CVD wrote:
Looking at tread title (average markdown on used coach); I’ll throw out an approach I’ve been thinking about. Not 100% sure it’s reasonable, but I’d like to hear what others think.
Assumptions
1) You know original MSRP, which includes options
2) Original purchase was for 75% of that MSRP (25% discount)
3) Coach depreciated 40% in first 5 years, 60 % in 10 years.
To calculate a fair value, simply subtract 25% from MSRP to reflect the likely original purchase price, then subtract 40% from that value for a 5 yr old coach (60% for a 10 yr old coach)
Sample calculation: 5 yr old coach ($100k optioned MSRP)
100k – 25k = 75k, 75k * (1 - 40%) = 45k value
Same coach, 10 yrs old:
100k – 25k = 75k, 75k * (1- 60%) = 30k value
Disclaimer 1:I believe a more accurate yearly depreciation scale would be year 1: 15%, year 2 – 5: 10%, year 5 – 10: 5%, year 11 – 20: 2.5%. But for ball park discussion, I’ll propose 40% depreciation after 5 years, 60% after 10 years.
Disclaimer 2: This is a ball park, “sanity check” technique. It ignores trade in value vs. resale value (let’s assume this is a “private party value” calculator). It also ignores that some brands and types hold value better than others, geographic differences, etc.
I like it. I have used a similar formula in helping others buy a used coach.
