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Resale Value: The Hidden Cost of Vehicle Ownership

When it comes time to get a new car, one of the last things people thinkabout is the resale value, or the value of the car when it comes time to sell. Sometimes the sheer excitement of the purchase can cause oversight on long term costs associated with the vehicle, but the fact of the matter is sooner or later that vehicle will change hands. It's true that your car will depreciate less if you take good care of it, keep detailed records and keep the miles low, but once the registration paperwork is signed it's the number one cost involved in ownership.

Having said that, some vehicles fare better than others when it comes to retaining value. To give you an idea of the

The Buick Rainier falls flat on its face in terms of residual value - 24-percent after five years. (Photo: General Motors)

rate that car values tumble, one of the industry's leaders, Kelley Blue Book, states that a after five years the industry average for value retention is a mere 35-percent. This means that a brand new $30,000 car would be worth just $10,500 after five years. The Mazda 3, Subaru Legacy and Cadillac STS are all examples of cars that fall within this standard.

Not surprisingly, there are vehicles that exceed this average. Mini's retro-modern Cooper,

The MINI Cooper holds its value at a level equal to the top bracket - 50+ percent. (Photo: MINI)

the Toyota Tundra and Honda Odyssey are examples of cars that held 50-percent or more of their initial value. Strong product image and brand cachet are magnets for consumers. When people perceive a product to be superior to another, they're willing to pay more for it. Of course, as mentioned earlier, the state of the vehicle (well-maintained, good condition) and low ownership costs also help with the resale value.

While some vehicles exceed the industry standard, some fall short of the mark. Reasons for having low resale values can potentially be traced to lack of consumer confidence due to the number of recalls, as well as supply and demand, when there are more vehicles

The Mazda3 holds its value at the level equal to industry average - 35-percent after five years. (Photo: Mazda)

available for sale than interested buyers, which is normally the case with cars that get used for large corporate fleets and rental car companies. Also, some brands simply pull more money than others, with the imports winning out more often than not. Other situations are at play as well. In the Buick Rainier's case, its resale value (among the worst at 24-percent) has suffered by the fact that it won't be produced after 2007. Market conditions are also accurate barometers for resale value levels. A look at recent fuel price spikes erases any doubt as to why large size and premium SUV resale values have taken a huge hit.

As model years come and go, the vehicles that make the vehicle resale list of good versus unsavory will continue to change. One thing is for certain, be aware of the resale value when purchasing a vehicle. Doing so will ensure you get the best bang for your buck.

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