Even people who hold cars forever should pay attention to this metric.
By Miriam Cross
When you’re shopping for a new car, dickering with the dealer to lower the sticker price may be your main concern. But even if you drive the car until the wheels fall off, overlooking resale value could be a costly mistake. “Depreciation is the largest cost in owning a car, more so than fuel and repairs,” says Tim Fleming, an analyst for Kelley Blue Book (KBB). Even if you don’t plan to sell it anytime soon—or ever—how your vehicle retains its value is important. For example, if your car is totaled in an accident, insurers will cut you a check for the value of the car at the time of the incident.
Midsize pickup trucks and midsize and large SUVs hold their value best, according to KBB. That’s because cheaper gas and improved fuel economy have boosted their appeal. Electric vehicles and subcompact and luxury cars depreciate the most over time. (Porsches are an exception because low volume fuels demand from status-conscious buyers.) Sleek “performance” vehicles, such as the Volkswagen Golf R and Subaru WRX, fare best after the bulky SUVs and trucks.
Resale values can vary widely among models within the same brand. For example, the Toyota Tacoma truck was named KBB’s resale winner for 2017, holding 67.5% of its value after three years and 57.5% of its value after five years. The 4Runner SUV came next, with a resale value of 62.2% after three years and 52.5% after five. But the tiny Prius C and Yaris models held only about 30% of their value after three years and 20% after five.
KBB and Edmunds.com both offer “cost to own” tools, which allow you to enter a make and model and calculate additional costs of vehicle ownership—including depreciation—over the course of five years. The higher the depreciation figure, the more value it loses over time.
One way to make depreciation work to your advantage is to buy a used car instead of a new one. Thanks to a glut of off-lease vehicles, prices for used cars have declined. Fleming says he expects the bargains in used cars to last another two years.
© 2017 The Kiplinger Washington Editors
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As you consider purchasing a car, here are some related links on the NEA Member Benefits website you may want to check out:
- NEA® Auto Buying Program: https://www.neamb.com/shopping-discounts/nea-auto-buying-program.htm
- NEA Auto Buying Research Center: https://www.neamb.com/automotive-buying-research.htm
- Calculator: What vehicle can I afford?: https://www.neamb.com/shopping-discounts/vehicle-loan-calculator.htm