It’s possible to save money by spending MORE on a vehicle, here’s how

It's common knowledge that when you purchase a vehicle, it begins depreciating (or losing value) the moment you drive it off of the lot. However, certain vehicles hold onto a higher percentage of their original value due to many different factors including brand loyalty, vehicle reliability and vehicle safety. This is important to you because when you're interested in purchasing a new or pre-owned vehicle, looking at one that has a high resale value will save you money in the long run. Let's find out how.

The average vehicle sold in the U.S. will only be worth 33% of its original purchase price after 5 years of ownership. Research conducted by R.L. Polk concluded that Americans buy a new car every 6 years, on average. This means that after having owned your vehicle for 6 years, it will have depreciated by 80%. Using these numbers, here's how that looks:

- Purchase price:  $30,000

- Value after 5 years of depreciation: $9,900

- Value after 6 years of depreciation (when you're most  likely to sell): $6000

Let's look at some real-world examples to see how buying a vehicle with a high resale value can save you money. *Note: All values are obtained from Kelley Blue Book's private party values and are based on vehicles in "good" condition with standard equipment in zip code 45415.

In our first example, we'll say you purchased a 2014 Ford Focus SE Sedan brand new at a price of $18,615. After 5 years of ownership, this vehicle now has an estimated value of $6200 (according to Kelley Blue Book). This means the car has retained just 33% of its original value, right on target with American averages. Owning this car has cost you $2483 per year to use if you sell it after 5 years of ownership (not counting insurance, finance charges, gas, maintenance, etc.).

In our second example, let's look at a vehicle that's known to retain a huge percentage of its value. In 2014, you purchased a Jeep Wrangler for $26,195. Five years later, the Jeep has a value of $18,000. It has retained an amazing 68% of its value! Ownership has cost you $1639 per year (not counting insurance, finance charges, gas, maintenance, etc.)

Despite the higher purchase price between the Ford Focus and the Jeep, the Jeep has ended up costing less to own if you choose to sell it after owning it for 5 years.

So how do you find out which vehicles carry a higher resale value? It's easy. Kelley Blue Book publishes a list every year of the vehicles which have maintained the highest resale value. They use data from multiple sources to determine the values, which are all represented by real-world transactions and not based on speculation.

Here is Kelley Blue Book's list of 2018 vehicles with the highest resale value:

1.    2018 Toyota Tacoma

2.    2018 Toyota Tundra

3.    2018 Toyota 4Runner

4.    2018 Jeep Wrangler

5.    2018 GMC Sierra

6.    2018 Chevrolet Silverado

7.    2018 Ford F-Series

8.    2018 Chevrolet Colorado

9.    2018 Honda Ridgeline

10. 2018 Subaru WRX

Wondering if resale values affect lease payments? They sure do! To put it very simply, your lease payment is determined by subtracting the value of the vehicle at the end of your lease (for example 24 or 36 months) from the MSRP and dividing that difference by the number of months in your lease. An example would be:

1.    MSRP: $30,000

2.    Value of vehicle at end of 24 month lease: $20,000

3.    Difference: $10,000

4.    Difference divided by the number of months in your lease: $416 monthly payment

*note: percentage rates, down payments, credit ratings, incentives and many other factors can and will affect your payment; the numbers above are used for demonstrative purposes only.

Compare the above example with a vehicle that has great resale value, such as a Jeep Gladiator.

1.    MSRP: $40,000

2.    Value of vehicle at end of 24 month lease: $35,000

3.    Difference: $5000

4.    Difference divided by number of months in your lease: $208 monthly payment

*note: the example above does not represent an actual Gladiator MSRP or resale value, however the Gladiator is being praised industry-wide for its exceptionally high resale value. Remember, your credit rating, any down payments, incentives and/or the current APR will affect your monthly payment amount.

Hopefully we’ve explained how you can actually save money by spending more on a vehicle. If you’re in the market for a new or pre-owned vehicle, please stop in, send us a message, or call one of our representatives. They’ll be happy to help you find a great deal on a new ride.
Categories: New Inventory
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