Ready for a new car? Buy one that retains its resale value

If you buy a new car today, will it go up in value? Don’t count on it. Here’s the most likely scenario: You purchase a new car from a dealer at retail cost and the instant you drive it off the lot, the vehicle drops to its wholesale value, at least $2,000 or $3,000 less than you shelled out for it (not counting the taxes and title fees paid).

Typically, a new car loses 15% to 20% of its value each year. Motley Fool gives an example: If you paid $20,000 for a new car, then after two years of driving, it may be worth $13,000. That’s $7,000 "vaporized in the thin air of depreciation" – or $3,500 per year, almost $300 a month!

The incredibly high cost of car depreciation

For the first five years after you buy a new car, depreciation is typically the single most expensive cost – more so than gas, maintenance or insurance.

That said, buying a car is a necessity for most Americans. If you buy a new car and expect to drive it until its life is over, then depreciation isn’t much of an issue. But for people who plan to eventually replace – and sell – their new car before it goes kaput, buying one with a good resale becomes a big factor in the financial equation. And not all cars depreciate at the same rate.

The cars mostly likely to retain resale value

Each year, Kelley Blue Book painstakingly examines and researches the new cars, then makes a list of those expected to most retain their value over the next three and five years. This year, the overall Kelley Book winners are SUVs and trucks, expected to keep at least 50% of their initial sales price for five years.

 
The 2015 Kelley Blue Book overall winners for holding resale value:

  • Toyota Tacoma (resale value at 36 months: 79.4%; at 60 months: 60.4%)
  • Jeep Wrangler
  • Toyota Tundra
  • Chevrolet Colorado
  • GMC Canyon
  • GMC Sierra
  • Chevrolet Silverado
  • Toyota 4Runner
  • Ford F-150
  • Honda CR-V (resale value at 36 months: 65.3%; at 60 months: 50.8%)

 
Additionally, best resale-value buys per car category are:

  • Subcompact: Honda Fit (resale at 36 months: 65.0%; at 60 months: 47.7%)
  • Compact: Subaru Impreza (resale value at 36 months: 61.3%; at 60 months: 47.1%)
  • Mid-size: Subaru Legacy (resale at 36 months: 61.8%: at 60 months: 44.3%)
  • Full-size: Dodge Charger (resale value at 36 months: 51.0%; at 60 months: 38.5%)
  • Hybrid/alternative energy car: 2015 Toyota Camry Hybrid (resale value at 36 months: 58.7%; at 60 months: 46.7%)
  • Sports car: Chevrolet Camaro V6 (resale at 36 months: 61.3%; at 60 months: 47.1%)
  • Luxury car: 2015 Lexus GS 350 (resale value at 36 months: 54.0%; at 60 months: 39.0%)

No matter what new car you buy, you can help it retain resale value by keeping it in great condition. That means following through with regularly scheduled maintenance (saving the receipts) and keeping the interior and exterior clean. Having low mileage on the car also helps. And if your car is still in decent shape, you usually can sell it on your own for a higher price than you would get as a trade-in at a dealership.

 

In the market for a new or used car loan? Check out Alliant’s great rates for auto loans. With your pre-approved loan in place, you can go to the dealer, confident that you’ll enjoy low rate financing.

 

Sources: bankrate.com, kbb.com, popularmechanics.com, odometer.com, marketwatch.com, theglobeandmail.com, howstuffworks.com, carsdirect.com, fool.com, forbes.com and edmunds.com