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.
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.
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 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.
Read the original article in Forbes for the complete list of 2015 ALG Residual Value Awards.
