The average vehicle loses 60 percent of its value during its first four years. As a result, new car buyers need to do whatever they can to prop up the residual value on what, for many, is the second-biggest investment they'll ever make. Vehicle add-ons play a major role in influencing resale price, but not every option pays off.
Experts agree there's a fine line between upgrading and personalizing. Upgrades should have mass appeal, but personalizing adds little to the resale value of a vehicle. In other words, go for the premium wheels and rims, but don't opt for souped-up mega wheels that will only appeal to a small audience.
How does a buyer navigate the wide selection of options and decide which have the most, and least, potential? For a guide to the best upgrades, check out Bankrate.ca's story "
The best options to add to your new car." On the other hand, there are several features to avoid if your main goal is to recoup your investment, while boosting the future selling price of your new vehicle.
Vehicles to avoid
The first step is to assess which type of vehicle offers the best return.
Canadian Black Book is a trusted source for used vehicle values, while
Canadian Driver provides comprehensive reviews.
Peter Pauls, of Peter Pauls Inc., in Winnipeg, and a director with the Used Car Dealers Association of Manitoba, advises buyers to think of fuel efficiency: "The gas-guzzling SUVs are an absolute bargain right now used -- I would stay away from them."
Buyer be wary
When selecting options, be realistic. Just because you spend $4,000 on extras doesn't mean your vehicle will be worth $4,000 more. Many add-ons make driving more pleasant, but they don't necessarily add value. Parking-assist systems and intelligent cruise control, for example, are cool features, but they rarely make or break a sale.
Keep in mind that when your new car dealer is helping select options, he may not have your best interests are heart. In most cases, dealers only make five per cent to seven per cent on the base price of an automobile -- they profit from options.
As a result, car manufacturers are coming out with cool new features all the time. Before jumping on the bandwagon, be aware that, in most cases, the jury is out on the long-term value of many such features, including:
- Xenon high-intensity discharge headlights. They will get you noticed but won't necessarily make you popular. They're expensive to replace and receive mixed reviews -- great for drivers but a headache and distraction for oncoming traffic.
- Navigation systems. These systems are increasingly popular in high-end vehicles, but they have yet to prove their worth as an investment. According to
Automotive Lease Guide, buyers can expect to pay US$1,000 to US$3,000 for the option but will recoup only $200 to $300 after a few years. Still, it's a feature people are coming to expect in higher-end European vehicles, says Mark Campbell, of Campbell Auto Sales in Barrie, Ont., and a director with the Used Car Dealers Association of Ontario, adding you should be prepared to add $5,000 to the purchase price of a new vehicle if navigation comes as part of a sport package.
- OnStar, the safety, security and navigation system. This system is making inroads with manufacturers, but its price varies considerably. GM offers the stand-alone option for about $700 (note: it's expected to be standard in all GM vehicles in 2007), however Acura sells it as part of a navigation package that totals close to $3,000.
Experts say that while it's proving popular in new vehicles, it has yet to make its mark in the used market. "I have not had a single person ask me, 'Does that truck have OnStar or not?'" says Pauls.
Features to avoid
Everybody wants something different when they buy a used car, but there are some features that simply don't offer a return on investment:
- The wicked speakers and $1,000 CD player that one driver holds in esteem may mean nothing to the next owner, who is happy if there is a CD player and speakers, regardless of the name brand. Upgraded stereo systems are great, but don't expect to get your money back or boost the selling price of your vehicle by $1,000 just because it has Bose speakers and the like. A vehicle worth $10,000 will fetch $10,000 with or without the $5,000 stereo, says Campbell, who advises holding on to the factory-installed stereo and reinstalling it before resale.
- North Americans like to customize (nobody orders a coffee when they can get a skinny café mocha with whip cream); however, imposing your tastes can backfire when it comes to vehicles. Custom paint jobs are popular, but they aren't a smart investment if the plan is to sell the vehicle in a few years. Buyers who want custom vehicles "want to do it themselves; they don't want to buy customized," says Campbell.
- If you opt for the banana yellow or lime green colour de jour from the dealer, be prepared to settle for a lower selling price when it's pitted against safer greys, whites and blacks on the used car lot.
- While options such as sunroofs and remote starters are great investments if they're factory installed, they lose their allure when added later. Such sunroofs inevitably leak and used dealers are loath to take on vehicles with cheap starters, which usually fail and have to be ripped out to make a vehicle sellable.
There are no bad options -- it's just that some offer higher long-term value than others. If you want a purple car complete with painted-on flames, a thumping stereo system and 22-inch wheels, go for it if it makes you happy. Just don't expect potential buyers to embrace your tastes or reimburse you for your efforts when it comes time to sell.
Michelle Warren is a freelance writer in Toronto.