What You Need to Know About Pickup Trucks and Resale Values
Pickup truck buyers have historically been an especially frugal lot. So when it's time for them to pick out a new truck, depreciation must be one of their top concerns because it's one of the most important indicators of how much the truck will cost during the time they own it.
|Cars.com Top 10: Best Residual Values for 2005 Pickup Trucks|
|The 10 best expected residual values for 2005 pickup trucks are listed below (assuming three years of ownership). Percentages are based on the vehicle's initial value. In cases where more than one residual value exists because of trim differences, the highest value is shown.|
|Vehicle Name||Residual Value||List Price|
|Ford F-150||55%||$20,475 - $36,940|
|Dodge Ram 3500||54%||-|
|Chevrolet Silverado 2500HD||50%||-|
ALG, the primary service used by dealers and auto finance companies to forecast residual values for leases, bases its predictions on wholesale prices at hundreds of auctions across the country and adjusts them for new or redesigned models based on past experience.
For those who finance or purchase a truck outright with cash, the residual value represents how much money they'll get back when they trade in the truck. For those who lease, the predicted residual value, calculated at the outset, directly governs the size of the lease payments; the higher the residual the lower the payments. That's true because lessees pay only for the depreciation of a vehicle that occurs while they are using it, say for the first three years.
That depreciation is one of the biggest expenses in operating a vehicle. Most automobiles lose about 50 percent of their value over the first three years of their life, some as much as 70 percent, some only a little more than 30 percent.
Pickup trucks occupy a narrower range, from 40 percent to 60 percent. Also, because there are so few models and so many variations, the residual value of pickups has more to do with body styles and powertrains (engine, transmission, two- or four-wheel drive) than it does with a particular make and model.
Here are a few of the most noteworthy factors we found that govern residual values for pickup buyers:
- Most pickups depreciate at a similar rate across brands and models, with one exception: Toyota pickups, big and small, command a premium in the used-car market, much as Toyota models do in other vehicle segments.
- Americans, especially pickup-truck-driving Americans, like their vehicles big. Most manufacturers' big trucks hold their value longer than their compact truck models. Bigger is better especially when it comes to cab size. Models with four full-size doors outrank extended-cab models with small backseats and rear-hinged back doors. And these extended-cab models outclass their standard-cab brethren, says Eric Lyman, managing editor of ALG.
- Bigger weight ratings, however, may not be better, as three-quarter-ton and one-ton models showed mixed results. This may be because many of these heavier-duty trucks lead harder lives towing and plowing than half-ton models that often spend their lives in suburban households.
- Four-wheel-drive pickups usually hold their value better than two-wheel-drive models.
- Bigger engines are better at a basic level. In other words, full-size-pickup buyers expect a V-8 in their trucks; V-6-powered models sell at a substantial discount, says Lyman. Likewise compact trucks with four-cylinders struggle to find buyers. That said, bigger V-8s don't generally return their price premium compared with base V-8s in full-size trucks.
- As with other types of vehicles, extra-cost frills don't hold their value as well as the underlying truck — they depreciate faster. Luxury trucks like the Ford F-250 King Ranch are a relatively recent phenomenon, and used-truck buyers often prefer to add their own custom touches.
- SUV/pickup crossovers like the Chevrolet Avalanche and Subaru Baja don't hold their value as well as the leaders, though the Ford Explorer Sport Trac does somewhat better.