Resale tells the tale
By Jeffrey Steele
CTW Features
When Americans buy new cars, many give far more weight to the cache, color and number of cup holders the vehicles possesses rather than how much value those rides will retain down the road. That miscue could cost them big time, says Jack R. Nerad, executive editorial director and market analyst with Irvine, Calif.-based Kelley Blue Book.
“Resale value is a very, very important factor for consumers to track and pay attention to,” he said. “It can often mean saving thousands of dollars in transportation costs over the life of that vehicle.”
That’s the reason Kelley Blue Book, the leading provider of new and used-vehicle information, releases its annual lists of the models expected to retain the greatest and smallest portions of their original retail prices after five years. And, as is often the case, this year’s Residual Value Analysis from Kelley Blue Book holds a few surprises.
For instance, those who figured Japanese brands would again top the list of the names with highest resale values were in for a double take. This year’s winner was Volkswagen, followed by BMW, Acura, Honda, Porsche, Subaru, Lexus, Infiniti, Audi and Toyota. Volkswagen had finished behind Honda and Acura last year.
“Volkswagen has had sort of a so-so run recently with its new vehicles,” Nerad says. “So people scratch their heads and ask why it’s so strong in residual value. Actually, there are several good reasons for Volkswagen’s performance.”
The first is the popular perception that Volkswagen is a strong brand that makes good used vehicles, a perception that dates to the original Beetle, Nerad says. Another factor is that for buyers who seek a European driving experience with better-than-average handling, Volkswagen provides it at an entry-level price. And an even more affordable price point for that European driving experience is a used Volkswagen. “It all kind of adds up to the fact that Volkswagens have very good resale value,” Nerad says.
The proof is in the three VWs that grace the publication’s Top 10 list of resale values. The Volkswagen Eos, Jetta and Rabbit are joined on that list by the Chevrolet Corvette, Honda Civic, Infiniti G37, Mini Cooper, Scion tC and xB, and Toyota Corolla.
Volkswagen’s triumph caps a five-year ascendancy through the rankings, Kelley Blue Book noted in its announcement of the listings. This year, all VW models, with the exception of the Touareg SUV, showed improved resale value when compared with 2007 versions. The majority of VW models held 48 percent or more of their original retail price, and the Eos, Jetta and Rabbit all averaged 60-month residuals greater than 50 percent, the report concluded.
Just as the best resale value list is dominated by imports, the list of vehicles with the worst resale value is peppered with domestics. Suzuki has the worst resale value, followed by Kia, GMC, Mercury, Dodge, Chrysler, Lincoln, Jeep, Ford and Jaguar.
But the prevalence of American names on the list is somewhat misleading. Domestic manufacturers are gaining in resale value, Nerad says. “Chrysler has had a tough time, but overall General Motors, in particular, and Ford, to some extent, have seen gains,” he adds. “Part of that is getting their production houses in order, putting fewer vehicles into fleets, and getting production more in line with retail demand.”
A big problem in the past, particularly with such models as the Ford Taurus, has been fleet sales, including sales to rental-car firms, he adds. Manufacturers built more units than there were customers for given models. When the vehicles entered the used-car market, their resale values were commensurately depressed.
If there is a surprise in the list of worst resale value, it could be the slotting of Kia in second-to-last place. This comes in spite of all we’ve heard about the great quality strides Korean automakers have achieved. The reason for Kia’s showing, Nerad says, is that its fellow countryman, Hyundai, has enjoyed a much greater improvement in quality.
While the automobile manufacturers are owned by the same Korean parent company, Hyundai, the brands’ cars are built in very different factories, Nerad says. “Hyundai has seemed to do a better job in their factories than Kia has,” he adds. “And Kia has been unable to build its consumer perception as a valuable used brand.”
As Nerad says, the Residual Value Analysis has gone a long way toward helping car buyers understand just how critical resale value can be.
It’s not necessarily true, however, that the list will feature large swings in the standings from one year to the next. “What you see in resale values is there’s not huge volatility,” he says. “This all has to do with consumers’ perception of value, and that’s very slow to change.”
