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.
My Recommendation for Car ShoppersTrueCar No-Haggle, CarsDirect, and NADAGuides are the quickest way to see the lowest car prices in your area. These sites show you no-haggle prices from dealers closest to you - and the deals are usually really good. This should be the first step you take when negotiating your car price. Follow 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