car, VW will tell you that it can take two or three days for each of their cars to roll off the production line. This attention to detail is vital in creating a reputation for excellent quality and reliability. That reputation remains with the car throughout its life, resulting in strong second hand values.

This reputation is a key part of VW’s ‘brand equity,’ an ephemeral quality that is made up of subjective areas like design and image but also of more substantial factors, such as reliability. Although harder to define, VW also takes great care in the way it designs its cars. Whereas other manufacturers may go for eye-catching, fashionable designs that change almost yearly, VW is more conservative. The company prefers classy looks that evolve slowly, so that even used VWs that are a few years old look almost identical to new models. This, again, helps to maintain second hand values.

The company also understands that their cars’ specifications will keep used car prices high. The factory spec is therefore generous and the inclusion of this equipment adds value to second hand models. In taking this approach, VW protects its new car buyers from that dreaded depreciation, but it also provides used car buyers with a high-quality option, that might be a little more expensive upfront, but will again hold its value well.

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