After their homes and perhaps putting their kids through college, an automobile is typically the next largest financial outlay a family makes. To help wring the most value out their vehicular investments, it’s prudent to choose a model that will bring a higher resale value (in the industry this is called residual value) down the road.
Generally, the more expensive the vehicle, the more important even relatively minor differences in projected resale values will become, simply because there’s more money at stake. Last year the average new car was predicted to retain about 38.2 percent of its original value after five years, meaning that a $50,000 model will only be worth nearly $19,100 at trade-in time. Pick a comparable model that’s estimated to hold five percent more of its value than average and you’ll realize an extra $2,650.
For those leasing a vehicle, comparing residual values among competing makes and models is critical. That’s because lease payments are generally based on a vehicle’s initial transaction price minus what its residual value is estimated to be at the end of the contract’s term, financed at a set interest rate.
What’s more, with used-car values beginning to drop for the first time in years – on average they fell by 3.5 percent in October, the largest such dip in two years according to the National Automobile Dealers Association – picking a new vehicle that holds onto its value steadfastly is particularly important.
Fortunately the valuation experts at ALG are making this decision a bit easier with their 2014 Residual Values Awards in each of 24 separate new-vehicle categories. These models are expected to retain the highest percentage of their Manufacturer’s Suggested Retail Price (MSRP) after a three-year period, based on criteria including segment competition, historical vehicle performance and industry trends.
Honda was named top brand for residual values among mainstream automakers, followed byToyota, Subaru, Hyundai and Mazda. Meanwhile, Mercedes-Benz took top honors overall among luxury makes, with Acura, Audi. Infiniti and Lexus rounding out the top five upscale band rankings.
Toyota placed the most vehicles on ALG’s list with eight segment awards, including the Tundra full-size pickup truck and Prius c hybrid car. Audi and Honda tied for second place with three models each, and Chevrolet swept the sports car awards with the Camaro and Corvette.