Money, money, moneyEnlarge Photo
You'd think that the image and prestige of such models would be sought-after on the used-car market, too. But the moment these models are driven away from the dealership, their values go off their own fiscal cliff. A Jaguar XJL Supersport, for instance, will lose $50,485 of its $119,975 MSRP in the first year; while the CL 65 AMG will typically shed $95k of its $216,205 MSRP in the first year—or a whopping total of $160k of it in the first three years.
The reason? By the time they're three to five years old, they're just used cars. And on the used-car market they're subject to an entirely different set of shopper priorities.
“There’s a lot of blue sky in the value of vehicles and the prestige and the image, and that’s much more true of them when they’re new,” said Eric Lyman, vice president for editorial at ALG, a leading authority for vehicle value information. “Part of the prestige is owning the latest and greatest, and there’s a premium you’re paying for that.”
Resale values a harsh reality
On the used-car market, that premium pretty much vanishes. So does most of any premium you've paid for cutting-edge advanced-technology features like a heads-up display, active cruise control, or parking assistants—or even that fancy touch-screen infotainment system that pulled you in for thousands more.
Back in the real world—for those who don’t have their own personal detailing crew—depreciation matters. The residual values from ALG, which predict value as a percentage of the vehicle's original MSRP, usually at three years, have become the industry standard for the vehicle finance industry—meaning that altogether you can get a pretty good picture of what you'll be able to get for your vehicle at trade-in time.
Residual values are also important if you plan to lease a vehicle, as they determine the amount of your monthly payment. “So if you get a vehicle that has a high residual value, your payments will be lower,” emphasizes Eric Ibara, director of residual consulting at Kelley Blue Book. And at the same time, you'll be driving a more in-demand vehicle, so it's a win-win.
Perhaps most importantly, resale value is the ‘hidden’ cost that can make certain models much more expensive to own over the long run than others--even if their prices on the lot might suggest that you’re getting a bargain.
What's going to be valued (or not) in several years?
2013 Lincoln MKSEnlarge Photo
Think you're better off going with a recently redesigned model, as it may still look more contemporary and thus worth more years from now? That's not always true. “When the 2012 Civic was redesigned, it received a lot of criticism by the press,” said Ibara. “It continued to sell really well on a retail basis, but we did track the fact that the 2012 Civic was not doing as well in value as the 2011.”
Contrast that with the last redesign for the Hyundai Sonata, in 2011. Five-year residuals on that model rose by up to 12 percent in a model year—and retail values on the used-car market are showing far higher values than the preceding model.
That said, product cycles are another thing that can negatively affect resale value, and whether vehicles either haven't seen a full redesign in many years, are on the cusp of one, or are no longer being seen by consumers as fresh in the market. Examples of that—and some of the lowest performers on the residual scale—include GM's full-size SUVs, or the Volvo S80.
ALG's Lyman says that the S80's low residual isn't because of the Volvo brand as much as it is how old that particular model is. “And for the Chevy Impala it’s the last year of the current model,” he said. “That's an old vehicle; it’s just long in the tooth.”
Even though the gasoline price shock of 2008 is already a distant memory, recent price swings have kept fuel economy a high priority for used-car shoppers, so it's no surprise that some of the vehicles with the worst residual values are those with some of the lowest mileage ratings (like the Nissan Armada and Nissan Titan) in their respective classes.
If you're torn between types of vehicles, it pays to consider that crossovers currently have something of a halo over them, and they may save you money on the depreciation portion of what it costs to own a vehicle. In general, crossovers are commanding higher resale values than sedans, while minivans are the vehicle segment that's doing worst in residuals.
It's really supply and demand
Supply and demand are also an integral part of the predicted value for vehicles. And a new vehicle that's pushed out the dealership floor, deeply discounted, is likely to do poorly on the used market several years from now.
“If you see a vehicle that's not performing well in residuals, it's usually because of the volume,” said Ibara. “If the manufacturer chooses to sell a large volume of vehicles to Avis or Hertz, then those vehicles come back to the market when they're taken out of service—and that can depress values.”
A couple of years ago Chrysler changed the name of its mid-size model line, from Sebring to 200. And while the name change might have provided the basis for some new marketing, it didn't raise values in the end. Instead, Chrysler continued with what KBB's Ibara called a “classic example of behavior that's going to hurt resale values”—the combination of putting a large number into rental fleets plus using large incentives for retail sales at the dealership.
Luckily, it's not that much of a gamble. Valuation sites like KBB provide easy-to-browse projected resale values. Combine multiple sources and you may end up with a surprisingly good picture of how much money you may be plunking down over three to five years.
In order to compile a list of vehicles that hold their value the worst, we first looked to ALG's updated list of 1-star vehicles—those in the lowest ten percent of the market for three-year residual ratings (holding just 34 to 44 percent of their value after three years). Within that group, we looked specifically at KBB five-year depreciation numbers, subtracted that from the market price, then expressed that value (as ALG does their residuals) as a simplified percentage of the original MSRP. The following list, then (all base models and 2013 model-year unless otherwise indicated), are the ten vehicles likely to be worth the lowest percentage of their original MSRP at trade-in time.
Click through to see these ten vehicles under $50,000 that may cost more than their sticker price suggests: