Volkswagen is in a world of hurt. So are Audi, BMW, Mercedes-Benz and the others who sell diesel passenger cars. Diesels are distressed properties which, ironically, make them a great deal if you’re in the market for a new car. Seriously: Buy a diesel now. If you’re thinking of investing in VW stock, that’s a different matter. It’s hard to say if the market has fully digested all the bad news.
The qualities that make diesels desirable remain: 500-800 miles between fill-ups, better efficiency than gas-engine cars, torque (oomph) when starting up from standstill. For all that, they only amount for 1.1% of US sales through August 2015, versus 2.9% for hybrids and 0.4% for plug-in hybrids. Here are scenarios for buying or holding a diesel-engine car. They’re mostly good.
C’mon down and shop. The problem is mostly VW’s, although there are reports that BMW may have problems and perhaps the entire industry. To sell diesels, the automakers will be offering fabulous incentives to get them off dealers’ hands. If there are no further problems, great. If there are, you’re protected by the raft of lawsuits and federal actions that will force repairs and compensate you for decreased value. What if the automaker files for bankruptcy? It’s unlikely as relates to the US, since diesels are a drop in the bucket.
The main problem with diesels so far appears to be Volkswagen’s diesel engines that VW said could be made to run clean without the use of the urea additive called diesel exhaust fluid (DEF) or AdBlue to reduce NOX emissions. They can’t — at least without cheating. All the automotive engineers who privately said, “There’s no way VW can do that with today’s technology and no urea injection,” they were right.
VW diesels will be hard cars to sell. Every car finds a buyer at some price and the market will determine if that’s $2,500 off or $10,000 off. If you were offered a diesel VW Golf of VW Jetta with a $5,000 discount, go for it. Suppose the car is devalued more than that at trade-in time? You’ll be covered by the flurry of lawsuits meant to protect your interests and perhaps improve the bottom line of the litigators. Probably.
Houston, we have a problem. If your diesel car meets emissions specs once you have it tested (why not?), you may be out of luck. You know its value is degraded — guilt by association – but you may not have standing (a legal reason) to sue. Sorry. It’s like trying to sell your house when the family next door was killed in a home invasion.
If you own a diesel truck or SUV, things aren’t quite as bad. People who buy pickups know diesel means the power to carry and tow big loads. The number one diesel passenger vehicle in the US is the Ram Pickup Diesel. If there are discounts, they’ll be smaller.
Congratulations! You’re on your way to a new car. Volkswagen will likely have to recall the car and make repairs, and maybe buy it back. Never mind that the amount of excess pollution emitted will make for a clean-running diesel of a generation ago, it’s still too much.
You will have options, most of them good:
— VW offers to buy back the car because repairs are too costly. They’ll likely give you more than the car is worth because they’ve got enough lawsuits on their hands.
— VW makes the repairs to meet the NOX limit and the car runs slower and gets worse mileage than the specs. You’ll get some kind of make-good cash in the thousands, not hundreds, and a goodwill coupon for your next Volkswagen.
In other words, the seemingly worst-case scenario (you own a VW diesel) is really the best scenario possible. And you’re still driving a car that is a lot more fun than most econoboxes. Fahrvergnügen lives.
If you’re thinking of leasing a diesel car, you’ll get all the advantages mentioned above, plus the option to dump the car when the lease ends, take the buyout on the stated terms (which should be good), or if the resale value sucks compared to the stated residual value, dicker with the dealer.
Say the sticker price was $25,000 and the buyout term is $10,000 as per the lease, but diesel values still suck and Blue Book is really $7,500, the dealer or the finance company would entertain an offer at, say, $8,000. Meanwhile, the lease payments were based on your “borrowing” $15,000 (a lease is the loan on the difference between the new car price and the buyout price) not $17,500.
The worst case scenario is that diesel as a technology is so tarnished that automakers one by one pull their diesel offerings from the US market. That’s going to drag down resale values further and the make-good rebate or next-car discount won’t look so fantastic. Overall, you’re probably going to come out ahead.
Passenger car diesels may go away, diesel SUVs such as the Jeep Grand Cherokee might, and the odds of light truck diesels going away rounds off to unlikely.
Cheer up. You’re in a good place.