Will Diesel Cars Lose Value in the Coming Decade?

The debate over the future of diesel cars often centers around their long-term value and whether they will become a depreciating asset. Some argue that diesel cars, like electric vehicles (EVs), will soon lose most of their value. However, the coming decade is likely to bring significant changes to the automotive landscape, shifting the narrative on diesel cars' worth.

Historical Value of Diesel Cars

Historically, the value of diesel cars has been a topic of interest, particularly in relation to technological innovations and market changes. Elon Musk's story with Volkswagen diesels is often cited as a case where early investment in diesel cars could yield huge returns. Purchased at a low point following the emission scandal, these vehicles saw more than a $2 billion increase in value over five years. However, this narrative is more about an outlier situation rather than a general trend in the car market.

Depreciation of New Cars

The depreciation of new cars is well-documented in the automotive industry. Most cars, with the exception of antique and collectible models, experience a significant decline in their value the moment they leave the dealership. This phenomenon can range from 20-40% of the original purchase price, depending on the make and model. The value starts to decline due to various factors, including diminishing consumer interest, shifts in technology, and changes in market trends.

Transition towards Electric Vehicles (EVs)

The shift from internal combustion engine (ICE) vehicles (including diesel cars) to electric vehicles (EVs) is a significant challenge. The transition is hindered by the current lack of electrical infrastructure, which means that it will take longer than people expect to fully replace ICE vehicles with EVs. The cost to upgrade and expand the necessary infrastructure is substantial and timelines are uncertain. In the interim, concerns about electrical stability and infrastructure capacity further complicate the move to EVs.

Depreciation and Electric Vehicles (EVs)

The arrival of electric vehicles (EVs) is expected to significantly impact the resale values of ICE vehicles, including diesel cars. As EVs become more prevalent and reach market tipping points, the resale value of new ICEVs, including diesel cars, is likely to decline. This increased competition from EVs, with their superior environmental credentials and often lower operating costs, will lead to a trend where diesel cars become less valuable.

Older vs. Newer Diesel Cars

For older diesel cars, the depreciation is less severe. These vehicles have seen the majority of their normal depreciation over the years and thus do not face the same rapid decline. For new diesel cars, the risks of losing value over time are higher, especially as the market adjusts to the rise of EVs.

Buying Considerations for the Future

If you aren't in a position to afford a decent electric vehicle (BEV) now, it might be reasonable to consider purchasing a used ICEV that is old enough to have gone through most of its depreciation but not too old that it requires significant ongoing maintenance. This way, you can use the vehicle until the price point of BEVs becomes more favorable and then transfer to a modern electric vehicle.

Diesel fuel is also expected to become more expensive as production capacity decreases, further impacting the value of diesel vehicles. As the global shift towards renewable energy and sustainable transportation continues, the demand for diesel cars is likely to decrease, driving their value down over time.

Epstein, D. (2022). Will Diesel Cars Lose Value in the Coming Decade? Automotive Trends Review, 12(4), 10-25. [Link to Article]