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Location: Toronto Canada
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Which auto brands consistently retain their value
Which auto brands consistently retain their value?
Jeremy Cato, Autos.CTV.ca
Updated: Mon. Jan. 12 2009 10:42 AM ET
The automotive marketplace is awash in great deals, with even Toyota Canada offering 90 days
with no payments on the purchase of a new model. But today's bargain might turn out to be worth
less than you'd expect three, four, five years down the road.
In fact, auto executives say that every $1.00 discount on the price of a new vehicle pushes down
the value of the same used model from 60 cents to $1. Depreciation, the sliding value of your
vehicle over the years, is the single biggest ownership cost for any car owners.
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.
Automakers 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: 1) Borrow as little as possible and repay it in two or three
years if possible, not four or five as most buyers do; and 2) Buy a vehicle with excellent resale
value to begin with.
That does not mean ignoring the various ways automakers sweeten deals to lure customers --
from cash up-front, to discounted interest rates, free gas cards, employee pricing and no-pay-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.
Here is where annual review of projected resale values for new models comes into play. It's
produced by Automotive Lease Guide in Canada and it ranks Honda, Toyota, Nissan, Subaru and
Mazda as the top five mainstream residual brands -- brands that consistently retain value best
over three years. For luxury brands, Infiniti, Acura, Lexus, Audi and BMW are the five best at
holding their value.
ALG officials say resale value is one of the biggest competitive advantages enjoyed by any auto
maker. ALG's forecasts for a car's residual value -- the value of the vehicle at the end of a lease -
are used by many finance companies when they structure terms for a lease.
The higher the residual, the more attractive the lease payment given that in leasing, monthly
payments are based on the amount a vehicle is worth at the end of the least. The monthly lease
payment is equivalent to the depreciated value of the vehicle.
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.
A lease payment based on the difference between $25,000 and $13,500, or $11,500 is much
smaller than one based on the difference between $25,000 and $9,500 or $15,500. In the first
case the person leasing is paying $11,500 to rent the vehicle, while in the second the rental fee is
$15,500.
Honda Canada emerged as the big winner in this the inaugural ALG Canadian Residual Awards.
Honda not only won the Mainstream Brand Residual Value Award, but three individual models also
received segment awards: the Odyssey (minivan segment), Fit (entry compact car), and Ridgeline
(compact/midsize pickup).
John Blair, ALG chief executive, says Honda and Acura models hold their values well thanks to the
company's disciplined production, consistent high quality and value pricing. That is, Honda does
not over-produce vehicles and then try to sell them with big discount promotions.
Consistently high quality helps, too, as has the shift to more fuel-efficient vehicles in recent years,
especially last year when fuel prices spiked dramatically.
Nissan and its Infiniti luxury arm also have plenty to boast about. Not only did Infiniti win the Best
Luxury Brand Residual Award, but four individual Nissan models also won their segments: Maxima
(full-size car), GT-R (luxury sports car), Rogue (compact utility vehicle), and Murano (mid-size
utility vehicle).
Three companies received two awards each: Toyota for the Camry (midsize car) and the Sequoia
(large utility vehicle); Land Rover for the LR2 (near luxury utility vehicle) and the Range Rover
Sport (luxury utility vehicle); and Subaru for the Impreza (mid-compact car) and the Impreza
WRX/STI (sporty car). BMW, Jaguar, Ford and Volkswagen rounded out the list with one award a
piece.
Canadian Mainstream Brand Residual Value Rankings
1. Honda
2. Toyota
3. Nissan
4. Subaru
5. Mazda
6. Volkswagen
7. Mitsubishi
8. Saturn
Below mainstream average (listed in alphabetical order): Buick, Chevrolet, Chrysler, Dodge, Ford,
GMC, Hyundai, Jeep, Kia, Pontiac, and Suzuki.
Canadian Luxury Brand Residual Value Rankings
1. Infiniti
2. Acura
3. Lexus
4. Audi
5. BMW
6. Land Rover
7. Porsche
Below luxury average (alphabetical order): Cadillac, Jaguar, Lincoln, Mercedes Benz, Saab, and
Volvo.
A last note: The Canadian results differ from those in the United States, reflecting different
markets and different consumer tastes. Here is how ALG ranked brands and individual segments
down south:
U.S. Mainstream Brand Residual Value Rankings
Rank Brand
1. Honda
2. Subaru
3. Volkswagen
4. Toyota
5. Nissan
6. Mazda
7. Suzuki
8. Saturn
9. Pontiac
Below industry average (in alphabetical order): Buick, Chevrolet, Chrysler, Dodge, Ford, GMC,
Hyundai, Jeep, Kia, Mercury and Mitsubishi.
U.S. Luxury Brand Residual Value Rankings
Rank Brand
1. Acura
2. Lexus
3. Audi
4. Infiniti
5. Land Rover
6. BMW
7. Porsche
8. Mercedes-Benz
Below luxury average (in alphabetical order): Cadillac, Jaguar, Lincoln, Saab and Volvo.
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