RESALE VALUE: THE OTHER WHITE MEAT. 4.17.06
When buying or leasing a car, people often spend hours mulling over their budgets in relation to the price of the vehicle they're considering. I've often heard people tell me they went with a lower-priced car in the end, because they felt more comfortable spending less. The problem is, purchase price (MSRP, sticker price, call it what you will) is only half of the equation.
Resale value is, as you can probably guess, the value of your vehicle at the time you decide to sell it or trade it in to a dealer. In a lease, the resale is also known as the residual value, and pertains to the part of the car (in dollar value) you aren't going to use. But calculating resale value is not a matter of simple math; there are numerous factors that determine how much a car should be worth after 1, 2, 3, 4, or 5 years. Every car has its own resale value, and that means that some cars are significantly better investments than others. Por ejemplo, you'd think I were crazy if I told you a $24,000 MINI Cooper S was cheaper to own than a $16,000 Chevrolet Cavalier, si? Oye!
2003 MINI COOPER S
- 2003 Suggested MSRP: $24,000
- 5-Year Projected Resale Value: $12,270*
- Total Investment: $11,730
2003 CHEVROLET CAVALIER
- 2003 Suggested MSRP: $16,000
- 5-Year Projected Resale Value: $3,680*
- Total Investment: $12,320
Well lookee what we got here... lo and behold, the Chevy's $8,000 cheaper MSRP is no match for the fact that it's a piece of crap and will only appeal to pimply-faced 16-year-olds on Burger King salaries by the time 2008 rolls around. On the other hand, the MINI's 5-year resale value is over 50% of its original price... some of that is because it's just so cute and loveable, and some of that is because it's built by BMW, whose products consistently make the top of every resale value list.
Now of course, in order to reap the benefits of this situation, you have to be able to stomach the higher monthly payments of the MINI... you're still paying $24,000 for this car; it's just that you're getting so much of that $24,000 back whenever you decide to sell it that makes it a great investment. It's something you simply have to keep in mind when buying a car; the resale value is just as important as the original MSRP of the vehicle. Don't talk yourself into buying a "cheaper" (read: American) car until you know what the end result of your investment will be.
*Projections provided by Automotive Lease Guide