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In this video I'll discuss why some high end cars have become so unreliable. Here are the highlights...
On the surface this car reliability problem doesn’t make much sense. With just about everything else that you purchase, such as for example expensive watches or clothing, spending more money will ensure greater reliability and longevity. You typically expect nice things that cost a lot to last longer than cheaper junk.
Take for example one of the least expensive cars sold in the U.S, the Toyota Corolla. It’s an entry level vehicle in the Toyota lineup, with base models starting at about $20K. This car has consistently scored in the upper end of reliability surveys. This reliability is reflected in the relatively high price of used Corollas, and these cars in generally keep their value quite well.
On the other side of the coin we have the sport and luxury models such the Mercedes S-Class sedans, the BMW 700 series, various Jaguars and Land Rovers, and even Italian exotics like the Maserati Quattro Porte. These cars all sell for anywhere from $80K to $120K, or 4 to 6 times as much as a Corolla. As such, you would expect that their reliability will be in line with their price, but these cars rank near the bottom of the reliability scale and this is also reflected in their used prices, with massive depreciation the rule, not the exception.
To understand why, you have to look at who buys these cars, how they acquire them, how long they keep them, and what they expect from them.
Upscale luxury models are acquired by wealthy individuals who wisely do not wish to outright purchase depreciating assets. Instead, they lease these vehicles for three-year stretches, and then move on to their next luxury car. While they have these vehicles, they demand top-of-the-line infotainment, comfort, convenience, and performance systems, some of which are on the cutting edge of technology. This technology takes time to mature, and in the fast-paced turnover in this market, that chance is rarely given.
The customers certainly do not care – any car will be problem-free for a few years, and then the lease is up and the car is someone else’s problem. This perfect storm of market variables puts tremendous pressure on marquee automotive manufacturers to keep pushing out the latest and greatest at the cost of reliability and refinement. When a car is so packed with technology, such as the BMW 740i, things will break, and break often. There is simply no pressure on the designers to engineer reliability. After all, the paying customer will get rid of the car in 36 months, and who cares what happens on the secondary market?
Automotive industry observers believe that this short-sighted strategy, will come back to haunt these manufacturers. Already, secondary market customers are learning to stay away from top-end German, Italian, and British vehicles just joining the used car inventory. The dramatic depreciation of some of these is breathtaking, and is the direct result of this short-term thinking. It’s not unusual to see a Maserati Quattro Porte, a $120K supercar when new, retail in the used market for under $30K just five years later. That is a 70% drop in value or about $90K. The same fate awaits BMW 5-, 6-, and 7-series sedans, as well as a few electric vehicles. Needless to say, it is advisable to stay away from these cars in the used market. While their value has dropped, the cost of upkeep has not.
DISCLAIMER
This video was created for informational and educational purposes only, and should not be construed as a source of specific investing, financial, accounting, or legal advice. This video should never be used as the sole source of information, without consulting with a financial or legal professional to determine what may be best for your individual needs. The creator of this video, Elliot J. Gindis, does not make any guarantee or other promise as to any results that may be obtained from using the information in the video. To the maximum extent permitted by law, the creator of this video disclaims any and all liability in the event that any information, commentary, analysis, opinions, advice, and/or recommendations contained in this video prove to be inaccurate, incomplete, or unreliable, or result in any financial or other losses.
