Depreciation

[Just Plain Jeff]

I have not been around for a variety of reasons. After accidentally starting all this up, I apologize for not being very active.

A couple of people have suggested that the topic of Depreciation be discussed, or perhaps an article or guide to depreciation be developed for this site.

The problem with this topic from my point of view is that I don't think, 'depreciation,' rather, I think 'value' of a coach. In recent years, the trade has come to put numbers on Prevost conversion coaches as what they call a 'hard' number. That is the number that they would be willing to pay for a coach off the street or from another party. Those are not pretty numbers. I am guilty of beginning to think that way myself. It is an unfair analysis of the value of a given coach and strips away the utility value of the coach, demand for a particular converter and any special features a particular coach might be. This is the old wholesale coach pricing system at work.

Not too long ago, a guy went to a converter and asked them a question. It was something like this: "If I agree to buy a new coach from you every single year, how much will it cost me to do that?" The response he got was something over $450K/yr. So there is a depreciation number and it sounds low to me.

Further, there is an inverse relationship between the cost of a new coach and its value in one year. That is, one might think that a more expensive coach would hold its value better. That does not seem to be the case. Instead, the lesser expensive new coaches seem to depreciate less.

Whether a new coach or a preowned coach, it makes sense to me that a buyer find a price point and a coach where enjoyment of the coach is paramount rather than being worried about the dollars ticking away with depreciation.

And I could be absolutely dead wrong.

[Jon Wehrenberg]

Welcome back, Jeff.

This will sound "preachy", but after watching the costs and values of these coaches over the last 16 years I have learned there is no such thing as a Prevost conversion holding value or being a good investment.

For almost all of us these are toys. At best, if we can get a business use out of them there may be some advantages that can translate into lower taxes, but as time passes your coach will be less valuable than what you paid for it.

Jeff is absolutely correct when he states the least expensive will depreciate the least. The biggest loss in actual value occurs during the first year and that depreciation gets less and less as time goes on. There is also a relationship between sellers and price. A purchase from the original converter is likely to be more costly than a purchase from a private seller, but generally speaking the converter is going to deliver a coach that has had a fairly comprehensive inspection and all things that need it are repaired. That converter will also stand behind the sale. A private seller is usually selling as-is, where-is unless some other arrangements are made. There is a value to each method that only the buyer can determine. The difference between the two sales makes it very difficult to establish normal depreciation.

A final thought is that you have to like the coach you are buying. There are so many factors that determine which coach is right for you, it is impossible to place monetary values on some of them. Features I may value highly (lets say OTR air) may be a detriment to someone who deems extra storage space to be vital. The important thing is to let the market prices guide you, but when you walk into that coach that hits you just right then you know what is right, including what you will pay for that coach.

[pognumber26]

The basic formula, as relayed to me by one of the major converters is this...On EVERY trade they use the SHELL year as the basis for any tade value...Making an "01 an '00 in a nanosecond...This must be an EXISTING formula because the converter I eventually bought my new coach from came within a couple of thousand dollars with his original trade $$ number...I agree the only investment being made with these coaches is in the realization of my dreams...to paraphrase the tv commercials...First year Prevost depreciation...ridiculous...First year Prevost travel experience...PRICELESS...

[ken&ellen]

Back in the stone age when I was in college studing to be a business tycoon I learned about depreciation, how to amortize capitol equipment, tax law, and etc. Then I bought an airplane......all logic went out the window...no matter how I tried the numbers did not justify owning that Mooney; however since I utilized it to pick up my young daughter, who lived 5 hours away in South Jersey , each weekend....it was indeed priceless.
I have owned many campers and motor homes, but the Prevost has brought back that same feeling of satisfaction I used to get when I had my airplane.
Ken;)

PS....Welcome back Jeff...I did not recognize you with your new name until I read this thread.