Want to save money, big money, on a new vehicle? Buy the ride that depreciates the least.
Indeed, depreciation is the single biggest factor in determining how much a vehicle will cost the owner. Thus, knowing which cars and light trucks have held their value best over the last few years and which ones are predicted to hold their value the most in the coming years should be of interest to all buyers.
This is where ALG, formerly Automotive Lease Guide, and the Canadian Black Book come into play. Recently, both organizations announced residual value award winners for individual vehicle categories. ALG also released brand winners.
The difference between the two: ALG’s 2011 Residual Value Award (RVA) winners represent a prediction of how various vehicles and brands can be expected to perform over the next 36 months for luxury brands and 48 months for mainstream brands. CBB’s Best Retained Value Awards “go to 2007 model-year vehicles retaining the highest percentage of their original MSRP over the past four years across 17 categories.”
In other words, CBB’s awards reflect hard value data going back several years. And, indeed, past performance is usually an excellent indicator of future trends. ALG’s RVA winners – the individual models and brands – are what you might call a formal prediction of the future: they are more forward-looking by definition, based not only on used-vehicle auction pricing but also a long list of other factors, says ALG’s Eric Lyman.
He says the “magic” or the “alchemy” at play is in ALG’s ability to look at trends and momentum in the marketplace on both the model and brand levels, and then make reliable forecasts. That is, ALG takes auction data into consideration, then factors in the impact of new rival vehicles coming into the market, along with current transaction prices, the value of improvements to new models, the significance of a redesign and even currency fluctuations, housing prices, gas prices, wage growth and the used-vehicle supply. On top of that, ALG’s forecasting model considers brand momentum, incentive trends and fleet trends.
Whew!
For ALG, Subaru tops the 2011 prediction of future residual values for the second year in a row. ALG predicts 2011 Subaru cars and trucks will hold an average of 41.8 per cent their sticker price after 48 months, the highest score of any mainstream brand. Honda is second at 41 per cent, followed by Nissan at 38.1 per cent and Toyota and Volkswagen tied at 37 per cent.
On the luxury side, Infiniti is on top of the 2011 ALG awards for the third straight year, with its vehicles predicted to hold on to 45.4 per cent of their value after three years. In second place among the luxury set are Acura (44.8 per cent), BMW (44.6 per cent), Audi (42.5 per cent) and Volvo (40.7 per cent).
CBB does not release brand winners, though its list of category winners suggests Toyota, combined with its Lexus premium brand, is the industry’s strongest performer when it comes to retained value over the last four years.
As auto analyst Dennis DesRosiers, of DesRosiers Automotive Consultants, points out in a note to clients, Toyota and Lexus have at least one vehicle among the top three in 13 of the 17 vehicle segments. The CBB results show that “Toyota is the absolute best brand at retaining value for the customer. Indeed, Toyota/Lexus was in first place in six of the 13 categories where they sell vehicles.”
