We’ve long preached the gospel of maximizing the value of one’s automotive investment by choosing a vehicle that inherently delivers the lowest long-term ownership costs, including fuel economy, insurance premiums, maintenance and repair costs and depreciation. The latter is an often overlooked, but especially significant factor, with even modest differences in many cases making a big impact at trade-in time.
According to Kelley Blue Book, the typical new vehicle tends to retain just 39.7 percent of its original value after five years, which means an average car that sells for $50,000 today would be worth around $19,850 at the end of 2019. By comparison, an otherwise comparable model that’s expected to retain an additional five percent of its original value after 60 months will put an extra $1,600 back into an owner’s pocket.
While a given model’s actual selling price on the used-car market will ultimately vary depending on its mechanical and cosmetic condition and the number of miles on the odometer, some cars and trucks are predicted to hold their value more tenaciously than others. Prognostications regarding a given model's residual value are based on assorted economic factors, historical data including used-vehicle auction values and supply and demand projections. For example, slow-selling cars that are typically offered subject to hefty cash rebates usually suffer steeper declines in residual values than do vehicles that sell quickly and for closer to their sticker prices.
Generally, the more expensive the vehicle, the more important differences in depreciation become over time, simply because there’s more cash at stake. A $30,000 car that drops 40 percent of its original worth after three years loses $12,000 at trade-in time, while a vehicle priced at $100,000 with the same rate of depreciation will suffer a $40,000 hit in residual value after 36 months. (On the other hand, differences in resale values tend to narrow the longer one keeps a vehicle, and can become negligible among those who literally “run a car into the ground.”)
And if you’re leasing, rather than buying a car outright, choosing a car that’s predicted to retain a higher residual value becomes even more critical, as payments are largely based on the difference between a model’s transaction price and its projected worth at the end of the contract’s term.
To help consumers find the best long-term values, the analytics experts at ALG in Santa Barbara, Calif. recently issued their 15th annual Residual Value Awards (listed below), that identify cars, trucks and SUVs in 26 different model segments that are predicted to depreciate the least over time. "Residual value is important for automakers and consumers because it's a complete indicator of the vehicle's future value, accounting for quality, durability and brand desirability among other factors," says ALG president Larry Dominique. "The award recipients demonstrate strong forecasted returns on investments for their owners."
Among mainstream makes, Toyota/Lexus tops the ALG list with five separate segment leaders, while ALG predicts Land Rover’s upscale SUVs will afford the highest average resale values among luxury automakers. “With some models like the Range Rover Sport, we're seeing vehicles on the dealer lot for just 13 days on average – far below the industry's 65-day average," Dominique says. "Some Land Rover models are in such high demand that they're selling above list price, which is a remarkable achievement.”
Here’s the complete list of 2015 ALG Residual Value Awards:
- Subcompact Car: Honda Fit
- Compact Car: Mazda3
- Midsize Car: Subaru Legacy
- Full-Size Car: Dodge Charger
- Sports Car: Subaru WRX
- Alt-Fuel Vehicle: Toyota Prius v
- Minivan: Honda Odyssey
- Subcompact Utility Vehicle: MINI Countryman
- Compact Utility Vehicle: Honda CR-V
- Midsize Utility Vehicle – 2 Row: Subaru Outback
- Midsize Utility Vehicle – 3 Row: Toyota Highlander
- Full-Size Utility Vehicle: Chevrolet Tahoe
- Off-Road Utility Vehicle: Toyota 4Runner
- Midsize Pickup: Toyota Tacoma=
- Full-Size Pickup: Toyota Tundra
- Midsize Commercial Van: Ford Transit Connect
- Full-Size Commercial Van: Mercedes-Benz Sprinter
- Premium Compact Car: MINI Hardtop
- Premium Midsize Car: Lexus IS
- Premium Full-Size Car: Hyundai Genesis
- Premium Executive Car: Porsche Panamera
- Premium Sports Car: Audi TT
- Premium Compact Utility Vehicle: Porsche Macan
- Premium Midsize Utility Vehicle - 2 Row: Land Rover Range Rover Sport
- Premium Midsize Utility Vehicle - 3 Row: Lexus GX
- Premium Full-Size Utility Vehicle: Toyota Land Cruiser
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