Audis are some of the finest vehicles available today. Like most German cars, Audi uses world-class materials in their vehicles. But the leather isn’t the only thing that’s top quality. German automakers like Audi are famous for meticulous engineering and thoughtful design.
When it comes to building an excellent car, Audi gets it right on almost every front. Owners know it, buyers know it, and the automaker knows it too. That’s why people frequently pay $40,000 to over $100,000 for one of these luxury vehicles.
The 2020 Audi A4, for example, has a starting price of $37,400. That’s just below the average price of all new cars sold in the United States, including supercars and loaded pickup trucks.
So why then does a 2017 Audi A4 Premium—a car that originally sold for $40,000—sell for between $21,500 and $26,700? Nearly 50% depreciation in just three years is absurd, so what’s going on? Why do Audis depreciate so much? We did some research and found the answer.
It’s a Fleeting Status Symbol
Before we look at the car, let’s examine the buyers. What kind of person spends $40,000 or more on a sedan? More importantly, what kind of person spends $40,000 on this kind of luxury sedan?
Millenials Like Flashy Things
Audi buyers come from all backgrounds. However, flashiness captures the attention of younger demographics. Millenials (specifically millenial men) in their 20s and 30s are the largest single demographic purchasing Audi vehicles. The Audi is both a refined driver’s car and a status symbol. Millennials (like myself) don’t mind splurging if we can. And in the social media era, it’s quite common to ‘flex’ with your car.
Newness Fades and Customers Upgrade
For flashy people, much of the appeal of a new luxury car is the ‘newness’ itself. When it’s not the latest product, it loses its appeal. The ones who can afford (or pretend to afford) a new Audi in 2017 will likely buy another in 2019 and again in 2021.
It’s a fairly simple concept. When your largest buyer demographic is likely to behave this way, it’s bound to affect resale value.
They’re Complex—And Expensive to Fix
Germans build some of the best cars in the world—with a catch. There’s a joke among mechanics that goes something like this: “When a dash light goes out in an Audi, you’ve gotta take the steering column out to get to it.”
German cars, specifically Audi and Mercedes vehicles, are enormously complex and expensive to fix. It’s a combination of high-quality materials and meticulous engineering.
Driving an expensive German luxury car is a thrilling experience, and you immediately notice superior functionality and handling capabilities. But when it gets old, mechanics must tediously reverse-engineer thousands of proprietary systems. Plus, supply-chain issues often gum up the works and add more to the bill.
People are well aware of the high costs associated with German luxury car ownership. It’s worth it to some people. But many others prefer to drive it under warranty and offload the vehicle before it liquifies their life savings.
The reason why technology causes Audis to depreciate is because they use so much of it. Today, luxury cars are packed with power options, screens, software infotainment systems, and all kinds of cross-device integration.
Think of the original iPod charger. Remember that white rectangle that only went in one way? Imagine if your car came with one of those dangling from the integrated sound and climate control system. Eventually, Apple CarPlay won’t work, and that digital tachometer will look dated and tacky. And that day is right around the corner.
You can’t just yank the radio out and replace it with a new one. If you have a CD player, you’re stuck with a CD player forever. Given how fast technology changes, cars with complex digital systems are likely to be obsolete soon after rolling off the lot. Thus, you need a new car every two years just to use the features it came with.
Should I Buy a Used or New Audi?
If depreciation is your primary concern, then it isn’t easy to justify buying a new Audi. However, if you value high-quality cars and excellent driver experience, you should consider a new Audi.
Leasing a New Audi
Options such as leasing are available if you plan to upgrade every few years. Leasing isn’t renting per se. When you lease a car, you pay the difference between the sale price and the predetermined residual value. Some say leasing isn’t financially advisable, and there’s a valid argument for that camp. But it makes sense if you can afford it and enjoy driving a new car every 2 or 3 years.
Buying a New Audi
You’ll take the depreciation hit if you buy a new Audi. But it’s the way to go if you want a brand new car to drive for many years. There’s no reason why you can’t expect the car to last 250,000 miles or more.
Buying a Used Audi
There are thousands of low-mileage Audis for sale. Many of them are late-model vehicles with options, and they cost literally half what you’d pay for a new one. Most people can’t tell the difference between a 2018 Audi A7 and a 2020 model, and you still get many of the same luxury features. Financially speaking, buying a used Audi is the best route for most people.
If Audi vehicles weren’t worth the depreciation hit, people wouldn’t buy them. Or they wouldn’t be so popular. But Audi builds a great car that’s reliable and respectable, so give one a try if you find a good deal. And if you don’t mind a used car, let somebody else take the huge depreciation hit and enjoy the car.