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A Mini Cooper hatchback bought for $25,800 in 2005 should be worth about $14,000 today, or 54.3 per cent of its original value. In other words, over four years the Mini depreciated by $11,800. That's about $3,000 a year or $250 a month.

Not bad.

In fact, the latest residual value figures from Canadian Black Book show that the Mini brand boasts the best residual value of any brand in Canada over the past four years.

Oh, but then there's Lincoln. Ford Motor's luxury brand is the exact opposite. A Lincoln LS sedan bought four years ago for $43,865 as a 2005 model would be likely be worth just about $7,800, or 17.8 per cent of the original value. The LS, then, cost about $36,000 to own in depreciation alone — about $9,000 a year or $750 a month.

And that's why resale value — also known as residual value — is so important. No ownership cost has a bigger impact on your vehicle ownership bottom line than depreciation. As the numbers show, the car that depreciates the least is also the least expensive to own.

Or to put it another way, the buyer of a vehicle from a strong brand with strong residuals might pay more up front, but after four years that vehicle would likely be worth much more than many rival used models come trade-in time. The net benefit down the road more than offsets the higher up-front cost.

According to CBB, just eight brands turned in above-average resale values over the past four years. The Mini brand was on top at 54.3 per cent after four years, followed by Toyota (51.3 per cent), Honda (51 per cent), Smart (48.5 per cent), Acura (44.4 per cent), Mazda (41.6 per cent), Volkswagen (40.9 per cent) and Mitsubishi (40.2 per cent). The industry average for passenger cars was 37.8 per cent.

All other passenger-car brands came in below average — some by huge margins. Surprisingly, some traditionally strong brands turned in subpar performances.

For instance, the Mercedes-Benz brand was 0.9 percentage points below average after four years. And Audi was 2.3 points below average, Lexus 4.3 points and BMW 4.4 points.

As for individual models, without providing exact retained-value percentages, CBB says the 2009 top 10 models for retained value in no particular order are the Toyota Rav4, Dodge Sprinter, Mini Cooper, Toyota Echo, Smart fortwo, Honda Civic, Toyota Tacoma, Toyota Corolla, Toyota Matrix and Mazda Mazda3.

The Canadian Black Book data reflect actual performance over the past four years. That is different from the predicted values released earlier this year by Automotive Lease Guide (ALG), something of a rival organization.

In its annual review of projected resale values for new models, ALG Canada placed Honda first, followed by Toyota, Nissan, Subaru and Mazda as the top five mainstream residual brands — brands that are expected to retain value best over three years. For luxury brands, Infiniti, Acura, Lexus, Audi and BMW are the five best at holding their value.

Obviously, the smart car buyer will look closely at current and projected residual values — especially now, with the marketplace awash in great deals and stunning discounts. Even though Toyota is atop the heap with both CBB and ALG, Toyota's residuals will surely be affected in the future.

In fact, the current wave of discounting and price-cutting will certainly have an impact on resale values for all brands, not just Toyota. Used vehicle prices in general will almost certainly fall.

Therefore, while real values will slide, in relative terms there may be little change in the residual rankings by brand. The brands on top today may still be on top years from now. That is, Toyota and Honda may still lead the mainstream brands, though the real value of vehicles from those brands — and others — may be lower.

So there seems little doubt that today's attractive bargain will very likely come with a price three, four, five years along. In fact, auto executives say that every $1 discount on the price of a new vehicle pushes down the value of the same used model by 60 cents to $1.

As a general rule, vehicles that depreciate fastest have been sold in big numbers at big discounts to regular buyers, or to rental car or corporate fleets. Fast-depreciating cars also are models that have not been redesigned for years — they are aging and not well.

Auto makers are sensitive about resale value; they know it can be a big issue for buyers. Plunging resale values can even leave owners owing more on their car loans than the cars are worth. That's called being "upside down."

But even owners who are not upside down are often in for a shock at trade-in time: the car you thought was worth $13,000 or $14,000 is only worth $9,000 or $10,000 at most.

There are two main ways to stay ahead:

• Borrow as little as possible and repay it in two or three years if possible, not four or five as most buyers do;
• Buy a vehicle with excellent resale value to begin with.

That does not mean ignoring the various ways auto makers sweeten deals to lure customers — from cash up front, to discounted interest rates, free gas cards, employee pricing and no-payments-for-90-days sell-a-thons.

But the smart shopper also looks closely at the brands and models that offer buyers a payoff not only at the time of purchase, but at trade-in.

Both CBB and ALG say resale value is one of the biggest competitive advantages enjoyed by any auto maker. Figures from both ALG and CBB are frequently used by finance companies when they structure terms for a lease.

The higher the residual, the more attractive the lease payment. That's because monthly lease payments are based on the amount a vehicle is worth at the end of the lease period.

In other words, leasing a $25,000 car that is projected to be worth $13,500 when the lease is up is much less expensive in terms of monthly payment than leasing a car projected to be worth $9,500.

But whether you lease or buy, the residual value will usually play a significant role in determining what you can afford when the time comes to buy a new replacement vehicle. It's simple, really: The more your older car is worth, the more you get for your trade-in.

And that means Mini Cooper owners looking to trade in are feeling better than all others these days.

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Depreciation

Various driving costs studies all conclude that depreciation is the single biggest vehicle ownership cost. Other costs include fuel, insurance, finance, repairs, maintenance, licence and registration.

But some argue that depreciation should not be considered as an across-the-board ownership cost. That is, for those who plan to keep their cars and trucks until they are hauled away to the scrap heap, depreciation doesn't really matter.

Some also argue that because new-car values differ dramatically from region to region, there is no way of assessing the (actual) net worth of a car after three or four years — other than to draw broad conclusions that do not necessarily reflect important regional differences.

Indeed, depreciation is affected by a multitude of variables — from market conditions to discounting, to brand strength and even the relative care owners take of their vehicles.

Regardless of how many years you hold on to your car and whether or not you consider depreciation an important variable cost, car ownership represents a substantial and ongoing financial commitment. There is no controversy about that. So in managing your family finances, it is critically important to understand how hard car ownership will hit your wallet.

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Orphan brands

The residual value of vehicles whose brands disappear in the current restructuring of the auto industry will likely plummet, say officials who have studied what happened in recent years when brands became orphans.

In recent years, the Oldsmobile (2004) and Plymouth (2001) brands died and, as a result, vehicle resale values plummeted.

"What happened with Oldsmobile was that the used-car values of Oldsmobile dropped a lot quicker than for brands that were still in business," says David Champion, head of auto testing at Consumer Reports.

Indeed, a year after each brand went out of existence, a two-year-old Oldsmobile or Plymouth suddenly had the value of a five-year-old car.

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Affordability: Prices being pushed down

Auto analyst Dennis DesRosiers of DesRosiers Automotive Consultants says the variables affecting used vehicle prices (or residual values) can be divided into three categories:

• Factors under the consumer's control, such as kilometres driven, wear-and-tear and accidents.
  
• Factors largely under the control of the vehicle company and its dealers, such as the prices of new vehicles, the strength of the dealer body, the quality and value perception of each vehicle and how end-of-lease vehicles are remarketed. This area also includes the level of involvement and sophistication of the dealer in the used-vehicle market and especially the degree any manufacturer plays in the fleet market.
  
• Factors largely beyond the control of individual consumers, manufacturers and dealers, such as the supply of used vehicles, tax/tariff changes, end-of-lease and fleet buy-out rates and trade-in rates. Also in this group are new-vehicle sales volumes, a long list of economic variables that includes exchange rates, and the cross-border trade in used vehicles.

DesRosiers says the data shows most of these factors have been pushing down used-vehicles prices over the last decade.

"Passenger cars have lost about 6-10 points of value the last decade and light trucks about 15-20 points of value relative to original MSRP (manufacturer's suggested retail price)," he says in a recent note to clients.

Lower values have pushed growth in the used-vehicle marketplace as buyers have migrated there looking for better deals. DesRosiers says used-vehicle sales have increased from about two million units at the beginning of the decade to about 2.6 million units last year. He expects used-vehicle sales to keep growing, hitting close to three million units over the next few years.

"These lower used-vehicle prices are the primary reason," he says.

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Automotive Lease Guide Canadian residual value rankings

• Mainstream brands

Average 48-month residual value is 34.4 per cent

1. Honda: 40.4 per cent
2. Toyota: 39.4
3. Nissan: 39.2
4. Subaru: 39
5. Mazda: 38.6
6. Volkswagen: 37.2
7. Mitsubishi: 37
8. Saturn: 36.2

Below average (listed in alphabetical order): Buick, Chevrolet, Chrysler, Dodge, Ford, GMC, Hyundai, Jeep, Kia, Pontiac, Suzuki

Luxury Brands

Average 36-month residual value is 41.0 per cent

1. Infiniti: 46.4 per cent
2. Acura: 45.0
3. Lexus: 44.7
4. Audi: 43.6
5. BMW: 43.5
6. Land Rover: 42.6
7. Porsche: 42.1

Below average (alphabetical order): Cadillac, Jaguar, Lincoln, Mercedes-Benz, Saab, Volvo

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How the brands do

Passenger Cars

The Canadian Black Book resale value after 48 months; the industry average is 37.8 per cent of the original price. The rankings show how much above or below the average the brand comes

ABOVE AVERAGE

Mini: 16.5 percentage points
Toyota: 13.5
Honda: 13.2
Smart: 10.7
Acura: 6.6
Mazda: 3.8
Volkswagen: 3.1
Mitsubishi: 2.4

Below average

Subaru: -0.2
Mercedes-Benz: -0.9
Volvo: -1.3
Nissan: -1.4
Audi: -2.3
Dodge: -2.8
Lexus: -4.3
BMW: -4.4
Suzuki: -5.3
Pontiac: -6.7
Hyundai: -6.8
Infiniti: -7.4
Ford: -8.3
Saturn: -8.6
Kia: -9.4
Cadillac: -10.1
Chevrolet: -10.2
Saab: -12.8
Buick: -14.1
Jaguar: -14.2
Mercury: -18.7
Chrysler: -19.8
Lincoln: -20.0

Light Trucks

Canadian Black Book 48-month resale value; industry average 27.4 per cent

Above average

Honda: 16.3
Lexus: 16.1
Mitsubishi: 15.5
Toyota: 14.2
BMW: 14.0
Infiniti: 13.7
Acura: 12.0
Hyundai: 10.1
Mercedes-Benz: 8.1
Saturn: 6.9
Subaru: 6.9
Hummer: 6.2
Nissan: 5.5
Volvo: 3.7
Kia: 3.1
Suzuki: 2.6

Below average

Land Rover: -0.2
Jeep: -0.5
Lincoln: -0.8
Cadillac: -1.5
Mazda: -1.7
GMC: -2.1
Buick: -2.8
Chrysler: -3.1
Chevrolet: -4.1
Ford: -5.3
Dodge: -6.9
Pontiac: -8.4