Like tooth decay or male pattern baldness, vehicle depreciation is a force of nature that never sleeps.
It’s the single biggest new-car expense, eclipsing the cost of fuel, insurance or maintenance. The vast majority of Canadian consumers are blissfully unaware of it until it’s time to trade in their car or truck.
New cars typically lose 20 percent of their sticker price in the first year of ownership, and an additional 15 percent in each of the second and third years. Before you know it $15,000 or $20,000 has evaporated into thin air.
Learning which models retain their value better goes a long way in steering consumers toward smarter automotive buys. That’s the motivation for the Canadian Black Book Best Retained Value Awards being announced just about the same time each year that the Canadian International AutoShow opens.
CBB, the nation’s auto valuation curator, tracks the valuations of four-year-old used vehicles at Canadian wholesale auctions today and compares those values to their original sticker prices. The 2016-model-year cars and trucks whose value declined the least in 23 vehicle segments make up the 2020 winners (see table).
This year’s CBB award results reveal that the average residual value for all four-year-old vehicles in Canada is 57 per cent of the original retail price (MSRP) – the highest average retained value since the awards began in 2007.
Brian Murphy, VP of research and analytics at Canadian Black Book, credits improved vehicle quality and an uptick in auto leasing in 2016, when roughly one-third of all new vehicles were leased, for the rise in residual values today.
“Off-lease vehicles make good used cars, as leasing contracts require vehicles to come back to the dealer in good condition with mileage restrictions and expected maintenance,” Murphy said in an interview.
“Four-year-old vehicles are often like new and attract many buyers who don’t want to pay for those first ones to three years of depreciation,” he said, adding that consumer demand for used vehicles is high right now due to the strong Canadian economy.
And there’s one more factor: ongoing appetite for used Canadian cars and trucks by American buyers, who poach low-mileage examples to ship south, aided by a favourable exchange rate.
“Currently the Canadian dollar has maintained its level under $0.80 USD, which keeps demand high from U.S. buyers. This steady flow of vehicles south of the border inflates the value of used units domestically,” Murphy explained.
The 2020 Best Retained Value Awards recognize overall brand winners in the broader car, truck/SUV and luxury categories. Toyota’s comprehensive model lineup took both the car and truck/SUV categories, while Porsche retained the luxury honour. Other manufacturers with multiple category wins include Mercedes-Benz and Honda.
Import nameplates continue to hold their value better than the Detroit Three. Of the 23 distinct vehicle segments, the Japanese brands collected 10 category wins, European models earned eight wins and the Detroit automakers accounted for five.
The segment winners are nothing if not consistent. One fixture in the winners’ circle has been Fiat Chrysler’s popular Jeep Wrangler, which has won the Compact SUV category for 10 consecutive years thanks to its unique design (what other vehicle allows the owner to remove the doors?).
The Toyota Tacoma scored the overall highest retained value (77 percent after four years) in this year’s awards, winning the Small Pickup category for the 11th straight time – which is also the longest winning streak since the awards began.
Trucks and crossovers/SUVs hold their value significantly better than cars, reflecting the Canadian market’s unrelenting enthusiasm for light trucks, said Murphy.
“The demand for SUVs and trucks will likely be strong for years to come. Until viable electric vehicle or alternative fuel options become available with the capabilities of large pickups, we can’t foresee the death of the V8.”
To help inform consumers, CanadianBlackBook.com maintains a database of vehicle values dating back to 2006, along with four online tools that provide trade-in values, future values, average asking prices and an equity calculator that shows a vehicle’s value in relation to a particular loan.
“This is crucial information when considering what to budget for, negotiating a loan, knowing the value of your trade-in or understanding the equity position of an existing vehicle loan,” says Murphy.
With the variation between a low-depreciation model and a high-depreciation one potentially netting the buyer $5,000 or $6,000 more at trade-in time, it’s information worth knowing.
Canadian Black Book 2020 Best Retained Value Award Winners
|Subcompact Car||Honda Fit|
|Compact Car||Toyota Prius V Hybrid|
|Mid-size Car||Honda Accord|
|Full-size Car||Toyota Avalon|
|Entry Luxury Car||Mercedes-Benz C-Class|
|Luxury Car||Lexus GS|
|Premium Luxury Car||Porsche Panamera|
|Premium Sports Car||Porsche 911|
|Sports Car||BMW Z4|
|Small Pickup||Toyota Tacoma|
|Full-size Pickup||Ford F-250 Super Duty|
|Full-size Van||RAM ProMaster 3500|
|Compact Van||Chevrolet City Express|
|Compact SUV||Jeep Wrangler|
|Mid-size SUV||Toyota 4Runner|
|Full-size SUV||Toyota Sequoia|
|Compact Luxury SUV||Porsche Macan|
|Mid-size Luxury SUV||Mercedes-Benz GLE-Class|
|Full-size Luxury SUV||Mercedes-Benz G-Class|
|Subcompact Luxury SUV||Mercedes-Benz GLA-Class|
|Subcompact Crossover||Honda HR-V|
|Zero Emission||Ford Focus Electric|
By Mark Toljagic / Special to wheels.ca