Rolls-Royce is a luxury automobile manufacturer headquartered in West Sussex, England. Since 2003, Rolls-Royce is a subsidiary of BMW and prior to that, it was owned by the Volkswagen Group. Currently, the company is producing five different models under the nameplate of Phantom, Cullinan, Ghost, Wraith, and Dawn.
Rolls-Royce manufactures some of the most expensive and luxurious vehicles in the world. Depreciation may not a problem for most of its owners but if you have ever wondered “Why Rolls-Royce depreciates so fast”? then you are at the right place. In this article, I am going to discuss 3 main reasons behind Rolls-Royce’s rapid depreciation.
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Why Do Rolls-Royce Depreciate Fast?
The majority of the people who can afford to own a Rolls-Royce won’t be looking for a used one. This low demand for a used Rolls-Royce is the main reason behind its quick depreciation.
Luxury cars of almost every brand depreciate faster than regular cars, and the same goes with the Rolls-Royce. They are very difficult to sell in the first place because the majority of the cars produced by Rolls-Royce have customized features selected by the first owner.
The release of a newer model every other year also takes some value off the previous model. All these factors combined with the reliability issues make Rolls-Royce cars depreciate at a higher rate.
How Fast Do Rolls-Royce Depreciate?
In terms of percentage depreciation, Rolls-Royce cars aren’t that bad and only depreciate 42 percent after five years of operation. Whereas a normal luxury car depreciates around 50 to 60 percent after 5 years. But the problem is that every single percent depreciation of Rolls-Royce means a lot of money.
Take Rolls-Royce Phantom as an example, the initial selling price of Phantom is around $450,000 and it depreciates 40 percent after three years. Most of the luxury cars will also have a similar depreciation rate after 3 years, but in the case of Phantom, this 40 percent represents $180,000.
Now that’s a lot of money and one can easily buy a new luxury car with the same amount. Therefore, in terms of actual money, Rolls-Royce cars are among the fastest to depreciate.
Below is the graph showing the average depreciation of Rolls-Royce cars over the course of ten years.
Rolls-Royce cars depreciate the most during the first two years and they lose more than 25 percent of their value after just a couple of years. For the next three years, the depreciation will be around 15 percent which takes the total depreciation to 42 percent after 5 years of operation.
The depreciation rate after the fifth year is relatively low and an average Rolls-Royce car depreciates around 22 percent from the 6th to 10th year of its lifespan. Again, percentage-wise this may not seem like a huge depreciation however, the depreciation in terms of actual money is enormous.
Now, let’s have a closer look at the three main reasons behind Rolls-Royce’s quick depreciation.
The market demand for a used Rolls-Royce car is very low because only a few people in the world can match the asking price. Also, the people who can afford to own a Rolls-Royce won’t be searching for an old one.
The resale price is determined by the simple supply and demand rule. If there isn’t much demand for a second-hand Rolls-Royce then it will automatically depreciate at a higher rate.
Hefty Price Tag
The huge price tag of Rolls-Royce cars is another reason behind its fast depreciation. The entry-level Rolls-Royce will cost you at least $300,000 meaning for every one percent of depreciation you will be losing $3000.
The initial selling price of its flagship model Rolls-Royce Phantom is around $450,000 and the price even goes further up for the customized versions. Rolls-Royce cars drop 5 to 10 percent of their value as soon as they left the showroom, simply because now they will be termed as a used car instead of a new one.
Rolls-Royce cars are very expensive to maintain, and even a normal service can cost thousands of dollars. Moreover, its parts are also very expensive and they are hard to find in the first place, especially for the old models.
The cost of maintaining a used Rolls-Royce will be the same or even more than the cost of maintaining a new one. That’s because as the car becomes older, the probability of having a major repair becomes higher.
All Rolls-Royce cars are assembled by hand and because of the complexity of their design only qualified mechanics can repair them. Again, these repairs are very expensive and therefore Rolls-Royce cars fail to retain their value in the long run.
Which Rolls-Royce Depreciate the Fastest?
The Rolls-Royce Ghost has the highest depreciation rate among all other models. Rolls-Royce Dawn is also very close, but the Ghost takes the lead by a very thin margin. It depreciates 46 percent after 5 years of operation.
Rolls-Royce Ghost belongs to the full-size luxury car segment also known as the F-segment. Rolls Royce Ghost is five and a half meters long and has a width of more than 2 meters. It’s a spacious luxury car with a sublime interior and outstandingly comfortable ride.
The initial selling price of Rolls-Royce Ghost is $323,225. After two years of operation, it loses 32 percent of its value meaning the first owner is expected to lose around $100,000 in the first two years alone. The following table shows the depreciation and residual value of Rolls-Royce Ghost against its age.
|Vehicle Age||Depreciation||Residual Value||Vehicle Worth|
The difference between the depreciation rate of Rolls-Royce Ghost and other Rolls-Royce cars isn’t very significant. Second-year is the only exception, during which the Rolls-Royce Ghost loses a massive 19 percent of its value. Then after the first two years, the depreciation rate slows down and becomes less than seven percent per year.
Which Rolls-Royce Depreciate the Slowest?
Almost all the Rolls Royce cars depreciate at a very quick rate but relatively speaking Rolls-Royce Wraith has the slowest depreciation rate. After 5 years of operation, it only depreciates 39 percent.
Rolls-Royce Wraith was introduced in 2013 and it is based on the chassis of Rolls Royce Ghost. Wraith is the most powerful car in the entire Rolls Royce lineup.
It is powered by the turbocharged 6.6-liter V12 engine that produces an incredible 624 brake horsepower. The car weighs around two and a half tons and still goes from 0 to 60 mph in just 4.4 seconds.
The initial selling price of Rolls-Royce Wraith is a whopping $345,760 and it further goes up if someone wants to add the customized features. The following table shows the depreciation and residual value of Rolls-Royce Wraith.
|Vehicle Age||Depreciation||Residual Value||Vehicle Worth|
Unlike other Rolls-Royce cars, the Wraith only depreciates 22 percent after two years and retains a selling price of $270,938. Apart from the first three years, it depreciates the most in the eight-year.
For the rest of the years, the annual depreciation rate is less than seven percent. It is worth noting that almost all Rolls-Royce models retain the same 36 percent of their value after ten years of use.
Also read: Porsche Depreciation: 6 Models Compared
How to Buy a Rolls-Royce without Losing too Much Money?
Depreciation is a continuous process and it cannot be stopped no matter how much you take care of your vehicle. The car will keep losing its value even if it is parked in a garage. Still, you can avoid losing too much money by following the advice mentioned below:
- Avoid buying a new one: Rolls-Royce cars depreciate the most during the initial years. Especially the first two years have the highest depreciation rate. Therefore, look for a Rolls-Royce that is at least 2 years old.
- Choose the standard versions: Rolls-Royce usually asks the initial owner if he or she wants to add any custom feature and most of them choose to have one. Such models are difficult to sell because different people have different tastes and preferences. When buying a used Rolls-Royce always go for the standard version.
- Minimum owners: Keep the total number of owners to the minimum and try to buy a used Rolls-Royce from the original owner instead of buying it from some company or a dealership.
- Avoid exotic colors: Cars with regular colors like white, black, and silver have high demand as compared to cars with exotic colors.
- Pick the right model: As discussed earlier, models like Rolls-Royce Ghost and Dawn depreciate at a higher rate. Therefore, pick the right model which has a relatively low depreciation rate like Rolls-Royce Wraith or Phantom.