Z356

One of our members recently started a thread concerned about the '07 S600 depreciation based on a linked Ebay '07 S600 going for a buy now price in the mid-eighties. The thread has been pulled for some reason but his question remains valid. Is there cause for worry? This particular '07 S600 in the linked Ebay auction was reported by its seller that "the car was involved in a slow speed accident, It went off the road into a ditch at about 15 miles per hour. It is fully repaired by Mercedes collision and was fixed 100 percent." This is incredibly relevant information. You also are not told anything about the title, e.g. is it 'salvage' and thus marked for life, which its greatly detrimental to its value. The fact the seller is from the water-troubled state of Louisiana does not help his cause, perhaps unfairly and without merit. But, nevertheless, the low 'Buy Now' price (reported in mid-eighties) is clearly an indication of this S600's accident, repairs and perhaps a 'troubled' title history. Thus, to answer his question directly, I don't think this sale is representative of 'how bad our cars are depreciating'!

That said, MY07 S class (550, 600, 65) have depreciated quite a bit since their introduction to the US market in early '06. However, this was anticipated & discussed by members of our Forum since the beginning. The accelerated depreciation has been confirmed by MB Financial, the leasing arm of MBUSA. MB Financial has set low residuals values for leased S600/65, which are in sharp contrast to those it set for the S550, or even those set recently for the MY08 S63. So this accelerated depreciation for S600/65 is apparently what MBUSA expected all along. In addition, values for MY2007 S class are not helped by the fact that MY2007 models have almost 1 & 1/2 of production volumes included, since early MY07 cars appeared in Jan/Feb '06 in the US for sale, rather than in late summer/early fall of '06 as normal for the introduction of a new model year. If you search today on Cars.com, Autotrader.com, etc, you will see around 40 used 2007 S600 for sale across the US. Most are priced above $100K. Wholesale auction prices have been reported hovering in the mid to high nineties. So the situation today regarding the current depreciation for MY07 S600 is probably 'as expected'. A used MY07 S600 without an accident history, with clear title, low mileage and late production (post summer 06 which benefitted from later production-line improvements & less consumption of its original warranty due to later in-service date), are now particular good 'buys'. Z356

WSH

Would argue any post-collision car will never be safety equal of otherwise-same car not involved in collision.....too many unknowns re: struc integrity post-crash forces, esp post-repair car's struc integrity vs any future collision....and factory-spec automated mfg/paintwork, quality, etc is imposs to dupe at any auth body shop/dealer.....e.g., even a mere replacement windshield is sub-std vs a robotically-installed/sealed windshield of a pristine, new car....

Deprec rates of 600/63/65 to-date are not surprising....esp w/glut of new, unsold cars that will be disctd and leased out at attractive terms.....used buyers naturally expect a substantial disct vs new car cost.....and, in a tighter credit environment and slowing economy, many used buyers will also be more demanding of discts than usual.....

Would be careful in reading too much into MBCredit lease terms vs actual predicted trade-in value......mfr leases are often a subtle game of disctg (and highly relevant since ?80-90% of new 600/63/65 are $0-down, 2-3 yr leased in major mkts)....mfrs can set artificially high residual values to reduce lease pmts to move units today; they will incur losses upon lease termination, but that's tomorrow's problem.....quick sanity chk: see what terms independent banks are offering to lease these cars

Value of discretionary cars is obviously subjective and irrational....we can each do the nominal arithmetic of costs of one car vs other.....but would also price opportunity cost of capital; value at risk (lease gap insurance); sales tx diffces of leasing vs buying; value of lemon laws protection of new car; and, more importantly, pleasure of choosing options/colors and driving a new car (this is a discretionary car to be used for daily enjoyment/entertainment, right???)

Just as many view the notion of buying used clothes as rather undesirable (no matter who previously wore/soiled those clothes...or which dry cleaner/tailor cleaned/repaired them before resale), many similarly view used cars negatively at any price....suspect we will each value costs/benefits differently...but that's what makes for a functioning mkt.....

trumpet1

I was the one that started that thread but within 30 minutes re-read the ebay details to see that the car had been in an accident and that made me realize that my entire thread was invalid. During that 30 minute delay, I even called my salesman to question him if this seemed odd and he said yes. I then , for some reason, glanced back over the description of the car to finally see that the car was not in mint condition. Take note that the mention of the mishap was conveniently hidden way down in the description and that is why I originally missed it. Sorry about the pull on the thread but I first thought >WOW! what a low ball price!~

Z356

WSH: Re: your quote "Would be careful in reading too much into MBCredit lease terms vs actual predicted trade-in value", I would suggest there is quite a bit to learn from what these residuals tell us. Please look the official MB Financial info for December 2007 (below). If anything, it would appear that the S600 and S65 residual numbers are 'realistic' and the S550 and S63 numbers are set artificially high (or inflated) to encourage the type of sale activity you suggest in your post...and which I agree is the intent of MB. Many of you might remember that back in early 06, the 07 550s had residuals close to 70% for 24 months. Yet the 07/08 S600 and S65 appear never to have been 'incentivized' in a similar manner or to the same degree. We are only left to speculate 'why not?'. Perhaps the buyer profile of the S600/S65 is such that it doesn't require it, especially in light of the smaller numbers MB expect to sell of these top models and the type of individual that is the targeted customer. What I find interesting is the lease assistance (higher residuals=lower monthly payments) for the S63. And if you look at the large number of S63s currently in inventory at MB dealers vs S600s, it might help us understand the rationale for the peculiar treatment it is getting from MB Financial. And in a year or two, we will see if used values for the S63 lived up to the expectations of MBUSA...and their owners. Z356.

PS WSH: I admire your continued arguments for buying new and replacing after six months, or less, of use. But you must admit that, for your theory to work, you need second-hand customers like me (and many of our fellow forum members who appreciate 'value') to buy your 'used' cars after your brief enjoyment. I sincerely hope you give those of us, that have made the calculated decision to buy a used MY07/MY08 S or CL, some credit - even if somewhat reluctantly. Right now, I do not know any way to share the cost of the massive depreciation these fine cars are taking in these short periods of time OTHER than to buy (with caution and care) used. And we will probably derive as much enjoyment from owning & driving our slightly 'soiled' vehicles as the original owners...and perhaps have the added comfort & joy of justifying our still considerable economic investment in these cars as even better 'value'. Warm regards, as always. Z356



2008 Mercedes S550 Sedan
24 Month – Residual 60% of MSRP – .00330 Base Rate
36 Month – Residual 50% of MSRP – .00300 Base Rate
48 Month – Residual 40% of MSRP – .00300 Base Rate
60 Month – Residual 34% of MSRP – .00355 Base Rate

2008 Mercedes S550 4matic Sedan
24 Month – Residual 60% of MSRP – .00330 Base Rate
36 Month – Residual 51% of MSRP – .00300 Base Rate
48 Month – Residual 40% of MSRP – .00300 Base Rate
60 Month – Residual 35% of MSRP – .00355 Base Rate

2008 Mercedes S600 Sedan
24 Month – Residual 51% of MSRP – .00390 Base Rate
36 Month – Residual 44% of MSRP – .00355 Base Rate
48 Month – Residual 39% of MSRP – .00355 Base Rate
60 Month – Residual 34% of MSRP – .00355 Base Rate

2008 Mercedes S63 AMG Sedan
24 Month – Residual 60% of MSRP – .00390 Base Rate
36 Month – Residual 50% of MSRP – .00355 Base Rate
48 Month – Residual 41% of MSRP – .00355 Base Rate
60 Month – Residual 36% of MSRP – .00355 Base Rate

2008 Mercedes S65 AMG Sedan
24 Month – Residual 53% of MSRP – .00390 Base Rate
36 Month – Residual 43% of MSRP – .00355 Base Rate
48 Month – Residual 36% of MSRP – .00355 Base Rate
60 Month – Residual 29% of MSRP – .00355 Base Rate

trumpet1

Great post Z356.
Also, thanks for the depreciation chart. That was really an eye opener for me in considering when to trade off my car (if I do). The end of the 4th year may be when I either buy an extended warranty or just say heck with it and buy a new one.

WSH

Z356, interesting datapoints....

Actually, though, would argue an S65 would likely trade-in for some 50% of MSRP in 12mos (can prob lease a new S65 @?90% MSRP, esp if car is in dealer inventory in Podunk; capital isn't free for dealers)....I suspect MB eats some added deprec on car turned in at end of 24mo lease.....

Interesting that until ?18 mos ago, MB didn't have 2yr leases on 65s, etc at even plausible rates....my anecdotal sense from dealers is that enough repeat buyers were burned by the old-body 65's deprec that MB figured a 2yr lease would move some units, by locking deprec exposure upfront (and sales tx effcys esp in CA).....seems like '07-'08 S65s are awfully popular commuter cars in SiliconValley these days.....and I hear that almost all of them are $0-down, 2-3 yr leased....

Suspect we're at something of an inflection point re: all new cars' mkt pricing and trade-in values.....as cars become increasingly tech-intense, they assume many of the characteristics of consumer tech devices, esp rapid obsolescence, no pricing power for new products, disposable/trade-in at weak prices, etc.....just as cars have effectively had price deflation over past 15-20yrs, would observe that the so-hot Motorola StarTac of '97 was trading for ?$1K in the secondary mkt at launch....consider that pricing vs today's hottest smartphones.....and who wants to buy a 2-3 yo used smartphone?

Obviously, new MBs are far more costly than smartphones, but my sense is the mkt (both mfrs and consumers) is only beginning, in past 2-3 yrs, to grapple w/how to most efficiently price/value/lease cars, esp as product/tech cycles create rapid obsolescence.....and leasing games allow mfrs to book revs today, while figuring out how to absorb any future costs of overly cheap, incentivized leases....and leases allow consumers to drive a new $200K car w/a simple $0 down approach.....suspect writing a $200K+ chk for a fast-depreciating car (like guys typically did back in Dark Ages of 10+ yrs ago) creates some pause, even among jaded consumers....

Fully appreciate that someone needs to buy my traded-in cars at some decent bid, o/w costs of my new car addiction increase...but also realize that mkt dynamics (esp w/rapid tech change and commoditization) will force mfrs to figure out how to develop interesting cars at a price point acceptable to buyers (who will presume heavy, instantaneous deprec).....for whatever reason, many affluent guys seem to be willing to accept price inflation in other luxury goods like Pateks, Petrus, NetJets, houses, etc....but pricing of cars is a difficult game for both mass mfrs like MB and more lim vol mfrs like Ferrari (don't believe the silly artificial US scarcity games; recall Ferrari struggled to sell its alloc of ?200 new Enzos at MSRP in EU in '03)

Marketing of discretionary goods is tricky....no one "needs" them; and many affluent guys tend to be somewhat bipolar characters who may spend lavishly on certain toys, but suddenly become frugal/rational/ROI-intensive when judging other toys.....