What factors affect car resale value?
Increasing your car’s resale value begins when you buy the “right” car in the first place, according to Mark Scott, a senior manager at AutoTrader.com, in Atlanta.
Resale value should be a top consideration for anyone who wants to buy a new car with some regularity. “If you want to trade in your car every two or three years, you should worry about resale value,” he says.
Depreciation is the major equity killer in vehicle ownership. Philip Reed, senior consumer advice editor at Edmunds.com, says, “Within its first year, a vehicle loses about 30 percent of its value. After three years of a car’s life, depending on the car, it may have depreciated 50 percent.”
What steps can a consumer take to minimize the effects of depreciation and maximize car resale value?
Reed says that historically some brands and models simply hold their value better than others. Consumers can spot cars with higher resale value because carmakers brag about the ones with good depreciation records, he says.
What affects car resale value?
According to Scott, beyond choosing a vehicle with a solid history of lower rates of depreciation, there are a number of other decisions a consumer makes, either when buying the car new or when selling it in the future, that can increase the car resale value.
Geography. Body styles tend to be geographic. Demand for a particular car varies in different parts of the country. You should think about the popularity of certain vehicles in your area when buying new if you are going to later sell it locally. For example, there will be less demand for a used pickup in Miami than in Dallas. “A pickup won’t hold value in Miami like a convertible will,” Scott says. “But that two-seater convertible isn’t very practical and won’t retain its value in Michigan.”
Climate. If you are going to sell a vehicle with four-wheel or all-wheel drive, it will have more value in colder areas such as the Northeast. Moreover, all-wheel drive will be more in demand in the winter than in the summer. The opposite is true of convertibles, Reed says.
Color. Stick to standard colors and steer clear of fad colors. “You may see a fun, trendy color that’s hot at the moment, but five years from now it will be like, ‘What were you thinking?'” Scott says.
Upgrades and options. Not all upgrades are created equal. Certain equipment options will add to the car’s resale value while some pricey options won’t. “Spending $500 on an upgraded stereo will mean a lot to you, but four or five years from now it won’t bring you any extra money when you sell or trade in,” Scott says.
There is more demand for automatic transmissions than manual ones. Reed says that sunroofs, CD changers and leather seats have historically added value to a car. An example of an expensive option that doesn’t contribute to a car’s resale value is a navigation system, Reed says.
Timing. Exercising some patience can pay off when trading in or selling a used car. If the used-car market is soft, wait six months until demand is higher. If fuel prices are high, wait until they cycle back down before trading in that SUV. Simply visiting a dealership on a less busy day can increase the trade-in allowance. According to Reed, dealers are more willing to negotiate on all aspects of a new car purchase, including the trade-in, at times when the dealership is less busy. Dickering over the trade-in value will usually be more successful for a consumer on a Wednesday morning rather than a Saturday afternoon.
Other factors to consider
Reed also adds that when trading in a car, you will usually get a higher price if you trade in a vehicle toward the purchase of a like vehicle. “Trade in a Toyota for a Toyota,” he says.
Once you purchase a new vehicle, the quality of its care and maintenance will also influence resale value. In addition to keeping it clean, follow the manufacturer’s maintenance schedule and document everything. “Whatever the manufacturer recommends, do it,” Scott says.
Reed says that documentation doesn’t mean as much when trading in a car. However, when selling a used car to a private party, the buyer will be more likely to pay more for the vehicle if you can prove that it has been well maintained.
Scott cautions against aftermarket add-ons. More often than not they don’t add to a car’s resale value, and they can sometimes reduce it. “When you do get work done, make sure it’s quality work,” he says.
Although resale value is an important consideration for most of us when buying a new car, that’s not always the case. “If you are going to keep a car until the wheels fall off, you shouldn’t worry about resale value,” Reed says.
“There is a point of diminishing returns,” Scott says. “A 15-year-old Honda is about the same as a 15-year-old Toyota.”