New Car Categories Becoming a Driving Force in Secondhand Market

The used-car market is friendlier than ever to outlier models such as minis or station wagons. You can even buy one in red and still breathe easy.

The best-selling car in Israel this year will probably not be a family car but the mini Kia Picanto, signaling a major shift in the Israeli auto market in recent years from family sedans to more eclectic models.

Israelis have traditionally been conservative buyers, choosing between a narrow range of models to ensure they get the best resale value when they put it on the used-car market. The buyer of an quirky or atypical car worried he could find himself driving a white elephant. The conservatism even went as far as colors: Buyers still think twice before ordering a red or other bright tones, the result being that Israeli roads are full of vehicles painted white and various shades of gray.

Nowadays, the Israeli car buyer is letting loose. Along with mini cars, crossover utility vehicles and sports coupe cars like the Hyundai Veloster have also enjoyed new popularity. Even family cars are no longer a monolithic group, with more spacious station wagons and family hatchbacks (for those who do not need much trunk space) experiencing better sales. Recently, smaller family cars like the SEAT Toledo and the Peugeot 301 have joined this list. In place of the standard 1.6-liter gasoline engines, motorists are buying cars equipped with a sophisticated turbo, economical hybrids and diesel-powered engines.

To take stock of the changing trends in Israel's used-car market, we examined the prices for the five most popular models in each major category in the local market after three years on the road, using figures from the consumer website Yad2.

Overall, our survey found that people mulling whether to buy one of the new categories of vehicle needn't worry about their resale value. However, one should keep in mind that used-car buyers tend to be more conservative than new-car buyers because they are more sensitive to the risk of high-maintenance costs. After all, they are buying a car that has already a lot of kilometers on it. Still, demand in the used-car market is dictated by what people are driving.

The more cars of a certain type are seen on the road - whether they are leased or privately owned - the more people in the used-car market will feel comfortable buying a particular model or class, says a senior industry source.

Minis: Holding their value

Popular vehicles: Kia Picanto, Hyundai i10, Suzuki Alto, Peugeot 107, Chevrolet Spark, SEAT Mii.

Annual depreciation: 10.4%

The boom in mini sales that began in 2010 has not stopped. Moreover, despite a hike in taxes, prices in this category have even fallen to NIS 60,000. When prices are really low, is there any demand for used cars? Our conversations with people in the car market revealed that the answer is a definite yes.

For minis, the average annual depreciation is 10.4%. However, if the SEAT Mii - which depreciates at a faster rate - is taken out of the equation, the others lose just 10.1% every year - they maintain their value better than the larger super-minis, which also depreciate at 10.4% a year.

The market is flooded with minis, and the drama over the shift to smaller cars is less prominent in the used-car market, says Ran Gantz, CEO of leasing company Operate. Sellers don't have to lower prices substantially to make them attractive to secondhand buyers.

Hatchbacks: Demand outstrips supply

Popular vehicles: Hyundai i30, Toyota Auris, Kia Cee'd, Volkswagen Golf, Citroen C4

Annual depreciation: 10.9%

Hatchbacks (or compacts) are vehicles with a large and spacious passenger area, but with smaller trunks than sedans. They make up the lack of storage space with easy access and the option of folding the back seats down for more space. In Israel, compacts used to be ignored by the market or sold as a second car for families. However, in recent years the category has become more prominent due to the success of models like the Hyundai i30 and the Toyota Auris.

Based on our survey, their increasing popularity is evidenced in the used-car market, where the average annual depreciation is 10.9% (compared with 11.5% for sedans). Demand is increasing because buying a family car like this is becoming a popular option. But the supply is limited, so the prices are higher, says a senior source in the car market.

Station wagons: An image makeover

Popular vehicles: Ford Focus, Hyundai i30cw, Kia Cee'd, Opel Astra

Annual depreciation: 11%

Although hatchbacks are considered by some to be a bit small for family cars, station wagons have the opposite problem - many see them as too large and heavy. Nevertheless, lower prices for cars in this class, along with aggressive advertising for several models, has seen sales climb. The moment they became popular options in the new-car market, they also began finding their way into the secondhand auto market.

We found that the annual depreciation in value for station wagons was 11%, still lower than the 11.5% for sedans, mainly due to the fact that supply has not kept up pace with demand in the secondhand market. The demand for station wagons has been consistently growing, says Gantz. We are seeing more customers asking specifically for these models.

Crossover utility vehicles: Plunging prices

Popular models: Nissan Qashqai, Kia Sportage, Hyundai ix35, Mitsubishi Outlander and the Mazda CX-5

Annual depreciation: 15.4%

Crossover utility vehicles are minivans dressed up as rugged SUVs. They are sold in several sizes, from the compact Nissan Juke up to the really large vehicles like the Kia Sorento and Hyundai ix55.

In the new-car market, the CUVs are pushing out the mid-luxury executive cars. They look more impressive and spacious, but sell at similar prices. In the used-car market, though, the situation is different. Surprisingly, the annual depreciation in value of these cars is 15.4%, compared with 13.5% for executive cars.

SUVs are seen as having high maintenance costs, says an industry source. When someone comes to buy a used car, he doesn't want such a big vehicle. The rate of depreciation for expensive cars is higher in general to meet the lower demand in the used-car market, but that is not the only reason.

David Bachar