|
Strategies for Smart Car BuyersSM
Keep Your Eye on Resale Value
By Philip Reed, Senior Consumer Advice Editor
Email
Most Americans are in denial about how steeply new cars depreciate. For years this dirty little secret was simply ignored because the desire to own a shiny, new machine overwhelmed our senses of reason. Furthermore, predictions of exactly how much depreciation cost buyers were hazy and subject to manipulation and interpretation. But now that we have cold, hard facts, it's time to do something about this costly issue.
Here is the unavoidable truth: some cars depreciate faster than others. Much faster. In fact, much, much faster. After five years, one car could be worth nearly as much as 60 percent of its initial purchase price. Another could have fallen to 20 percent of its starting value. See which cars hold their value best by reading Top 10 Cars With the Best Residual Value for 2008.
Buying a car with weak resale value will cost you money. You won't necessarily notice it immediately, but such a car will drain your financial resources steadily as you own it. A car with a high resale value might cost more up front, but will save you money in the long run.
What this means to you, the highly pursued American car buyer, is that you owe it to yourself, and your family, to face the music. Make depreciation an important part of your car-buying decision. Not only will you get more when it's time to trade in, but if you decide to lease, your monthly payment will be lower. (An important part of the lease formula is based on the depreciation or "residual value" of the vehicle.)
Car dealers pay attention to depreciation and call this "buying right." A sales manager might be heard to comment, "He bought right in the first place so when it was time to trade in he got strong money for his old car."
Take a tip from the insiders and buy right by looking at depreciation first. Edmunds.com makes it easy to buy right by presenting depreciation information in a number of ways. Most prominently, we feature a True Cost to OwnSM (TCO) section for every car. The depreciation of the vehicle is shown over a five-year period along with other related costs. Additionally, there is a bar graph of depreciation that shows which cars have a high resale value.
Auto manufacturers know that resale value is the life blood of their product since it is, in essence, an indicator of how desirable their cars are.
To get you started thinking about this important subject, try looking at our Top 10 Cars With the Best Residual Value for 2006 where the car with the highest resale value is a Mini Cooper Clubman, with a residual value of 54 percent after five years (note: resale value for vehicles is estimated by different sources and, as a result, some discrepancy might exist). Then look at Top 10 Cars With the Worst Residual Value for 2008 where the Jaguar S- Type is expected to have a residual value of only 14.4 percent after five years. That's quite a spread.
Buy wisely and you'll not only save money, you'll feel good about your car the whole time you drive it. You will have the pleasure of knowing that you've maximized the value of your hard-earned money.
|
