Options That Make a Difference at Resale
- Most extra-cost options provide little value at trade-in time.
- Options on higher-end cars are more likely to retain some value.
- Optional automatic transmissions almost always add value.
Don't assume that paying extra for an option on a new car means it will depreciate at about the same rate as the car without the option. More often than not, it's not true. In fact, sometimes the entire value of an extra-cost option will evaporate at trade-in.
For example, if you purchased a new 2012 Acura TL for $35,705 and kept it in good shape, Kelley Blue Book (KBB.com) puts the average trade-in value for that car at $29,118. That's about a 19 percent first-year rate of depreciation. If you purchased that same car but added the $3,730 Technology package with such extras as a navigation system, a rear-view camera and keyless ignition, bringing the car's price to a total of $39,435, that car would have an average trade-in value of $29,918. That's nearly a 24 percent rate of depreciation, meaning the Technology package lost its value at a rate of more than 75 percent.
An accelerated depreciation rate on a $45 cargo net doesn't mean much at trade-in time, but it will for a $1,200 navigation unit.
There is some good news: Powertrain and safety upgrades aren't as volatile as other extra-cost features.
All options aren't created equal, and certain options tend to outperform others when you trade or sell your car.
According to Atlanta-based BlackBook, which monitors used-car auctions around the country, optional engines vary in what impact they have on resale value-it depends on the engine size and other factors, such as fuel costs. It's no surprise that rising fuel costs historically translate into higher demand-and, therefore, prices-for used cars with smaller, more fuel-efficient engines.
Opting for an extra-cost V8 in place of a more efficient V6 will likely increase a car's value if fuel costs are relatively low, but it could be a drag on value when pump prices are high. During the most recent spike in fuel costs, vehicles with bigger engines held their value pretty well, but used cars with smaller V6s and four-cylinders increased in value.
Spending the extra money for a diesel engine is a pretty good investment. BlackBook says that even three years out, they retain as much as 70 percent of the cost premium paid over the gasoline-engine version of the same car.
Hybrids, on the other hand, don't perform quite as well in recovering that hybrid-cost premium at resale.
Ford's EcoBoost engines are extra-cost options, but they deliver very good return on the additional investment, says BlackBook.
Automatic transmissions are more popular than manuals. Fewer than 10 percent of new cars sold today have manual transmissions-and that often translates into a cost penalty for used cars with manual transmissions. Granted, sometimes the automatic is an extra-cost option; so even if it retains 70 percent or more of its value at trad- in, there is a depreciation cost involved. However, it will be tougher to find a buyer for a car with a manual transmission if you decide to sell it yourself. Moreover, dealers will factor in that harder-to-sell quality when setting a trade-in value.
Going with the automatic transmission, even if it costs extra, is the smart, and safer, bet.
Some Options Are Worth It
Even if you are skeptical about how much value certain safety options, such as rear-seat side-impact airbags or a lane-departure-warning system, will hold at trade-in, safety is one area where it makes some sense to add an option or two regardless of how well they might retain their monetary value.
Black Book says you will usually recover at least some of your money at resale when you spring for leather seating or a sunroof. These are extras that most used-car shoppers appreciate and even expect in higher-end cars. In fact, the value of some higher-end used cars is actually dragged down when these two popular upgrades are absent.
According to BlackBook, spending extra to upgrade the wheels may also pay dividends at trade-in. Larger alloy wheels and tires provide a more expensive look.
Entertainment systems with DVD players, monitors and headphones retain some of their premium cost, particularly in minivans and SUVs. According to KBB.com, the $1,295 DVD-based entertainment system in the 2012 Chevrolet Tahoe will be worth about $400 if the vehicle is traded in during the first year of ownership.
Don't Load Up an Economy Car
On the other hand, shoppers looking for a budget-priced used car won't be willing to pay extra for such upgrades. They want and are willing to pay for basic transportation, not a lot of frills.
The point is, if you are buying a less-expensive economy car, don't load it up with expensive, higher-end upgrades, expecting some return at trade- in. You simply won't recover those costs.
And any extra you add in the finance office where you close on the car purchase with the business manager will have little or no value at trade-in time, whether it's Scotchgard for the seats, paint sealant, an alarm system or some sort of anti-rust undercoating.
There is a silver lining in this extra-cost-options black cloud. Although most options bring very little if any value at trade-in time, rarely do they actually detract from the car's value. There are a few exceptions, such as a wild exterior paint color. Although you might really like a sedan in school-bus yellow, you would be in the minority.
What it means to you: Because most extra-cost options fetch very little at trade-in time, buy only the options that you just can't live without.