American made cars are gaining on their competitors in the Asian and European markets in the area of resale value. According to Kelley Blue Book (KBB) and Automotive Leasing Guide, foreign based companies such as Toyota, Honda and BMW are still in the lead, but their scores are dropping a bit from last year. Ford, GM and Chrysler, however, are scoring higher than they did a year ago.
A vehicle’s resale value is defined as how much of the original cost is retained after being in use three years or more. Consumers often look for models with high resale values, considering them a wiser investment because more money can be recovered when the car is resold or traded.
Right now, lower gas prices are allowing consumers to buy larger SUVs and trucks, which have traditionally been the bread and butter of Detroit’s Big Three. The surge in spending has helped automakers recover, albeit slowly, from a devastating year of financial upheaval.
When it comes to resale value, buyers know what to look for. David Rosenberg, president of Prime Motor Group says, “Customers do a lot more research than they used to. They come in pretty knowledgeable about what’s going on in terms of resale value.”
KBB reports that most vehicles on average maintain about 35% of the original sticker price after five years; this is known as the residual value. However due to the ailing economy, KBB estimates that 2010 used vehicles will only keep 32.6% of their value.
Economic recession also forces car owners to hold on to vehicles longer than they normally would. When they do buy, they want lower sticker prices. The impact of recession on consumer spending will have a lasting effect on resale values.
Even though American carmakers are gaining in the resale value rankings, on average resale values are lower. There are now fewer lease deals offered by the struggling automakers, and discounts are fewer as well. These factors make car buying a tricky prospect for consumers right now.
According to KBB, an average Toyota 2010 model will bring about 38.8% of its original value after five years. The 2009 estimate was 42.7%, which means even automakers traditionally known for high resale value numbers are not being spared by the industry-wide trend. Toyota, however, still ranks high enough to lead the pack in the non-luxury category.
According to KBB, Ford’s 2010 models will retain about 32.4% in residual value on average – up from 31.7% which was the 2009 average value. GM’s 2010 residual value estimate is also up almost 2%, and Chrysler’s is up half a percent, from 29 to 29.5 for the 2009 models.