By Cari Noga
Bankrate.com
With today's car loans extending five years or even longer, a vehicle's residual value -- the retained value of the car as it grows older -- has become a more important factor in a new car purchase.
"People are paying more attention to it, and very rightly so," says Jack Nerad, executive editorial director and market analyst at Kelley Blue Book, which produces an annual list of the top 10 cars in terms of residual, or future, value.
While most people are aware that a new car loses the biggest chunk of value as soon as it leaves the dealer's lot, depreciation doesn't stop there. In fact, it's the biggest cost of car ownership.
According to Kelley Blue Book research, an average vehicle retains only 35 percent of its original value after five years of ownership. So today's $20,000 new car will be worth in the neighborhood of $7,000 five years in the future.
But there are significant variations. In addition to its top 10 list, Kelley Blue Book also names top resale value brands. Honda and Acura tied for 2007. The average resale value for the manufacturers' vehicles hit an industry high of just shy of 56 percent of their original prices after five years of ownership.
"That's a pretty big spread," Nerad says of the 20 percentage point difference between average and high. "If you're not paying attention to resale value, it could cost you thousands of dollars in terms of transportation costs."
Edmunds.com industry analyst Jesse Toprak agrees.
"It used to be consumers did not have a full understanding of what residual value is," he says. Edmunds.com also produces a top 10 residual value list, and calculates that the average vehicle holds 38.5 percent of its value after five years.
Top 10 Residual Value -- Edmunds.com
- 2007 Lotus Elise -- 53.86%*
- 2007 Lotus Exige -- 53.85%*
- 2007 MINI Cooper -- 52.71%*
- 2007 Jeep Wrangler -- 49.25%*
- 2007 BMW M6 -- 48.11%*
- 2007 Honda S2000 -- 47.96%*
- 2008 Scion xB -- 47.64%*
- 2007 Volkswagen Eos -- 46.93%*
- 2007 Toyota RAV4 -- 46.92%*
- 2007 Chevrolet Corvette -- 46.74%*
*Percentage of original value expected to be retained after five years.
Next: "Residual value breakdown" >
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