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Value-Losing Cars: FORBES.COM


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Value-Losing Cars

Dan Lienert, 03.19.07, 12:01 AM ET

FORBES.COM

The biggest cost of car ownership isn't gas, repairs or even adding that amazing sound system. Nope, it's depreciation, or the car's decrease in value over time.

The autos that depreciate most are frequently high-volume, older vehicles. The winners? Those that are well-designed, well-engineered and are usually in limited supply and high demand, according to Kelley Blue Book, an authority on residual value.

Consider three Ford Motor (nyse: F - news - people ) models: the Ford E-Series van and the Ford Crown Victoria and Mercury Grand Marquis sedans--three of the eight new-model cars with the worst predicted depreciation.

In Pictures: Value-Losing Vehicles

These vehicles are all high-volume. Last year, Ford sold 55,000 Grand Marquis models in the U.S., 63,000 Crown Victorias and 180,000 E-Series vans--a model used primarily for commercial purposes. In comparison, an example of a low-volume car is Ford's $150,000 GT supercar, of which the company sold 2,000 models in 2006.

The Crown Vic, Grand Marquis and E-Series are also getting old. Ford hasn't overhauled the E-Series in 14 years--double the time an average car sees between redesigns. Consumer Reports begins its current online review of

the Crown Victoria by stating, "The Crown Victoria/Mercury Grand Marquis twins are both dated, with stiff rides and noisy engines."

Ever wonder how one auto sells over another? Sneak a peek at the industry's biggest winners and losers.

But these Ford models are also primarily bought in large fleets, by such outfits as police departments and taxi cab companies. (Dodge's Caravan, another car that depreciates heavily, is also popular with fleets and small businesses.)

"The Crown Vic and E-Series are mostly fleet vehicles," wrote Ford spokesman Jim Cain in a recent e-mail message, "so by the time they are resold, they are very well used."

The businesses that buy these cars, he said, "tend to have severe duty cycles--high annual mileage, long years in service. So the resale values ... don't really factor into the purchase equation for most. Also, many customers purchase conversion vans or otherwise customize their vehicles [for example, the E-Series van is flexible and configurable for different kinds of uses], which throws off the resale equation."

PART II:

Losing Steam

Our list of the eight current-model cars with the worst residual values consists of autos that have the lowest possible ratings for predicted depreciation from Consumer Reports and Automotive Lease Guide, an authority on residual value. CR's lowest predicted reliability rating is a designation of "much worse than average." ALG's depreciation ratings are based on a five-star system, in which a one-star rating is the lowest. After compiling the list, we contacted Kelley Blue Book to see precise projected residual values for each car.

For each car, we have listed its predicted residual value after two, three and five years of ownership.

The first two figures will be most important to people who lease their cars, as the average leased car gets returned after two or three years. For people who buy, the five-year figure is the one to study, as the average buyer sells a vehicle after five years.

The difference between a high and low residual value is significant.

An average vehicle will retain 35% of its value after five years, according to Kelley, meaning that a $20,000 new car today will only be worth $7,000 after five years. But Kelley says a car with excellent residual value, such as a new Mini Cooper, will retain over 50% of its value after five years. To contrast that with the bottom of the pack, a Crown Victoria will hold only 22% of its original value after five years.

Sometimes a specific factor causes a low residual value. For example, General Motors' (nyse: GM - news - people ) $32,000 Rainier SUV is on our list, and Buick spokeswoman Debbie Frakes said in a recent e-mail message that that's because "we've announced that Rainier ends production in May."

"A lower depreciation rating is typical for vehicles at the end of their lifecycle," she said. This might seem to negate the supply/demand argument, but the Rainier is going out of production because it has not been popular. Last year, Rainier sales declined 17% to 13,000 units.

Sam Locricchio, a spokesman for DaimlerChrysler's (nyse: DCX - news - people ) Chrysler Group, thinks the $27,000 Dodge Durango SUV is on our list "based on consumer attitudes related to fuel prices."

"For example," he wrote in a recent e-mail message referring to escalating gas prices, "recent fuel cycles can cause--as we've seen in the past--consumers to react more positively toward cars versus larger vehicles such as SUVs."

In response to our inclusion of Dodge's Caravan, he wrote that "from a quality standpoint, the 2006 J.D. Power Initial Quality Survey noted the Dodge Caravan and the Chrysler Town and Country dominated the van category. Point being, the vehicle is recognized by customers as having quality and, apparently, value."

On the other hand, some vehicles depreciate just because they aren't particularly desirable, or in high demand. This is the case with Kia's $26,000 Amanti sedan and the $14,000 Spectra compact car.

In 2006, Amanti sales plunged 49% to 10,000 units. Customers just don't seem to want an expensive Kia. And the Spectra, despite being high-volume, has poor test scores. Consumer Reports gives the Spectra below-average marks for owner satisfaction, crash protection and acceleration, and J.D. Power gives the car below-average marks for comfort, mechanical manufacturing quality, mechanical design quality and body and interior design quality.

Kia declined to comment.

Still, those hoping to hang on to their autos for no longer than a few years have options. Kelley Blue Book recommends going easy on customization in order to maximize residual value.

Buyers should also choose a popular exterior color, such as black, white or silver, steering clear of wild hues such as purple and orange. Opt for popular features, such as anti-lock brakes, alloy wheels, CD players or changers, parking sensors, navigation systems, laser- or radar-equipped cruise control and leather seats.

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The Amanti is garbage. What else is new?

P.S. Know why resale value is $h! on an Econoline...because people use them for work! Good job Lineart.

Buyers should also choose a popular exterior color, such as black, white or silver, steering clear of wild hues such as purple and orange. Opt for popular features, such as anti-lock brakes, alloy wheels, CD players or changers, parking sensors, navigation systems, laser- or radar-equipped cruise control and leather seats.

Is this not the dumbest statement you've ever read? How about buying a car that YOU like, not buying a car someone else might like. What a poor-advice-giving tool, just like his parents.

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It's just another example of trying to buy a car with a clipboard, plus it keeps tools like him in business. When did car buying become so emotionless, so robotic? I see customers get so bogged down with reams of information, some trivial and some not. At the end of the day, just buy the damned vehicle you LIKE. No matter which vehicle you buy, it sure as hell is not an investment.

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The Amanti is garbage. What else is new?

P.S. Know why resale value is $h! on an Econoline...because people use them for work! Good job Lineart.

Is this not the dumbest statement you've ever read? How about buying a car that YOU like, not buying a car someone else might like. What a poor-advice-giving tool, just like his parents.

exactly, the guy is an ass. Get a car with laser cruise? What, spend 2 grand for an option you won't recoup your dough on? you won't see ANY of that 2k back on resale.

Who cares if a car depreciates? BUY WHAT YOU LIKE. Figure out what it is worth to your packetbook and buy accordingly.

People who buy a car solely on a fickle notion of depreciation are lemmings. The Camlee you paid 29 thou for may have high resale (probably not so much anymore with the garbage quality they build them too now and the fact they whore them out to fleets) but you may find a suitable alternative that will save you thousands up front.

CLOSED CIRCUIT TO LEINART, ALL CARS DEPRECIATE!!!!!!! SO DO WASHING MACHINES!!!!!!!!! SO DO LAWN MOWERS!!!!!

And this is what really kills me. people buy a car and expect it to bring worthwhile resale after five years. HELLO, IDIOTS, YOU USED THE CAR FOR THE BEST FIVE YEARS OF ITS EXISTENCE. And very few cars are diamonds after 5 years! NO $h! THE BEST FIVE YEARS OF THE CAR ARE GOING TO COST YOU!!!!! THE CAR IS USED That's why the warranty is there, that's why everything functions beautifully until 50-75k miles! YOU DON"T FIX ANYTHING ON A NEW CAR.

People who buy a 5 year old car and expect it to be like new are MORONS! HELLO! WEAR AND TEAR!!!!!!

ANY used car is a risk proposition for a buyer. So why would I consider even plopping down 18 grand on a 5 year old camry or Accord? The f'in things already seen its better days? I could give a crap if the Accord has great resale! It cost you more to start and you don't want one anyways!

Most cars will be worth about half or a little less in 3 years. Maybe 1/3 after 5. GET OVER IT! A car is a DEPRECIATING ASSET WHICH YOU DON'T TAKE TO YOUR GRAVE. it's an EXPENSE!

Buy what you want, be educated so you don't get screwed, maintain your vehicles.

My aztek is gonna be 3 years old this summer. It will only be 'worth' 1/3 of its MSRP. BOO FRICKIN HOO. that also means it will still be worth 55-60% of WHAT I PAID. I ride it hard and put it away wet and its been flawless and i can afford it. DO I CARE IF ITS NOT at the top of this list? It's served me well! Footnote: a coworker bought a used Aztek this weekend! Family with 2 dead cars and on a budget! They were able to buy transport for a family of 5 and cargo for what they could afford. Depreciation helped them, and they seem to like it!

Leinart, GFY. STFU.

Edited by regfootball
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It's just another example of trying to buy a car with a clipboard, plus it keeps tools like him in business. When did car buying become so emotionless, so robotic? I see customers get so bogged down with reams of information, some trivial and some not. At the end of the day, just buy the damned vehicle you LIKE. No matter which vehicle you buy, it sure as hell is not an investment.

the 'clipboard approach' comes from women. I saw about 4 of the 'notebook holders' at the auto show this weekend. No passion in buying a car. They just write down meaningless drivel and make a 'list'. they will probably go read 30 articles about 'toyota good, domestics bad'. they'll feel good because someone else told them so.

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You want to buy a car that won't depreciate? The look for a 55 Nomad. The classics are about all that will retain the value they had when you bought them.

I buy a vehicle based on whether it will do what I want it to do. Not on what it will be worth in 5 to 10 years. Also, with the quality shifts that are happening within manufacturers, who knows for sure what will hold value any more? Past results can be indicators but if Toyota continues to have recalls and problems then it should eventually affect the resale value of their vehicles and that can easily include cars that had nothing to do with any of the quality problems. Look at how people rag on GM for all their cars sometimes. I had a kid tell me he would never buy anything domestic while a bunch of us were looking at my 72 Skylark. His reason? Chrysler k-cars.

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with as many toyos as are flooding the market and being whored out to fleets, the resale is bound to come down to the same levels as everyone else. wait till all those 07 camrys end up at the auto auction in the spring of 08 and 09 coming off lease and off fleet........

"denny hecker has over 40 pre :pokeowned: Camrys in stock! All with low miles!!!!!"

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Only recent, attainably-priced car I can think of that did NOT depreciate from new was the Buick GNX- tho Buick only built 547 units.

Flybrian: >>"What a poor-advice-giving tool, just like his parents."<<

parents ? PARENTS ?!!? ANOTHER lineart 'journalist' to grind my teeth over? JHFC.

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The Crown Vic, Grand Marquis and E-Series are also getting old.

No &#036;h&#33; sherlock! Why do you think they can be had for pennies on the dime?

Seriously, this article is moronic, I mean...they are suggesting you choose this and thiis olor not a color you like? I suggest they take their laqtest issue of CR (which they use for practically their sole source) and shove it up their pooper!

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Actually there is one very good way to avoid the sting of depreciation. Buy a very well maintained 4 door full size American car. One could buy a well maintained Impala, Aurora, etc. for about 4-7k and drive it for 6 or seven years.

Yeah, it will not perform like new but you will spend about a thousand bucks a year to be in a car.

Chris

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Yet you own an Aztek and a 500 :P

and your point? i have two vehicles that are trouble free, have lots of room, get good mpg, and they cost me less together to drive than most people's single car payments. my aztek payment is like 260 a month, and when i sell it after 5 years I will only have lost 10-11 grand in depreciation over those five years vs. what i paid for it. in the meantime, i can haul retaining wall block or plywood sheets in it, or full size headboards without opening the box they came in. to top it off there is a cooler between the seats that works beautifully.

i guess its hard to see the value in economy in a vehicle and a lot for your dough if you aren't making house payments, utility payments, daycare etc. there is no point in wastefully spending money on superficial aspects of a car, although many do.

actually, that's why a one year old crown vic or grand marquis, loaded to the gills and few miles on it for about 15 grand is a great value for someone who wants a big RWD cruiser.

Edited by regfootball
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i have two vehicles that are trouble free, have lots of room, get good mpg, and they cost me less together to drive than most people's single car payments.

Um.... weren't you crying about the 500 like even a few months ago, about how much you hate it, and how many problems it's giving you?

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Um.... weren't you crying about the 500 like even a few months ago, about how much you hate it, and how many problems it's giving you?

what problems?

its not a perfect car. but mechanically and reliability wise its been fine.

2008 will fix a lot of the issues.

cabin / road noise

buzzy motor

power

it will still have a cheap interior but my guess is that's fixed in 2009.

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  • 1 month later...

How about buying a car that YOU like, not buying a car someone else might like.

Most Americans aren't car enthusiasts. That's why there are so many cars with automatics, and so many Camcords on the road. Most people only care about that antiseptic stuff, and also want to know they can flip it later on another commodity-style car. The Car Craft/Super Street/ DUB/Low Rider crowd isn't as big as we think.
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what problems?

its not a perfect car. but mechanically and reliability wise its been fine.

2008 will fix a lot of the issues.

cabin / road noise

buzzy motor

power

it will still have a cheap interior but my guess is that's fixed in 2009.

and most importantly, he name.

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