There is a lot to think about when you are going to buy a car — safety, reliability, styling, and, of course, price. As you choose between models, you should also consider depreciation.
Most buyers will eventually sell their car or use it in a trade-in, so a model with good resale value is money in the bank. According to the editors of Kelley Blue Book, depreciation is often the greatest expense incurred in the first five years of ownership.
I had a chance to talk to Jack Nerad, executive editorial director and executive market analyst for Kelley Blue Book’s kbb.com, about depreciation and this year’s winners of the 2008 Kelley Blue Book Best Resale Value Awards.
Q: Why should we worry about depreciation?
A: Depreciation is very important to all of us who own cars because our cars are losing value as we speak. As they’re sitting in our garages, as they’re sitting in the parking lot outside our offices, they’re losing value.
But some lose that value much faster and more drastically than others do, and the difference can be thousands of dollars. It’s nothing you write a check for, and it’s not part of your monthly budget. You never see it until you sell the car. If you chose a car with poor resale value, it’s going to cost you thousands more.
Remember, if you buy something in a wild color — a purple and orange that may be cool to you — you should know that it might not be cool to the next person who is going to buy that car.
Clearly, there are certain brands and specific models that do better than others when it comes to holding their resale value. Why is that?
There are brands that have a reputation for good resale value. There is a bit of self-fulfilling prophecy here in that brands that have a reputation for good resale value kind of have good resale value because people think they do. They expect to pay more for those vehicles so it’s kind of a circular thing.
And among those are the brands you would think of: BMW, Honda, Acura — and our big winner this year is Volkswagen. A lot of people, when they think of used cars or used cars they’ve owned themselves, they think of VW as a good, reliable, exciting-to-own used car.
What factors do you consider when picking a vehicle you expect to be a standout when it comes to resale value?
The winners of all the awards are based on projected value and a lot of that has to do with consumer perception. Consumer perception of value translates into how much people are willing to pay. That’s the key thing we see in terms of resale value.
A car might have really desirable styling. So you’ll see a car like the Mini Cooper, which has transformed the small car segment as being very, very desirable — just because they’re cool. And they’re also fun to drive.
The Infiniti G37 coupe is very compelling in terms of its driving performance. It looks great, but it feels great to drive and that translates into very strong resale value.
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The Chevrolet Corvette has an incredible reputation for resale value. It has become the epitome of resale value for the domestics and it proves that domestic manufacturers can build vehicles with high resale value.
BMW is a brand with very strong, almost iconic presence in the marketplace. Their BMW 6 series wins for luxury car with best resale value. It has great styling. It has a lot of fun-to-drive aspects to it. And it’s built in limited numbers as well, so you’re not going to see one on every street corner. All of these things key into very good resale value.
There’s only one vehicle from a domestic manufacturer, the Chevy Corvette, on your top 10 list. We hear that American automakers are doing a better job of building quality vehicles. That hasn’t translated into better resale value yet?
The domestics have been rising in terms of resale value. Over the past 15 or 20 years their reputation in the marketplace for reliability, quality, and even styling had fallen way down. Now we’re seeing a big change in that at Kelly Blue Book.
In fact, the brands that are improving the most are domestic brands. They’re not into the top 10 yet, but we’re going to see, we think, many more domestic brands among the top 10 in terms of resale value over the next several years.
I’m actually surprised that more vehicles from Asian manufacturers didn’t make it into the top 10.
That is interesting. Asian manufacturers do quite well. The ones you think of in particular – Honda, Acura, and Toyota — do quite well. Scion actually outdoes the Toyota brand these days in terms of resale. And of course Scion is a division of Toyota. It has done remarkably well. Toyota is rejuvenating what it is doing with Scion, so we are seeing some Asian brands with some very strong presence in the list.
What sort of things can owners do to enhance the resale value of whatever car they buy?
They should maintain their vehicle very well. Keep records of the maintenance and pay a whole lot of attention to the appearance of the vehicle. Wax that vehicle and keep the interior clean. That means a lot of money when it comes to resale time. These are things you can do without spending very much money at all.
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