Residual-value losers: Some cars depreciate faster
By Jennie
L. Phipps • Bankrate.com
The moment you drive a new car off the lot, a shocking
amount of its value disappears. And every day thereafter, even if
the car just sits in your garage, more of its value evaporates.
The auto industry calls the value that declines depreciation.
That which remains is residual value.
If you buy a car and intend to drive it until its
wheels fall off, then neither inevitable depreciation nor residual
value is of much concern to you. As long as you like the car and
it operates dependably, how much it is worth on a used-car lot doesn't
matter.
But if you intend to resell a car after a few
years of ownership or if you lease a vehicle, then choosing one
that maintains its value -- one with a high residual value -- can
be money in your pocket.
On average, vehicles retain about 35 percent of their
original value after five years, but there are exceptions. Some maintain as much
as 50 percent. And some, those we're going to talk about here, only retain 20
percent or less. The Kelley Blue Book Residual Value
Guide (January/February 2005 edition) identifies the following models as the 2005
losers of the residual sweepstakes, those most likely to lose the most value over
the next five years. The percentage is the amount of its original manufacturers
suggested retail price that the car will be worth after five years.
-
Pontiac Aztek, 16 percent -
Dodge Neon, 18 percent -
Pontiac Sunfire, 18 percent -
Chevrolet Cavalier, 19 percent -
Lincoln LS V6 Sedan, 19 percent -
Mitsubishi Diamante, 19 percent -
Chrysler Sebring Sedan, 20 percent -
Mercury Sable, 20 percent -
Chevrolet Venture Minivan, 20 percent -
Chevrolet Blazer 2-Door, 20 percent
Does lost value make a car bad?
Here's the bottom line question: Are the cars that retain less value necessarily
vehicular dogs that if you listen to carefully you can hear howling a warning? The
answer is yes and no. Familiarity breeds disdain,
says Charlie Vogelheim, executive editor of the Kelley
Blue Book, which uses a variety of sources to determine used-car values. "A
car with limited availability will generally depreciate slower than a car that
is in excess supply, one that is in lots of rental fleets, for instance,"
says Vogelheim. A high performance, uniquely designed
car can be riddled with flaws and there will still be enthusiasts who are willing
to cough up a ton of cash to own one, agrees Jie Cheng, vice president for solution
development for J.D.
Power and Associates, whose retained value rating is a variation on standard
calculations of residual value. (continued
on next page) -- Posted:
Feb. 15, 2005 |
