As mentioned in another thread I am looking to replace my MK4 wagon with something newer. I've been considering a 328d but I was thinking that buying an expensive diesel car at this time might be a particularly bad idea because it could depreciate horribly (i.e. more than petrol cars) over the next 5-7 years. Diesel is already considered less environmentally friendly than petrol engines (less CO2 but more other pollutants), and the price of diesel is now consistently higher than regular gas. Along with the increased efficiency of petrol engines the cost-per-mile benefits of diesel for many motorists are eroding, and only the very highest mileage drivers and diesel enthusiasts like ourselves will be left. Seems to me like this would be a particularly bad time to spend $30K + on a diesel car since it could be next to worthless no too far down the road.
Note: I am aware that it is a bad time to buy *any* vehicle right now, and that as supply begins to improve that anybody who paid pandemic pricing will see huge depreciation over the next few years. But I am wondering if diesel cars will be even worse and the average car.
Thoughts?
Sorry for the delay, this was slowly assembled, like the pandemic VWs in Mexico...
Thoughts:
Depreciation: Depending on exactly how you run it, depreciation is largely determined by initial cost minus resale value (or TMV, if not selling, and only accounting for depreciation). The value of TDIs over the last 20 years, have remained substantially higher than their gasser counterparts, when comparing like models and trims. This means TDIs see less of a depreciation hit. (It's likely true for TDIs and VW IDIs prior to 2000, but I haven't done that comparison).
Timing: Since depreciation is partially determined by market value, and TDIs have sharply increased in market value as the cost of all fuels has risen, depreciation as a factor of TCO is less of a loss for those that sell while value is higher. That means that just as selling now reduces depreciation on TDIs bought prior to the spike in TDI values, buying now does increase your chances of seeing higher depreciation, but not because TDI values will plummet compared to gassers, but because you purchased at a high point. Your sense that TDI values will plummet (as compared to their gasser cousins) has no support over the long-term history of values.
I've been considering a 328d but I was thinking that buying an expensive diesel car at this time might be a particularly bad idea because it could depreciate horribly (i.e. more than petrol cars) over the next 5-7 years.
Buying almost
any expensive car is a particularly bad idea if you want to avoid depreciation as a factor of TCO. Obviously the first owner takes the biggest depreciation hit, and some cars certainly lose value more quickly, or more completely than others, but the more you spend on a car the more likely you are to see TCO rise due to depreciation. The obvious way to offset depreciation as a factor of TCO is through high resale value, and given that TDIs hold their value compared to their gasser counterparts, the TDI see less of a depreciation hit. I can't speak to the diesel BMW.
Diesel is already considered less environmentally friendly than petrol engines (less CO2 but more other pollutants), and the price of diesel is now consistently higher than regular gas.
Obviously this isn't an emissions thread, but those who consider diesel less environmentally friendly are typically working with narrow parameters, often which favor their bias. From a TCO standpoint, it has little impact on depreciation, unless the claim is that TMV will shrink due to reduced demand. I think this unlikely, but certainly one could make a reasonable argument. The value of "dieselgate" cars, which are the most likely candidates for a shrinking market due to negative media attention have seen shockingly high values compared to their gasser counterparts.
For most owners, the average price of diesel has been higher than the average price of regular gas for a
long time, likely since the period of ULSD, depending on where you live. Of course, this isn't always the case, and several time I've paid less for D2 than RUG in various states over the last 5 years. Despite the typical higher cost of D2, the value of TDIs has remained consistently higher than their gasser counterparts. In part, this is due to (1) the difference in cost of fuel per gallon versus MPG, and in part (2) due to how rising prices offset the difference in price as a percentage.
The first is obvious: A MkIV gasser Golf in the family gets, for a lifetime average, 27 in the city and 33 on the highway, or 30 MPG combined. My MkIV TDI Golf has a lifetime average of 48 MPG. We can express this FE ratio in several different ways, but when we compare it to the average price difference between RUG and D2 over the last decade, we find the superior FE of the TDI outweighs the cheaper cost of RUG. There are several things to note: (a) Obviously the cost of D2 could jump, skewing the cost ratio to RUG, but in general, D2 is much more stable than RUG. (b) Comparing D2 to the cheapest gas is only good for those who use RUG, for VW owners (and anyone else) who require PUG, both the fuel cost ratio and FE ratio favor the TDI. (c) I'm comparing MkIV gasser to TDI, but the FE vs fuel cost ratios skew even worse for gasser cars industry wide, where many can't return an average of 30 MPG. (d) The FE vs fuel cost comparison skews to the positive for some hybrids and BEVs, but those still have a higher TCO due to initial cost.
The second part of the equation has to do with rising prices. Here I'll keep the math simple for ease of comparison. At $1.00 a gallon for RUG, and $1.50 a gallon for D2, diesel is 50% more expensive than RUG, and D2 seems like a ripoff. When prices rise, and RUG is $2 and D2 is $3 per gallon, diesel is now a $1 more per gallon, and our TDI doesn't make sense. When prices jump again, and RUG is $5 and D2 is $6.50 per gallon, you'd have to be crazy to have a TDI. You can already see the issue here. As the prices rise, the percentage difference between prices drops. In the first instance, our TDI has to get 50% better FE. In the second instance, the price gap has increased, but requirement for 50% better FE hasn't changed. In the third example, the fuel spread is the highest, but our TDI only has to get 30% superior FE to match the cost difference.
What's more notable for real world numbers are two factors: (a) D2 is very rarely higher than gas (as a percentage cost compared to FE) despite my examples (I've never seen it for my comparisons), so real world fuel prices favor the TDI more than my examples. (b) Although TDIs do get 50% better FE than many cars, the comparison must be between cars that the
individual is considering. Beating the AAA FE average for sedans is easy, as is improving over a medium or large truck as a DD, but a Jetta 1.4T getting 40 hwy vs a TDI at 50 hwy brings the ratios much closer. Someone considering a gasser BMW vs diesel BMW must do that comparison, which might be close in fuel cost per mile. Someone going from a Jeep or F150 as a DD to a MkIV Jetta TDI will see an enormous drop in fuel cost per mile. Someone going from a MkIV Jetta TDI to new hybrid or BEV may also see lower cost per fuel mile. What's interesting is that all of these scenarios may see higher TCO, which is why proper maintenace and longevity are the golden recipe for low TCO.
Along with the increased efficiency of petrol engines the cost-per-mile benefits of diesel for many motorists are eroding, and only the very highest mileage drivers and diesel enthusiasts like ourselves will be left.
Cost per mile is a great way to express the cost of owning a vehicle. The problem is that
fuel cost per mile is only one expression of TCO, and although important, may not correctly express the realities of comparing vehicles. Depreciation is typically the biggest factor in TCO, but can be avoided by buying older used cars where value has leveled off, and purchase price vs market value produces minimal loss. For most new cars, fuel costs tend to be the second most significant factor in TCO, but this isn't true for cars that require especially high maintenance costs (and here we aren't including unusual or catastrophic incidents). This may also not be true in situations where the owner includes fuel "upgrades" into their TCO, such as home chargers and solar panels for BEVs, where these costs raise the TCO (expressed either as a fuel factor, maintenance factor, or other factor). Of course, many BEV proponents don't include these in their TCO, and my guess is that bias is an issue.
As said, as gassers improve their FE, the advantage that TDIs have in fuel cost per mile lessens, but the advantage remains regardless of how someone drives their vehicle (city/hwy), unless you are only comparing best case hybrid scenario in the city, versus worst case TDI operation in the city. Here the fuel cost per mile swings away from the TDI, and we'd have to compare TCO as a whole to see if the impact is noticeable. Note again, that if fuel prices rise, and if the percentage cost of D2 vs RUG narrows, the impact of gasser gains in FE are reduced.
Seems to me like this would be a particularly bad time to spend $30K + on a diesel car since it could be next to worthless no too far down the road. Note: I am aware that it is a bad time to buy *any* vehicle right now, and that as supply begins to improve that anybody who paid pandemic pricing will see huge depreciation over the next few years. But I am wondering if diesel cars will be even worse and the average car
In terms of depreciation and TCO, you have it captured. Avoid a big depreciation hit by not buying at inflated prices. Contrary to your assertion of gasser vs diesel, history suggests the opposite: The TDI is the better long term bet. I can't speak to the BMW either in terms of TCO or other costs, but I"m guessing the diesels will the ones still running, loved, maintained, and commanding higher prices than their gasser cousins.
If TCO is your primary concern, buy used, favoring low maintenance costs and high fuel economy. This might put you in a Honda Civic or equivalent, which is why discussions of TCO only go so far, and comfort, space, community, and the joy of driving often trump dollars and cents.
