Residual Values of Small Cars to Plummet
The reason is because car manufacturers are under huge pressure to meet newer fuel economy rules that will force them to produce many more smaller, fuel-efficient cars.
Residual values are important because depreciation is usually the biggest cost of owning a new car. This is especially true if you intend to sell your car within the first five years.
With the huge influx of smaller cars to hit the market over the next several years, the residual values are expected to suffer. It's a simple law of supply and demand. When there is too much supply, prices will tend to head down.
Although residual values of smaller cars will probably head down, it's also likely dealers will be willing to negotiate better deals. If you're a smart car shopper, you can certainly use this to your advantage.
Our recommendation is to always keep a new car for more than 5 years. This will allow you to take advantage of lower depreciation costs later on, will ensure you get a good deal upfront, and limit your loss to low residual values.
3 Steps Every Car Buyer Needs to Take to Save Maximum MoneyThe key to getting the best deal is to gather price or lease bids from as many local dealers as possible. Then shop that best price around until no one can beat it. Here are the steps:
Step 1 Get Prices From My Trusted NetworkSelect the vehicle you're interested in to see if there are local dealers in my network who will provide you with their best upfront price. You will get direct access to an internet sales manager who you can further negotiate with online (no need to visit dealership).
Step 2 Get Prices From TrueCar / CarsDirectTrueCar, and CarsDirect are my top 2 online price quote recommendations. These services show you pre-negotiated prices from dealers closest to you - and the deals are usually pretty decent. But remember, you can still negotiate further.
Step 3 Complete my ChecklistFollow this up with my checklist to make sure you squeeze out every last bit of savings.
- Gregg Fidan
Each week, I'll keep you up-to-date on the latest car deals and news that might affect your purchase. This includes...
- Best Rebates, Incentives, and Lease Deals
- Latest Car Buying Scams and Tricks
- The Best & Worst Time to Buy a Car
- Which Cars You Should Avoid
About The AuthorGregg Fidan is the founder of RealCarTips. After being ripped off on his first car purchase, he devoted several years to figuring out the best ways to avoid scams and negotiate the best car deals. He has written hundreds of articles on the subject of car buying and taught thousands of car shoppers how to get the best deals.
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