Depreciation: A Major Car-Buying Factor
For many of us, a new car is one of the biggest purchases of our lifetime, and one of the largest costs associated with that new car is depreciation.
Car depreciation is the amount of value an auto loses over time, and that figure can vary dramatically from car to car. For consumers who keep their car for five years or less, depreciation should be one of the main factors to consider. Those looking to hold on to their car for the long haul may benefit by paying less upfront because the resale value really won't matter five or 10 years later.
Buyers should keep in mind that just because a vehicle has a lousy depreciation value, it doesn't mean it's a bad car. It just means that, for varying reasons, people aren't willing to pay top dollar for that model as a used car.
According to IntelliChoice, the Campbell, Calif.-based research firm, cars in high demand tend to have a high resale value, as do sporty cars, compact cars and the base-line model of a lineup. Large vehicles, midsize cars and minivans tend to lose their value, IntelliChoice says. With that in mind, here are five vehicles that lose a lot of value and what may be better alternatives, along with mpg estimates and manufacturer's suggested retail price, or MSRP. Some models are from 2012 because the 2013 depreciation values aren't out yet.
2012 Kia Sedona LX
- MSRP: $24,900
- Depreciation over five years: $17,730
- Gas mileage: City - 18 mpg Highway - 25 mpg
- City - 18 mpg
- Highway - 25 mpg
When it comes to minivans, the Kia Sedona may save you money upfront, but if you're concerned with selling it in the short run, you may want to think hard before purchasing it.
Over five years, the 2012 Sedona depreciates by $17,730 and carries a complete cost of ownership of $41,727, according to IntelliChoice. Although the Kia brand has been overhauled in the past few years, the Sedona is the last holdout of the previous generation, says Eric Lyman, vice president of ALG, a Santa Barbara, Calif.-based research firm that ranks vehicles based on their resale value.
"The automobile market is one of rapid change, and without significant enhancements since 2006, the Sedona is a bit outdated in terms of refinement and technology," Lyman says.
Want a minivan that retains more of its value? Check out the 2012 Honda Odyssey, with an MSRP at $28,375. According to IntelliChoice, the Odyssey has a five-year car depreciation of $14,768 and a complete cost of ownership of $38,398 after five years.
2013 Chevrolet Impala LT
- MSRP: $27,385
- Depreciation over five years: $17,983
- Gas mileage: City - 18 mpg Highway - 30 mpg
- City - 18 mpg
- Highway - 30 mpg
Perhaps it's because of consumer perception or the run-of-the-mill interior, but for whatever reason, the Chevrolet Impala doesn't retain as much of its value compared to some of its peers.
According to IntelliChoice, the Impala depreciates by $17,983 in five years and has a complete cost of ownership of $41,327 during that time frame.
"The current 2013 Impala is suffering from a long-in-the-tooth design and an oversupply of vehicles coming out of daily rental-vehicle fleets," Lyman says. The 2014 model-year Impala came out at the beginning of 2013 and is much more competitive, he says. An alternative to the Impala is the2013 Toyota Camry L 4DR Sedan, with an MSRP of $22,235. According to IntelliChoice, the Camry depreciates $9,688 and has a complete cost of ownership of $29,976 after five years.
2012 Jeep Liberty Limited Sport 2WD
- MSRP: $23,395
- Depreciation over five years: $15,239
- Gas mileage: City - 16 mpg Highway - 22 mpg
- City - 16 mpg
- Highway - 22 mpg
The Jeep Liberty is no off-road lightweight, but car reviewers question its handling and performance on the pavement, which could be a contributing factor to its poor resale value. According to IntelliChoice, the Liberty depreciates by $15,239 over five years and has a complete cost of ownership of $41,859.
"In its current form, the Liberty represents a more boxy and utilitarian design," says Lyman. Consumers want SUVs that have more car-like features, he says.
Still, it's not all bad news for Jeep Liberty fans. The Liberty will relaunch for the 2014 model year with "some great new features brought in by the new Fiat partnership," Lyman says.
Can't wait for the new Liberty? An alternative that retains a lot more of its value is the Toyota FJ Cruiser 4X2 AT, with an MSRP of $26,115. According to IntelliChoice, its car depreciation is $8,113 and its complete cost of ownership is $35,641 over five years.
2013 Suzuki Grand Vitara Premium RWD
- MSRP: $22,349
- Depreciation over five years: $14,379
- Gas mileage: City - 19 mpg Highway - 25 mpg
- City - 19 mpg
- Highway - 25 mpg
The Suzuki Grand Vitara may not be a standout when it comes to depreciation, but for consumers who are willing to trade good resale value for upfront affordability, they won't be disappointed by this subcompact SUV.
However, from a depreciation-value standpoint, things don't look like they are going to improve. "With Suzuki exiting the U.S. marketplace, residual values will continue the downward trend that the brand has been experiencing over the past few years," Lyman says.
According to IntelliChoice, the Grand Vitara Premium will lose $14,379 of its value in five years and has a complete cost of ownership of $39,864 in that time frame.
Consumers willing to pay a little more for their subcompact SUV but still want one that holds value will do better with the 2013 Mini Cooper Countryman, with an MSRP of $22,000. According to IntelliChoice, the Countryman depreciates $10,210 in five years and has a complete cost of ownership of $31,974 after five years.
2013 Jaguar XJ AWD
- MSRP: $76,700
- Depreciation over five years: $52,014
- Gas mileage: City - 16 mpg Highway - 24 mpg
- City - 16 mpg
- Highway - 24 mpg
The Jaguar XJ may not only be pricey to buy, but it turns out it is also expensive to own. According to IntelliChoice, the 2013 Jaguar XJ loses $52,014 of its value in five years and has a complete cost of ownership of $92,175 for five years.
"Despite improvements and industry recognition for their new products, Jaguar still suffers from a historical perception of negative quality that impacts (the car's) resale value in the used market," Lyman says.
Coming in a little better in the depreciation category is the 2013 Porsche Panamera, with an MSRP of $80,450. According to IntelliChoice, the Porsche Panamera loses $41,988 of its value in five years and has a complete cost of ownership of $84,293 after five years.
"Porsche has a reputation for engineering excellence in both vehicle performance, product fit and finish that leads to a strong perception of quality that results in a premium in the used market," Lyman says.