Not all resale values are created equal
Buying a new car or truck can be a very expensive endeavor. Style, safety, and reliability are usually at the top of shopper's lists, but the one area that will get you in the end is the all-important resale value.
Some vehicles, like the Honda Odyssey, hold their value extremely well, even after five years. Owners of the Dodge Caravan aren't nearly as lucky, with resale values after half a decade of ownership at a paltry 24-percent of the sticker. As Forbes' Dan Leinert points out, however, the Caravan actually scores quite well in JD Powers studies, so the horrendous resale value can be accounted for when considering the large incentives that are used to move hundreds of thousands of Dodge minivans off dealer lots.
Most of the other vehicles on the list have either gone a really long time without an update, like the Crown Victoria, or are just plain lousy vehicles, like the Kia Amanti. Either way, if your vehicle appears on the "Losing Value List," we'd suggest you hold onto it -- for a while.
You can see the list of the biggest losers after the jump.
[Source: Forbes]Biggest Depreciatiators over 5 years
Buick Ranier - 26%
Dodge Caravan - 24%
Dodge Durango - 23%
Ford Crown Victoria - 22%
Ford E-Series - 23%
Kia Amanti - 27%
Kia Spectra - 27%
Mercury Grand Marquis - 23%
Reader Comments (Page 1 of 2)
Avinash machado 9:59AM (3/20/2007)
The Domestics seem to be lagging in resale value. Could be due to the perception that they are inferior to the Japanese vehicles.
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Michael Karesh 10:10AM (3/20/2007)
When calculated as a percentage of MSRP, resales values mislead at least as much as they inform. While domestics do seem to depreciate more quickly, they do not depreciate nearly as quickly as these figures suggest.
The Durango, for example, can often be bought for $8,000 or more below MSRP once rebates and dealer discounts are totaled up.
So how much of this extra "depreciation" is truly depreciation, and how much is a larger discount at the time of purchase? It's hard to say without knowing initial transaction prices.
This is a downfall of pretty much every depreciation figure I've seen.
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geo.stewart 10:26AM (3/20/2007)
MK is correct. We bought our grand caravan loaded at roughly 75% of list new. so with a 24% resale of list, depreciation is only 1/2. From purchase price, I am at 33% at 5 yrs, probably not stellar but not horrendous. Figure a lifespan of 10 yrs and I get the best 1/2. 33% isnt terrible.
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EnviroBob 10:17AM (3/20/2007)
Re-sale values are very deceptive numbers, as the vehicles value after five years is calculated against its original MSRP, not actual selling price. Once rebates, incentives and lower interest payments are figured into the equation, the difference in out of pocket expenses from brand to brand aren't quite as extreme as these numbers would indicate.
Edmund's True Cost To Own calculations show this, as the cost to own (including depreciation) a Grand Marquis is .02 per mile more than an Accord ($45,230 out of pocket expense for the Grand Marquis vs. $43,794 for the Accord). When compared to the Avalon, which is closer in passenger volume to the Grand Marquis, the Mercury is actually .06 LESS per mile to operate over the five years.
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The other Bob 10:43AM (3/20/2007)
When people shop and base their buying decisions on resale value, one can only assume they are doing this because they are planning on selling the car in three years or so. By shopping resale value they are trying to be more financially responsible in their purchase, but by selling a car after only a few years they are being financially irresponsible.
The way I look at it, if you are financially responsibly you will drive a car until it is junk. Therefore, resale value is irrelevant.
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Michael Karesh 10:50AM (3/20/2007)
If you use transaction prices, the resale on the Durango goes from 23 percent to 33 percent. Just wrote that up here:
http://www.truedelta.com/blog/?p=71
Domestics will look worse in MSRP-based figures because they tend to be available with larger incentives and rebates.
Seems we've got a number of minds thinking alike in this thread.
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mr.ed 11:26AM (3/20/2007)
I bought a 2004 Mazda6 wagon almost two years ago at approximately $7000 off sticker through a $4000 rebate, $2000 from the dealer and $1000 from Mazda credit, whose balance I paid off immediately. Total with tax came to about $20,000. It's now worth about $17,000, or $10,000 off window sticker (37%) but $3,000 of the actual cost (15%).
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Richard Warren 10:59AM (3/20/2007)
Most of the time if you got a discount or rebate at time of sale, you got your resale up front. Pretty simple to understand. The other side of the equation, if you own the vehicle till the wheels fall off, resale means nothing.
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Mr. Oak 11:03AM (3/20/2007)
The shell game played by the imports played on a self-absorbed nation of idiots.
I. It should come as no news to anyone who posts here that DCX's huge inventory backlog would destroy the resale value of their products.
II. The world and more specifically the USA is full of idiots, that are willing to spend 10s of thousands of dollars on a preception, instead of doing some research.
III. Other than what I've read here, and other trade publications, I have bearly heard a peep out of the mainstream media about the sub-standard junk that Toyota and Honda have been selling.
IV. That Toyota decieves the general public, by labeling their recalls as "Service Bulletins".
That aside, all the cars on this list deserves to be there. I wouldn't buy any of them brand new without a deep discount off sticker. People however, need to look at every car individually. Instead they take the worst of the lot of American cars and make them the poster boys of the entire industry.
I adbolutely love my '04 Lincoln LS, and would buy another, before I buy any appliance from Toyota. The Zephry/MKZ that supposedly replaces the LS is not even in the same class. (Ford's Luxury division produces an economy class knock-off). Cadillac here I come.
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Jeff 11:35AM (3/20/2007)
I had this very debate last summer when buying a new car. I wanted a convertible with a big enough back seat to actually hold a real size human. This left me with a few choices and I narrowed it down to the Toyota Solara Convertibel and the Pontiac G6 Convertible (hard top vert). I ended up with the Pontiac. Yes, the Toyota may have higher resale percentage, but the Pontiad, after rebates and low interest rates, and a better deal on the trade in of my existing car, totaled out at about 8K less than the Toyota. After 5 years, there is not going to be 8K difference in the total resale value in these two cars.
Top that off with the fact I actually liket the Pontiac better, and the hard top is a nice feature in the mid west winters, the resale debate kind of is meaningless when one factors in the starting price of the automobiles.
J
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Bob-omb 12:19PM (3/20/2007)
No, the Caravan is a crappy van. Maybe not compared to the Freestar or the Uplander, but...crappy.
It's a shame that depreciation doesn't extend to the Spectra5. I'd love to buy one cheap -- fun car!
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Ryan 11:33AM (3/20/2007)
The other Bob - I do not think you have to drive a car until it's junk in order to be financially responsible. There is always a quality of life / financial tradeoff, which is how we define Value. As your "junk" car ages and your cost of repairs rises and your enjoyment and comfort decrease, you fall on the losing side of the value curve. And I would call your logic into question at that point.
Of course, there is nothing wrong with driving a junk car. I just wouldn't say that it's universally "smarter" than driving a newer car.
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Doc Lucas 11:44AM (3/20/2007)
Saving big $$$ on cars...
1. Research & buy the best example you can find of a 2-3 year old model you actually like. Pay 50-70% MSRP.
2. The car is young enough for you to influence its longevity. Keep it for 10+ years.
3. During years 5 thru 10+, pay no attention to the Jones' new car. Get a book about "wabi sabi", have your wife read the book too.
4. If you have teenagers at this point, appeal to their nostalgia for childhood. Pawn the car off on one of them. Act as though YOU are doing the favor.
5. If you haven't spent all your savings on trips to Banff, or medical bills for your kid, you'll have enough cash saved to buy another new(ish) car of your choice, maybe even a Bugatti Veyron.
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shoe007 10:43AM (3/21/2007)
I sell Toyotas and this is my first run at car sales, but I can say that my thoughts about cars and values has changed greatly over the last 2 years.
The simple rule I use now, and the one I tell my customers, is to imagine a ten year old car with 150kmi on it. It is a pontiac Grand Am, do you want to buy it? How much would you pay for that and how much longer would you bet it will last. Now make that a Camry, with 150k mi how much life does it have left. If I can verify it was maintained I would bet it is less than halfway though its life.
What amazes me is that even people who have never owned a Honda or Toyota before get this, it is the perception and it has been earned.
I go to the auction sometimes with the Used car manager. Not the big fancy one, I am talking about the one that your 10 year old trade-in goes to. As you watch caravan after caravan get drug across the lane with the same issues time and again (transmissions mostly) you see the ugly reality fast.
As to the "Service Bulletins" I have seen the nit-picky things that Toyota brings their cars back for and it actually makes me respect the company more. They identify problems quickly and rectify them before the government has to step in and force it.
You can tell a voluntary recall because those are the ones on 1-3 yr old cars. How many times have you gotten a recall notice on a domestic car that you sold 5 yrs ago(I know I have had it happen to me twice)
I actually have a Chrysler Sebring and the tie-rod end popped of at 68k mi. As I researched we actually did 3k better than most. This a known issue that effects every one of these cars, it is 6 years old and still there is no recall! I'll take the bad press from a "service bulletin" anyday over the idea of my wife's car falling apart on the highway.
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Chet 12:42PM (3/20/2007)
GM, Ford, and the Chrysler Group are in control of their own resale values. If they're worried about the effect of resale value figures on perceived quality (and they should be), they need to give up the cash-on-the-hood game and set the MSRP realistically. (Never mind the negative impact on perceived quality that up-front cash discounts have...)
They all said they'd give it up, and for a while it seemed like they got it... but they've all put cash on hoods in the last six months.
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Lithous 12:40PM (3/20/2007)
I simply refuse to believe that the domestics aren't as bad in resale as everyone is to believe. I read about their poor resale value on TLAC site all the time, so it must be true! And they (at least the site leader) want American cars to succeed (stated such on the site) and I can tell this is true the way they take the "father who belittles their kid to do 'better'" tactic day after day after day to teach GM and Ford how to do it right! What better way? It is so cute how they are so constructive (just like that cliched father) and not destructive in any way. Isn't the father who does that usually trying to make up for lack of greatness on their own part? Naaaaawwww.
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wetstuff 12:54PM (3/20/2007)
Mr. Oakie better love his Lincoln - it's only worth about $2k in the average ghetto.
.
And pretty much the rest of you are writing press releases on our 'success' in EyeRack. Nobody with eyes open cares what discounts are given - because they'd never know what they were. When your 'dream machine' shows up on Slippery Joe's sales lot; Joe is going to tell you this fantastic Durango was a $40+k ..and he'll make you a great deal. Crap settles to the bottom - no matter where it started out.
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PapaWhiskey 1:24PM (3/20/2007)
The other Bob said:
"5. When people shop and base their buying decisions on resale value, one can only assume they are doing this because they are planning on selling the car in three years or so. By shopping resale value they are trying to be more financially responsible in their purchase, but by selling a car after only a few years they are being financially irresponsible.
The way I look at it, if you are financially responsibly you will drive a car until it is junk. Therefore, resale value is irrelevant."
Driving a vehicle until it is junk may be financially responsible to you, but doing so is unsafe to you and other drivers/passengers on the road. It is unsafe because aging cars are more likely to have mechanical failures which could cause an accident. It is also unsafe because as time passes, new safety technology is invented, and cars become safer.
It is bad for the health of the population and the environment because older cars pollute more than new cars.
If you live in Japan it becomes increasingly expensive to register a car the older it gets. Consequently, after about five years it's too expensive to register a car, so people buy new ones.
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Justin 1:28PM (3/20/2007)
Resale = perception, plain and simple. If average joe believes a toyota is automatically better than a gm, then he will pay more for it. Most of the cars made by all the major car companies are pretty darn good and this difference will only be shrinking with some of the anticipated cars, like the g8, malibu, camaro, etc. And that's not a knock against Toyota or Honda either, they make really good practical cars as well. But this isn't the 80's like the mainstream public thinks when American and Japanese car companies.
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UH2L 1:30PM (3/20/2007)
To add to the good comments that Michael K. and EnviroBob have posted, one should also consider that it's financially better to have less money tied up in a depreciating asset such as a car. If you buy a domestic sedan for $22,000 instead of an import sedan for $25,000, that $3,000 spread out over a 48 month loan at 7%, would save you $70 a month. Assuming you keep the car for the length of the loan, if you invested that $70 each month into a CD at 5%, you would earn an additional $800 in interest. So, the resale value story is even more skewed towards the imports than it should be if one considers the price difference including rebates.
Atul
http://www.realitydriven.com
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