Although Volkswagen has paid dearly for its mistakes leading up to its diesel-emissions scandal, most owners of 2.0-liter TDI models have emerged relatively well off, thanks to the restitution and buyback terms of the $10 billion settlement program. Volkswagen dealerships haven’t fared too badly, either, with their $1.2 billion settlement. And now they appear to be making a bundle selling new, modified four-cylinder TDI models—while they last—as well as every used TDI they can, at prices inflated by market demand and short supply.
The going rate for a new, emissions-modified 2015 VW TDI model—yes, a two-year-old car, including the Jetta, Golf, Beetle, and Passat—is its original sticker price. A $5000 customer bonus does apply in many instances, but in some cases dealerships are writing that out, too. And good-condition, late-model used TDIs that are eligible for resale at this point are commanding transaction prices that approach their original MSRPs.
Good-condition, late-model used TDIs that are eligible for resale at this point are commanding transaction prices that approach their original MSRPs.
“Demand is really solid,” said Tom Herzog, the managing partner at Herzog-Meier, which has a Beaverton, Oregon, Volkswagen dealership that has taken in more than 1500 buyback vehicles so far. At the time Volkswagen froze sales of new 2.0-liter TDI models, Herzog-Meier had in stock 26 new TDI vehicles with the Gen 3 four-cylinder engine. Herzog confirms that the dealership has sold about two-thirds of those cars—each as soon as it’s fixed. And they’ve all been at MSRP.
Used TDIs Also Hard to Find
In addition to the strong market for new TDIs, used late-model TDI VWs are selling for more than their Black Book value, according to sales manager Travis Dusenberry at Dick Hannah Volkswagen, another Portland dealership. “People know that they’re worth the money, and they’re not negotiating too much,” he said.
A sales manager at a Southern California dealership said that they haven’t had a TDI get through cleaning and prep to the lot; they’re always sold prior to that. He described sales this month of new and used TDIs as “very hot” and said he doesn’t have the stock to meet demand.
April was the first full month in which dealerships had new TDIs to sell, while the sale of bought-back used TDI models just began earlier this month. Several dealerships said that there is intense interest around the remaining 2015 models fueled by Volkswagen’s announcement that its diesels are unlikely to return to the U.S. market.
What the Cleanup Entails
The fix for Gen 3 models comes in two phases. Phase 1, which is being performed now, is a straightforward software swap that takes dealerships about an hour. The Phase 2 fix won’t be available until early 2018 and takes an estimated nine labor hours to replace the particulate filter, oxidation catalyst, and selective catalytic reduction converter. For automatic-transmission models with less than 40,000 miles or manual-transmission models with less than 70,000 miles at the time of the fix, VW will have to replace the oxidation catalyst a second time before 150,000 miles. That fix hasn’t yet been approved.
Under the Phase 1 fix, the engine sound may change slightly, VW said, although it won’t result in any significant changes in driving characteristics, performance, reliability, or durability. The automaker actually touts better throttle response with the fix, as well as earlier upshifts when lightly accelerating in Sport mode and “smoother acceleration and improved driving experience.”
There’s one sour note to take into consideration: VW says that some owners of Gen 3 cars will notice an increase in the consumption of diesel exhaust fluid (DEF) with the Phase 1 fix. New 2015 models sold now also will have revised EPA fuel-economy figures—not because the vehicles get worse mileage, but because the way the numbers are calculated has changed, VW emphasized.
Temporarily Inflated, But a Long-Term Value
Anil Goyal, senior vice president and chief analyst at Black Book, reports that earlier in the year there was speculation on TDI prices—over how some models could potentially command more than the buyback amounts—but they believe the situation is temporary. “The prices will start to normalize as start seeing more volume and transactions in the market,” he said.
According to Volkswagen, 3169 TDI models from the 2015 model year were sold as new in April. Based on information in the last Independent Claims Supervisor report, from February, we estimate that several times as many used TDI models will soon be back on sales lots, with a stronger supply in the coming months, as dealerships work through the backlog of these Gen 3 cars.
One can still make a strong argument for why these TDIs are a great deal—perhaps even more than before the scandal. For one thing, owners are getting a better warranty. The Extended Emissions Warranty that is included with Gen 3 vehicles will run for as long as 11 years or 162,000 miles and cover the entire exhaust system, fuel system, turbocharger, and various other components, including most engine issues. And it will be fully transferable to subsequent owners.
Although the TDI badge might not have the same allure it once did, Herzog notes that the emissions issue hasn’t changed the value that customers see in the cars—and diesel’s more attractive running costs may assure that used prices won’t settle much lower than where they were before the scandal and settlement. “It’s still a value to the consumer if they’re going 100 miles a day on the commute,” he said. “I’m encouraged that people still see that value.”
If you want a brand-new TDI and aren’t offput by either the 2015 vintage or the soiled reputation, they’re going and soon to be gone. So head to the dealership, and prepare to pay accordingly. If you’re content with a used TDI, it might be smart to wait a bit for the initial frenzy to die down.