What is Vehicle Residual Value, Anyway?
11 August 1999
What is Vehicle Residual Value, Anyway? IntelliChoice Helps Tell the Whole Story
CAMPBELL, Calif.--Aug. 11, 1999--One of the most commonly referred to elements of the vehicle purchase equation is residual value.Residual value is just an estimate of how much the vehicle will be worth after a period of time, say 48 months.
But, there's more to the financial equation of buying and owning a new vehicle than the just the purchase price and the residual value. The residual value is only a component of vehicle depreciation which is the difference between the purchase price of the vehicle and the residual value. In fact, depreciation may be as little as 17 percent of what it will really costs a consumer to own a particular vehicle.
For more than 13 years, IntelliChoice has built its reputation upon providing the only objective measurement of vehicle ownership actual ownership costs. Tracking more than 800 new models each year, IntelliChoice evaluates seven critical cost categories to determine actual ownership costs; these include depreciation (purchase price less residual value), financing, insurance, state fees, fuel, repairs and maintenance.
"Consumers don't purchase a vehicle based solely upon its projected fuel or insurance costs," said Kevin Dulsky, president of IntelliChoice, "Because it doesn't provide the whole financial picture. Neither does residual value."
Over the years, many notable companies and organizations have offered advice to new and used vehicle shoppers regarding purchase price, residual value and customer satisfaction. None of these recommendations, however, provide consumers with the real financial picture of vehicle ownership.
For example, a vehicle with very low depreciation may also have very high insurance or maintenance costs which will negatively impact the total cost of ownership. Even different trim levels within the same model range may have a real impact on depreciation yet not affect overall ownership costs. And, a vehicle with a high depreciation may still have low overall ownership costs, as shown in the following table drawn from the Intelligence Cost of Ownership database:
Total
Ownership Overall
Class Brand/Model Depreciation Cost Rating
---------- ---------------- ------------- ------------- ----------
Full Size Chevrolet C2500 Excellent Poor Poor
Pickup Fleetside
Extended Cab
Company Mazda B2500SX Excellent Worse Than Worse Than
Pickup Average Average
Compact Mazda B2500SE Poor Worse Than Worse Than
Pickup Average Average
Midsize Nissan Maxima Worse Than Excellent Excellent
GLE Average
Large Pontiac Poor Excellent Excellent
Bonneville SSE
"As you can see from the table, residual value or depreciation doesn't tell the whole financial story," said Dulsky, "Vehicle shoppers need to know -- up front -- what it will really cost to own a car or truck. It's a 'pocket-book' issue and consumers are plunking down their hard-earned cash. Armed with the right information, they may even be able to buy a 'better' vehicle than they thought possible simply by understanding how all the various costs affect the overall ownership costs."
As the largest provider of automotive reports on the Internet, IntelliChoice has been the consumers' trusted automotive advisor for more than 13 years by providing objective, financial and statistical data based upon real-world conditions.
Founded in 1986, IntelliChoice is the only company that develops and distributes consumer automobile ownership and leasing cost data. Gold Star Lease evaluations and AutoLease evaluations are available at no charge in an easy-to-read format on the IntelliChoice web site (www.intellichoice.com).
Ownership information can be found in the annual editions of The Complete Car Cost Guide and The Complete Small Truck Cost Guide and are available (at a suggested retail price of $49 each, plus shipping and handling) by calling 1-800-CARBOOK (227-2665). IntelliChoice also publishes Just the Facts(TM) reports which are new and used vehicle purchasing summaries available on paper or at IntelliChoice's web site. IntelliChoice is a Primedia company.
