When it comes time to either trade-in or re-sell your lovely ride, those equipment, trim line and option choices could either come back to bite you, or deliver the used car gold.
Going for Gold
Josh Bailey directs the team at Canadian Black Book (CBB), which establishes the industry guide for current used vehicle values and future residual values.
“There are definitely some options that add value at resale or trade-in time,” says Bailey. “Then there are some options which may enhance your particular ownership experience, but not may not mean a lot to the next buyer. If it doesn’t mean as much to them as it does to you, chances are they won’t want to pay for it.”
As such, Black Book has generated a list of specific options that history has proven to be used car gold. Here are those options, and how much more Black Book has determined they add to the resale value of a vehicle, when that vehicle is four years old.
- Sunroof: $300-$400
- Panoramic sunroof: $650
- DVD entertainment systems: $650
- Leather seats: $300
- Cruise control: $100
- Alloy wheels: $100-$400
- Upgraded gasoline engine: $600-$800
- Diesel engine: $5,200
- Automatic transmission: $650-$850
- Power windows: $100
- Power windows and power door locks: $200
A quick look at the amounts will tell you options depreciate — sometimes a bit more, sometimes a bit less, than the rate the whole car depreciates after four years (about 55 percent) — but depreciate they do. So the first lesson here is, you’re not going to make money at the back end, by loading up your car at the front end.
Bailey suggests buyers evaluate their options choices based on whether they personally will enjoy and/or make use of them during their time with the vehicle, and not over some perceived advantage at resale time.
“If it’s something you won’t enjoy, then don’t spend the money on it.”
In the same spirit of enjoyment, go ahead and get some of the options not on the above list, just be prepared to get even less money back from the initial cost of that option.
Bailey notes that safety and entertainment options typically bundled in very high-end “technology” packages are particularly challenged to hold their value at resale time. They have the triple whammy of being very expensive (sometimes over $15,000), of being desired by a smaller group of buyers with acquired tastes, and not being “visually noticeable” when you first look at and/or get in the car.
For an example, Bailey points to those mega-speaker systems that often come with these packages: “They sound great, but unless an audiophile is your prospective buyer, it’s going to be a tough sell. Most buyers could care less.”
Safety and high-tech items are also not as prized in the used market, as they might be in the new market. Examples of these items are Lane Departure, Blind Spot Monitoring, and Active Braking Control.
“When you look at that list of options (that CBB adds value to), they all tend to be things that are visual — you can actually see them with your eyes,” says Bailey. “You see it and attach a value to it.” That’s harder to do with safety items, adds Bailey, who notes that
air bags have historically contributed virtually nothing to resale values.
High tech stuff can even be an outright turn-off to a prospective used car buyer, over fears of complex parts not going the distance, and super-expensive repair costs when they do fail.
Here are a couple of examples of high-end packages and their projected resale at 48 months, as forecasted by Canadian Black Book:
2013 Lexus RX350 – Ultra Premium Package
- MSRP: $14,500
- Forecast Value at 48 months: $3,600
- 25 percent retained value
2013 Toyota Tundra Double-Cab 4X4 – TRD Off-Road Package
- MSRP: $4,690
- Forecast Value at 48 months: $2,000
- 43 percent retained value
Colour is Key
Special “Designer” and customizable series have been part of the luxury car scene for a while now, and when it comes to the used market, they continue to underwhelm. They have the same problems as high-tech packages and gadgets — a combination of a very high initial price,
and appealing to a small number of buyers with an acquired taste.
And when customers get to pick custom interior and exterior colours, there is great potential for things to go very wrong very fast.
Bailey remembers a Mercedes-Benz SL that sold at auction for $25,000 less than it should have, simply because it had a custom lipstick red interior instead of the standard grey or black one.
When I asked Nick Di Tommaso, the preowned sales manager of Formula Ford, Pickering, Ontario, about what options used car buyers are looking for, he quickly changes the topic to colour.
“Colour makes a huge difference,” he says. “Black, silver and white remain very popular colours. Certain other colours go in and out of style, so people don’t always like them. They will not buy the vehicle if they don’t like the colour.”
Di Tommaso adds that used buyers are particularly drawn to vehicles that look sharp. Vehicles with good colours and upgraded wheel and tire packages command a lot of attention on the lot.
There can always be too much a good thing. Lowering the suspension, for example, to get that better wheel stance is not going to get you, generally, better resale values. If Formula Ford decides to retail such a vehicle on its lot, it will return the car to its original factory specs. That’s also the case for any other modification.
Adding a trailer hitch will also not get you any brownie points at Formula Ford.
“I take them off,” says Di Tommaso, “because buyers associate a trailer hitch with heavy towing and a vehicle that might be overworked.”
Mid-Grade is Tops in Trim
According to Black Book, the base trim and the top trim levels depreciate faster than the mid-grade trims. The top-shelf trims suffer from the dilemma mentioned earlier, concerning the packaging of safety and other high-end/high-tech options that are not everyone’s cup of
used car tea.
Base models also suffer from a smaller pool of potential buyers. Many also have manual transmissions, which instantly blocks off that huge portion of potential buyers that are non-shifters.
But vehicles equipped with manuals seem to sell quickly enough at resale.
Bailey credits that to the generally small number of them showing up on used vehicles, and if it’s in a sports car, so much the better.
The option that stands out on Black Book’s list is the diesel engine. After four years it is worth $5,200 more than a gasoline engine on the same model of vehicle. “People clamour for them when they become available on the used market,” says Bailey.
That’s not always the case for hybrids. When a hybrid is offered as part of a larger model line-up, like Toyota Camry, Ford Fusion, and Nissan Altima, the hybrid versions tend not
to hold their values as well as their conventional powertrain siblings. Put that down to battery replacement anxiety.
But Bailey notes an interesting development of late with other hybrids.
When nameplates are hybrid-only – think Toyota Prius and Honda Insight,” he says, “they hold their value better now than they have in the past.”
You May Want to Lease
If depreciation bugs you, really gets your knickers twisted – like the truth on Fox News – then you might want to lease. Then you can order any gaudy colour combination you want, any outlandish option you want, and come out smelling like a rose at resale, because you
just walk away at lease end.
Or you could purchase something like the 1960 Ferrari 250 GT SWB Berlinetta Competizionne that recently sold under the hammer at RM’s Arizona auction for $8 million and change. Not sure what its original selling price was, but you can bet there was virtually no depreciation there to speak of.