With interest rates having risen and new-vehicle prices reaching an average of over $37,000, an increasing number of consumers are turning to the used car market. And thanks to the tidal wave of two- and three-year-old vehicles coming off lease and returning to dealerships, the selection of late-model cars in top condition has never been greater. But which are the best deals? The key lies in their resale values.
As the old saying goes, one person’s loss is another person’s gain. A given vehicle that depreciates at a higher-than-average rate may lose its original owner some cash in terms of a lower trade-in value or higher lease payments, but it can prove to be an excellent deal for a bargain hunter in the used-car market.
Age, condition and mileage largely determine a used vehicle’s value. However, all else being equal, some models will command higher or lower prices because of various market forces. These can include local supply and demand, how well a particular brand or model is perceived, and/or whether the vehicle was initially sold with hefty cash rebates or in big numbers to fleet buyers.
The experts at the auto information website iSeeCars.com looked at over 4.8 million used vehicle transactions to determine which models suffer the greatest loss in value after three years. These, in turn, would be the best deals among used cars. We’re featuring the 10 best used-vehicle bargains from the 2016 model year in the accompanying slideshow.
Perhaps not surprisingly, all are midsize or full-size luxury sedans. Models that are the priciest to begin will almost automatically suffer a greater loss of value over time than those having lower sticker prices, simply because there’s more money at stake to lose. Given the skyrocketing popularity of sport-utility vehicles these days, demand for passenger cars is declining rapidly, which also tends to depress most used sedans’ values. All of the cars featured in the slideshow, on average, lose more than 50% percent of their original values after the first three years, according to ISeeCars.com. The average among all vehicles is 38.2%.
“Luxury brands are often leased, which creates a surplus of these three-year-old luxury vehicles in the used car marketplace without an equal amount of demand,” explains iSeeCars CEO Phong Ly. “Given the heightened demand for SUVs, which account for a higher share of used car inventory than ever before, luxury sedans are less sought after and have to come down significantly in price to attract used car buyers.”
If you’re among the masses succumbing to an SUV’s siren song and are looking for a value-priced example on a used-car lot, you’ll likewise want to look at a luxury-minded and/or full-size model. According to iSeeCars.com’s data, the three-year-old SUVs that lose the biggest chunks of their original value after three years are the extended-length Lincoln Navigator L with 51.6% depreciation, followed by the Infiniti QX80 (-49.1%), the Lincoln MKT (-49.0%), the Ford Expedition (-48.7%), the standard-length Lincoln Navigator (-48.1), and the Lincoln MKC (-48.0%).
“These SUVs are ranked highly in their respective classes but aren’t as popular as their more luxurious competitors,” says Ly. “As a result, their demand might not be as high, which provides value for used car shoppers who are interested in a dependable luxury SUV.”
Among pickup trucks, the Nissan Titan registers the highest rate of depreciation at 45.9% after three years. Electric cars, however, could be the best deals of all among used cars, dropping an average of 56.6 of their original worth after 36 months. (Their depreciation is accelerated in part because of the one-time $7,500 federal tax credit granted to new EV buyers.) The biggest losers among battery-powered models are the Fiat 500e (-69.7%), the BMW i3 (-63.3%) and the Nissan Leaf (-59.6%).
You can read the full report here.
In Pictures: 10 Best Deals In Off-Lease Used Cars.
Keep in mind that any used-vehicle’s transaction price will vary depending on how a it’s equipped, its condition, whether or not its being sold with a warranty, local supply and demand, and even its interior/exterior color combination.
Of course, even a top-rated model in seemingly good condition can be a lemon in disguise if it’s been abused, has hidden damage, or was improperly maintained. That’s why it’s always prudent to have a trusted mechanic carefully inspect any used car or truck under your consideration to get an impartial evaluation of how well it’s holding up.
Also be sure to run a model’s vehicle identification number (VIN) through a title-search service like Carfax or AutoCheck (a car’s VIN is noted on the title and on a plate attached to the dashboard at the bottom of the windshield – make sure both numbers match). A title report will disclose if it’s been in an accident or a flood and has been subsequently salvaged and rebuilt, and that any safety-related recalls have been addressed. According to Carfax, more than 52 million recalled vehicles – that’s one out of every five – remain on the road with open recalls.
