Downside Of More Diesels: Rising Depreciation?

Follow Antony

2013 Volkswagen Beetle TDI

2013 Volkswagen Beetle TDI

Enlarge Photo

Diesel cars are quite appealing to some drivers, and it isn't hard to see why.

The current choice of diesel vehicles may not be that varied, but those available mix good performance with impressive efficiency (particularly on the highway) and refinement unheard of from their counterparts of yesteryear.

Solid resale value is also an attractive attribute, helping to negate the high initial purchase price of diesels next to their gasoline equivalents.

But with more diesels on the way and existing models selling better than ever, how long will that benefit remain?

Our sister site The Car Connection notes that diesels hold up far better on the used market than their closest gas mileage competitors, hybrids.

According to statistics from ALG, the average compact car, like a Chevy Cruze, retains around 53 percent of its MSRP after three years. The average hybrid, such as a Toyota Prius, around 55 percent.

By comparison, diesel models retain around 63 percent of their original value after three years, thanks to high demand on the used market.

Will diesel values fall?

However, ALG's statistics also suggest that as diesel's market share increases, and more manufacturers release their own diesel products, existing values will start to fall. It's simple supply and demand--currently, diesels are in short supply and high demand--but that will likely change.

Volkswagen rules the roost for compact diesels at the moment, but as Chevrolet releases its Cruze diesel--and the Jeep Grand Cherokee EcoDiesel and Mazda's diesel 6 appear shortly--buyers will have more choice than just "new diesel Jetta" or "used diesel Jetta". The prices of used VW diesels could fall as a result, above the currently inflated late-model used values.

Diesel's market share is currently fairly small, at 1.7 percent, and Bosch's prediction of 10 percent diesels by 2015 is looking increasingly optimistic--so used values aren't likely to tumble too far, even so.

Falling used prices aren't disastrous for everone either. While the new car buyer may not see as healthy a return as they were expecting, lower used prices are great for the used car buyer.

Diesel fuel pricing

There are other market forces at work, too. Fuel prices, for one: Diesels cost more to buy, but also more per gallon to fuel.

If the break-even balance is skewed the wrong way for consumers--i.e. their investment in a more expensive car and more expensive fuel takes too long to recoup--all the choice in the world won't encourage buyers to go diesel. Diesel-biased taxes, like those proposed for Virginia, will also affect sales and values.

On the other hand, as gas prices rise, diesel looks proportionately more attractive unless it rises at an even faster rate.

And neither of these eventualities account for the buyers who simply like the way diesels drive--all that mid-range torque is compelling regardless of the fuel you're putting in the tank.

Whatever happens to diesel values, we're looking forward to the next wave of efficient diesel cars hitting the roads over the coming year--and they'll almost certainly go down well with customers, too.


Follow GreenCarReports on Facebook and Twitter.

Follow Us

Comments (12)
  1. It is all about price of the diesel.

  2. Rising smell as they age too. Older diesels stink. Just drive behind a bus that's two years old and get your nostrils burned.

  3. These are ultramodern clean quiet and powerful diesels. They have no smell because of the particulate filter. You can run a finger inside of my car's exhaust and come up with virtually nothing on it.

  4. When one buys a diesel car, one buys it to drive it because it is indestructible, to keep it forever, not because it holds a good resale value.

    I have noticed a worrisome lack of understanding of the current diesel car target demographic. If you as automotive journalists do not understand how we think, and why we think what we think, why we buy diesel cars, then what chance do marketeers and management of car companies have?

    This profound lack of understanding of the target demographic really concerns me...

  5. "When one buys a diesel car, one buys it to drive it because it is indestructible, to keep it forever, not because it holds a good resale value."

    This would not be so amusing if you were not constantly claiming this about VW's diesels specifically. Once again, VW has the absolute worst quality rating of any major brand sold in the U.S., as everyone but you seems aware.

    Then again, VW's 26th place finish in the JD Power Vehicle Dependability Study for 2012 was its best in many years, so I guess going from near worst among all brands to far below average is still an improvement.

    Apparently, you've confused indestructible and far from reliable.

  6. Actually, apart from claiming that the current Volkswagen's TDI engine is simple to a fault, I am not claiming Volkswagen is reliable at all.

    When I write "diesels are indestructible", I am referring to mazda diesel engines first and foremost, ones you did not get in the United States, but which I owned for a number of years, and Mercedes and BMW engines second.

    But hey, nice try.

  7. Hilarious... You first claim that diesels are indestructible, then when it's pointed out that VW does very poorly in any reasonable quality metric, you change your stance and meant only Mazda's diesels. Yet you continue to claim that diesels overall are a better choice.

    Yes, when the only volume manufacturer of diesels sold in the U.S. is known more for worst-in-industry quality than anything else, your claims fall apart.

    Oh, not diesels, I really meant only Mazda, etc... Nonsense, of course.

  8. The engine in the Jetta SportWagen is made in Germany. I put that engine through hell, and when I was done I tortured it some more, and it took it all without complaint one bit, over 46,000 miles. Very few engines would endure the kind of abuse I put them through.

    Volkswagen does have quality problems, but they are not with the engine. The engine itself is very simple, and if it survived my abuse, I can safely write that it is indestructible. Apart from the engine and the transmission, the rest of the car leaves a lot to be desired in terms of quality.

  9. Guess what, gas engines built in recent history are also far outlasting bodies and especially transmissions. Hence lifetime engine warantees from dealers. And should troubles arise in a gas engine, you aren't held captive by the dealer.

    Look at the prices for 2000-2006 VW diesel, and then look at all their problems and you'll find their value grossly overstated.

  10. I also want to add: one can hardly find a used diesel car because the owners rarely get rid of them, if ever. Finding a low mileage diesel car is mission impossible. Try it and see for yourself.

  11. Antony,
    You could speculate this same question for any car group that increases in market share. "Downside of More Hybrids: Rising Depreciation?" "Downside of More Electric Teslas: Rising Depreciation?" etc. etc.
    So what's the point of the article?
    -- It appears to me, to be just one more negative spin towards diesel vehicles. Yes, it appears from reading your articles that you have a bias in this regard. I'm not sure why?

  12. I'll put this in the same category as the folks claiming electric cars will shortly ruin our grid...

Commenting is closed for old articles.

Get FREE Dealer Quotes

From dealers near you

Find Green Cars


© 2015 Green Car Reports. All Rights Reserved. Green Car Reports is published by High Gear Media. Send us feedback. Stock photography by izmo, Inc.