The Myth of depreciation | The Daily Star
12:00 AM, November 30, 2016 / LAST MODIFIED: 12:00 AM, November 30, 2016

The Myth of depreciation

Depreciation - it’s what you call a situation where you start with four wheels, some seats and an engine (otherwise called a car) and, when you try to sell it after 8 years, you realise it’s a cow. Not a cow you can eat or find use of either. Some cars are seemingly better at being useless cows than others, but what really drives the value of a cow/car up or down?

In the summer of 2015, my neighbor bought a 2014 Toyota Premio. It was pearl white, duller than drying paint, and “loaded with equipment” such as the optical instrument cluster, chrome door handles, and wooden paneling, thus somehow justifying the nearly 30 lakh taka price tag. It was horrifyingly conformist - the automotive equivalent to a vaporizer enthusiast in 2016. 

You know what else is popular in 2016 besides Toyota Premios and vapes and skinny jeans? Donald Trump. That alone should tell you what a steaming pile of raw sewage the years 2015/16 have been. Like the brain-dead people buying into Donald Trump's idiotic, hate filled message of making America great “again”, there are throngs of people waiting in line to buy what I honestly consider to be the worst car currently sold on the market. At least in terms of how much it promises, what it delivers and how much you pay for those hollow dreams of floating away on a Premio shaped cloud. 

What prompted this vitriolic rant against the preferences of people in this country?

The whole issue came out of a discussion among the Shift team about cars that should be great for the local market, but won't ever be because most of the car buying crowd will stop dead in their tracks beside yet another reconditioned showroom selling a Premio, awed by yet another “red wine” paintjob. Not only will the owner-to-be stand around looking at the Premio from 200 different angles, admiring one of the most uninspiring shapes to ever exit a designer's brain, it's very likely that this person will end up buying it, thus adding to the massive pile-up of uninteresting cars on the roads of Dhaka. “Resale value”, “maintenance cost”, “will Jorina be impressed by my luxury ride” will run through this person's mind - perhaps the worst case of myopia affecting car buyers today. 

This is a market where a 2009 Honda Civic, bought for a brand new price of 30 lakhs, is sold off in 2016 for a price of 11 lakh taka – a '09 Premio will easily fetch a secondhand price of 15-16 lakhs, despite having much less standard equipment, less power, horribly plain exterior design, and subpar interior design. 

Let's look at the facts. Is the Premio worth the praise it receives for its apparently magical anti-depreciation powers? Well, considering the depreciation affecting much better cars all because these cars are not Premios, it would seem that Bangladeshis are quite fond of upsetting the balance of market forces in determining and comparing the values of two perfectly running vehicles in almost similar conditions. 

This is a trend built up over generations – the idea that Toyotas will always retain value, they'll work forever unconditionally, they'll be cheap to run, parts will be available. These are not absolute facts. Reconditioned Toyotas WILL break down, WON'T be as cheap to run at some point down the line, and parts are just as expensive as other brands. Yet, almost inexplicably, they will retain value – mechanics and neighbours and that uncle you have who knows everything there is to know will keep insisting used and abused reconditioned Toyotas are worth their salt. This is akin to a snake biting off its own head, as these very people will turn around and moan about people asking exorbitant prices for turd secondhand cars. In the process, the true depreciation value of these old Toyotas are lost and people pay through the nose for pretty bad cars, while the Hondas and Nissans and Mitsubishis roam around, worthless but wonderful. 

This presents a final dilemma – for car enthusiasts, “those in the know”, cut-price secondhand Hondas and Nissans can be gems to own, love and maintain. However, if they ever want to sell them off, they'll be in trouble because of the lack of Toyota badges on them. Because, no matter how good a 1995 Honda Civic might be, it'll never have the same kind of value as a used car as it actually deserves, precisely because there's a myth going around that everything other than Toyota vehicles are worth more. 

In other countries, the market treats depreciation as a legitimate factor – it's nearly scientific. Build quality, equipment levels, complexity of the car, past track record with other users, and more go into deciding a car's resale value, not just the insistence of users and people around them. The idea of depreciation is a dynamic, flowing concept which changes with time and new products – it's high time Bangladesh viewed it in the same way as well.

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