The Value – Issue #16: Vehicle Tech: Dollars and Sense

Welcome to Canadian Black Book’s – The Value. Our goal is to provide our clients and partners with news, event updates, new initiatives and opinions from Canada’s trusted source for vehicle values and automotive insights. In this edition we cover:

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By: Brian Murphy, VP Research & Editorial, Canadian Black Book

Colour commentary on the pace of technological change around us is plentiful here in 2019.  There is an abundance of amateur and professional futurists living among us.  It doesn’t matter what aspect of society or business, the impact of ever evolving tech is front and center in daily discussions and media reporting.

The automotive industry illustrates a perfect example of rapid technological change.  You can bet the farm that every model year there will be shiny new innovations, some better than others.  To further make the topic interesting, technology that was once a pricey option, may now be magically “free” as standard equipment.  At Canadian Black Book keeping on top of new tech and the related price/value trends is critically important to us.  A key element of our business is forecasting future values for vehicles, so we also have a need to forecast what vehicle features will be worth in the coming years.

Recently the focus for many vehicle manufacturers is the deployment of numerous active safety features, such as lane assist/warning, smart cruise control, emergency braking and so on.  Somewhere in the suite of offerings are self-parking and other semi-autonomous features that I am often too risk adverse to try, when we have a vehicle on loan. We have also seen in-vehicle screen sizes and quality grow rapidly, along with all the various apps and widgets that inhabit them.  The list of new automotive tech is long and seems to be added to almost daily.

So what does it all mean for fleet professionals and vehicle values?  Well, I expect we all know that vehicles depreciate at a fairly brisk rate.  Given the many, many years of data, that has become something not easy to predict, yet is predicable if you have enough data and effective modeling.

Technology features within a vehicle are arguably much more difficult to predict.  We have been gathering data on how vehicles age and devalue for a very long time, but when it comes to understanding how a particular feature ages there is typically very little reliable data.  To make it more difficult the lifecycle of a technology can be hyper fast.  A feature could go from all new and very expensive, to being available on almost every car and priced into a package or a model as standard equipment in a matter of a few years.

Vehicle technologies, similar to other technology such as home entertainment components, tend to go down in price rapidly as manufacturers find ways to drive cost out of the manufacturing process.  A case in point is the DVD player I bought in the very early days of DVD, which I recall was about $900, Best Buy has a Sony model today for $44.99.  A similar price trend exists in the auto industry today and it’s something to carefully consider when selecting vehicles and the technologies that go with them, for your fleet.

My recommendation is for you to become a fleet futurist yourself.  When you are making fleet purchase decisions, the question to ask yourself is what a feature or group of features will be worth in 5 years or 150,000 km from now, or whatever your magic age and mileage numbers are.  Picture yourself at the auto auction as a purchaser for your own hypothetical used car business.  When you are considering bidding on a 5-year-old used car that has a package of tech gizmos on it that originally sold for $2,000 new, what is it worth to you now?  I think you might be surprised that often the answer you come up with is nothing, or very little.

To be clear, it is not that I am negative about technology, nor am I counselling you to be tech-adverse in your vehicle ordering, I’m simply suggesting you need to have a very objective hat on when making these decisions.  There are certainly many benefits of new auto technologies.  Improved safety for the people behind the wheels of your fleet is the most obvious one.  Some of the autonomous emergency braking technology has great potential to avoid accidents or to at least lower the impact speed greatly and help to prevent injury.

A bit of a safer bet, in my opinion, are any options that lead to larger infotainment screens being installed in a vehicle.  The way we look at the market today, larger screens and features that support handheld devices like Apple CarPlay and Android Auto are very worthwhile to add to your vehicles.

Technology is changing and improving very quickly, and manufacturers are working to cost reduce it all the time.  With that in mind, don’t be disappointed if your operating costs take a hit when these vehicles are remarketed.  Choose wisely!

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