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John Takai/Getty Images/iStockphoto

You're under water? You are not alone. Many Canadians are metaphorically drowning at trade-in time, says the Power Information Network (PIN).

The latest data from PIN, an automotive industry analysis service, shows, in fact, that one in three Canadians trade in a vehicle worth less than the outstanding loan. Under water, upside down, or whatever you want to call it, these owners are in a financial pickle, large or small, depending on the circumstance. Because they have a vehicle with an unexpectedly low resale value, they'll be paying at trade-in time.

So don't for a second think resale values don't matter. They do. No, not if you plan to hold onto your ride for eight, nine, 10 years. But if you need or want to swap your current three- or four-year old vehicle for something new – or if you just want to sell it and get out of the car ownership game altogether – then the latest studies from Canadian Black Book (CBB) and ALG, the former Automotive Lease Guide, are important. They suggest what you might get on the deal. If you're a used-vehicle shopper, CBB and ALG research offer guidelines for how much to pay for a three- or four-year-old model.

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These indicators of past and future values point buyers in the direction of vehicles that best hold their value. In doing so, they suggest models that are above average in quality, style, reliability and durability. Junky, ugly cars are not loved or wanted; pretty ones with a reputation for not breaking are prized – their resale values indicating desirability.

"In the end, it is consumer perceptions and how much they're prepared to pay for cars and trucks that ultimately determine how much a vehicle is worth," says Josh Bailey, vice-president for research and editorial at CBB.

Real dollars and cents bring this closer into focus. If you bought a Subaru Outback or Honda Accord four years ago, in the $30,000-$35,000 range, that car is now worth $15,000-$18,000. The average mid-size model in Canada is worth 5 per cent to 7 per cent less. At trade-in time, the Outback or Accord owner is in better shape than Joe or Jane Average by several thousand dollars.

Why the differences? Auto analyst Dennis DesRosiers points to a long list of reasons for the spread in resale values, but fleet sales are the most telling.

"Fleet vehicles are dumped into the used car market in a relatively short time period, which creates an excess of supply of used vehicles within the brand," he says. "Supply and demand kicks in and forces down the resale value of any model that has high fleet percentages."

You won't find fleet vehicles among the combined list of CBB/ALG segment winners. That's why those winners are a near-perfect collection of vehicles with loyal, happy owners who embrace vehicles from a manufacturer with an excellent brand image. The list is peppered with Toyotas and its Lexus luxury brand, along with Hondas and Subarus. Sure enough, the latest brand rankings from Consumer Reports has Lexus, Subaru, Toyota and Honda at or near the top. Brand matters.

There are specific variables that affect used vehicles prices and DesRosiers divides them into three categories:

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1. Factors the consumer can control: Kilometres driven, wear and tear, and accidents.

2. Factors largely controlled by manufacturers and dealers: New-vehicle pricing, dealer body strength, the so-called "quality/value perception" of each vehicle and how vehicles are re-marked at the end of a lease. Also important is the dealer body, it's "level of involvement and sophistication in the used vehicle market." Fleet sales are most important.

3. Factors largely beyond the influence of consumers, manufacturers and dealers: Used-vehicle supply, tax/tariff changes, buy-out rates for off-lease and fleet vehicles, trade-in rates and new vehicle sales volumes. DesRosiers also says that a long list of economic variables have an impact on resale values – from exchange rates to the cross-border trade in used vehicles.

The big economic issues that DesRosiers lumps into Category 3 play heavily into how ALG determines its winners. ALG's numbers are projections of what vehicles will be worth in four years for mainstream models and three years for premium ones. ALG analysts look at everything from the health of the housing market to interest rates, to employment levels and the usual vehicle and brand issues. By contrast, Black Book valuations are based on CBB analysts who look at "hundreds of thousands of sales transactions and other data points from live auctions, online auctions, dealerships and other proprietary sources," says CBB. In direct contrast to ALG, CBB numbers look at the actual values of four-year-old vehicles across the board, from mainstream to luxury.

"Although proclaims the winners, in effect, it's the Canadian car buyer who decides who wins our Best Retained Value awards, says Bailey.

Canadian buyers looking to stay above water, take note.

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