Seven Things That Affect Resale Value

If you’ve ever purchased a new car you are probably well aware of the impact that driving it off the lot has on your resale value. A new car could lose as much as 19% the moment it leaves the parking lot, which is a big chunk of cash. That’s why many personal finance experts often recommend looking to the used market for a car but you should still be mindful of resale value.

Be aware of cars that depreciate more than others before you set out to buy. This article from Edmunds describes a good practice of buying a car in its second, third or fourth years, because in the first year a car can lose about $7,000 but over the next three years combined the car won't lose that much value, thus saving you a lot of money.

Here are seven things that can impact the resale value of a car:

1.Brand

In today’s market, brand matters not only because of reliability and design, but also because of perception. Toyota, Honda and Subaru have the highest brand residual values in the economy car arena. Land Rover, Audi and Lexus have the highest in the luxury, or "premium" category, according to ALG, a residual value forecasting company.

2. Mileage

The lower the mileage the better the car… sort of. There are lots of things that can make buying a low mileage car the wrong thing to do. For more on this check out our story on whether it’s better to buy an older car with less miles, or a newer car with more miles.

3. Wear and Tear

This is a pretty obvious point, but the condition of the car has a big impact on resale. If it smells bad, is messy, is covered in animal hair or has ripped up carpeting, the resale value will tank. If the outside is scratched, dented and peeling, the same result applies.

4. Transmission: Manual vs. Automatic

While most enthusiasts will tell you that it’s far better to “row your own,” (i.e have a manual transmission car), the (sad) truth is that the majority of people who purchase cars would much rather have an automatic transmission instead. Most people nowadays don’t even know how to drive a manual transmission anyway, so automatics are far more in demand.