NADA: Premium Luxury Vehicles Show Highest Annual Depreciation Rate

NADA Used Car Guide (NADA) reports the premium luxury vehicle segment experienced the highest annual depreciation rate among three-year-old models in 2007, due in large part to consumer preference for the latest new models and high replacement levels.

NADA Official Used Car Guide data, developed by NADA's editorial, shows premium luxury coupes and sedans held four of the top-10 spots for vehicle depreciation for the year, with a replacement rate of 43 percent on average.

"Luxury vehicle owners consistently demonstrate a strong preference for owning the latest new products in this segment," said Terrence W. Wynne, director of editorial and data services for NADA Used Car Guide. "The changing customer preferences and high manufacturer replacement rate effectively accelerates depreciation of these vehicles, deflating the resale performance of previous models and those competitive models late in their life cycle."

According to the NADA report, the top 10 depreciating three-year-old vehicle models in 2007 were:

Jaguar XJ8 - 25%

Mercedes-Benz CL-Class - 22%

Kia Rio - 22%

Audi A8 - 21%

Lexus LS - 21%

Suzuki Verona - 21%

Volvo C70 - 20%

Hyundai Accent - 20%

Audi A4 - 20%

Audi A6 - 20%

Wynne noted that the replacement rate directly impacts incentive spending in the luxury segment and compounds the pressure already present on the used-car market based on consumer change in design preference. He said that unreplaced models tend to have the heaviest incentives.

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