Best and Worst Depreciating Vehicles

The MINI Cooper is one of the best investments in the automotive world. After three years, the mighty MINI retains 67 percent of its value.


Next to purchasing a home, buying a car is one of the toughest financial decisions a person will ever have to make. And today's topsy-turvy economic climate, which has caused a double-digit dip in new car sales over the past year, makes that decision even more complicated. Regardless, people are still in the market for quality, well-built automobiles to get them to work, the grocery store and the kids' soccer practice. But their buying criteria have changed.

According to Automotive Lease Guide's most recent Automobile Consumer Attitudes Study (ACAS Fall/Winter 2008), 64 percent of respondents intend to buy a vehicle in the next three years. However, consumers want to spend less and test the pre-owned, or used, market more.
As a result, choosing a ride that will maintain a greater amount of its value over the average car ownership period (5 years) is more important than ever.

What Is Depreciation?
The biggest cost of car ownership isn't gas, repairs or that 20-speaker, 1,000-watt sound system installed by the dealer. No, it's depreciation — or a car's decrease in value over time. Depreciation should not only be a crucial factor in a purchase decision but also a determinant of whether you have made a good buying choice these days. It therefore helps to know which vehicles have the best (lowest) depreciation and which have the worst (highest).

With the help of the folks at ALG, experts in gauging depreciation for the automobile industry, we've compiled this list of vehicles with the best and worst resale values based on their original manufacturer's suggested retail price. The percentage shown represents how much of the original sticker price the vehicle has retained over the last three years.

Best 5 Models in Value Retention
Rank Brand Model 3-Year Retention
1. MINI Cooper 67%
2. Toyota Camry 62%
3. Toyota RAV4 62%
4. Scion xB 61%
5. Honda CR-V 60%

Worst 5 Models in Value Retention
Rank Brand Model 3-Year Retention
1. Ford Freestar 27%
2. Ford **Taurus 28%
3. Chrysler Sebring convertible 28%
4. Chevrolet Uplander 28%
5. Pontiac Montana 30%

**This does not include the new 2010 Ford Taurus

How Is a Car Valuated?
So what makes one car worth nearly 60 percent of its initial purchase price after three years, while another could have fallen to 20 percent of its original sticker price? "There are a number of tangible and some intangible factors that affect valuations," says Eric Ibara, director of market valuation for Kelley Blue Book. "The most obvious is supply versus demand."

If a car is in low supply and high demand, it will probably retain value, and vice versa. "For example, the high fleet penetration of the Ford Taurus has created a huge supply relative to its demand, driving its price down," says Fernando Ubeda, manager of custom modeling and analytics for ALG. Generally, cars that depreciate fastest are sold in large numbers at big discounts to rental-car or corporate fleets, like the aforementioned Taurus. Those flood the used-car market when the fleets replace their vehicles.

To read more go to:

http://editorial.autos.msn.com/article.aspx?cp-documentid=900726&page=2