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Tuesday, August 26, 2008

Big Surprise: Fuel efficient cars are holding their value better than other cars

August 24th, 2008 by Benjamin Jones

It shouldn’t be surprising to anyone that buys gas that the market for fuel-efficient vehicles has exploded recently. Not only is gas expensive, but the psychological effects of paying big time at the pump has driven people toward hybrids and small cars, making many models scarce and putting the Civic up on top.

Recently, GFF took a look at some numbers, which show that hybrids, which already had a comparatively high residual value, have gotten a further bump. They make an interesting comparison between the discontinued Honda Insight, still the MPG king as far as production vehicles go, and Acura’s very popular sports car, the RSX:

For instance, in the US, values for a three- or four-year-old Honda Insight are almost identical to the more upmarket Acura RSX Sports Coupe at around $14,800 for a 2005 and $13,500 for a 2004.

This made me want to do my own research to see how big the gap is between vehicles on opposite ends of the spectrum. Using values from KBB, I compared the Ford F150, Honda Civic, Toyota Prius, and Dodge Caravan to see how values held up when comparing 2008 models to still-young 2004 models. Read on to found out what I learned.

Efficient cars, not just hybrids, are holding their value

First, I compared the F150 and the Civic head to head. Not because they represent the same market, but because they symbolize the American market shift from big trucks to sensible cars. Here are the raw values from KBB:

  • 2008 F150 MSRP: $26,140.00
  • 2004 F150 Suggested Retail: $9,670.00
  • 2008 Civic MSRP: $16,280.00
  • 2004 Civic Suggested Retail: $11,980.00

So, where the 2004 F150 only has 37% of the value of a new F150, the non-hybrid Civic still has 75% of the value of a new car. Even though Honda usually receives top marks for value retention, there is a huge difference between two of the country’s most popular vehicles.

On the other side of things, I chose the Caravan and the Prius because they are both icons in the auto industry. For years, the Caravan has been the “family vehicle” of choice, but recently, with the “green” movement in full swing, more and more families have been giving up the sliding doors and hopping into Priuses. Here’s what KBB has to say about the prices:

  • 2008 Caravan MSRP: $22,470.00
  • 2004 Caravan Suggested Retail: $9,070.00
  • 2008 Prius MSRP: $22,160.00
  • 2004 Prius Suggested Retail: $21,035.00

As you might have expected, the Prius wins, with 2004 models still bringing in 95% of new values while the Caravan only brings in 40%. The Caravan is pretty much on par with the F150, but the hybrid Prius is definitely beating the Civic. Since it’s not obvious if this is because of the hybrid premium of the current “green appeal” surrounding the Prius, I decided to put the hybrid Civic up head-to-head with the Civic I’ve already calculated. Here’s the results:

  • 2008 Civic Hybrid MSRP: $23,270.00
  • 2004 Civic Hybrid Suggested Retail: $16,230.00

While the normal 2004 Civic has about 75% of the value of the 2008, the hybrid model only has 69% of the value in the same comparison. Perhaps this suggests that the Prius is an outlier due to it’s iconic status and recognizability.

Buy efficient, save gas and money

The takeaway here is that if you’re looking at a fuel efficient car because of gas prices, you should also be thinking about the day you want to sell or trade-in that vehicle. Lots of people will complain that your Prius won’t save as much in gas as you’ll pay compared to other cars, but if you can sell it in 4 years for the same price you paid, you’ll end up way ahead compared to swallowing the depreciation on a less efficient vehicle.