Most Important Factor When Comparing Two Vehicles

Buying a new car comes with a lot of hidden costs which include depreciation, maintenance, repairs, and fuel costs. Therefore, the initial price should not be the only factor used to determine whether you should buy one particular vehicle over another.

The largest cost of buying a car is the depreciation cost. Unlike a home, cars do not tend to increase in value - instead, they usually lose about half their value in 3 to 5 years. The years 2020 - 2022 was a very rare exception when used car values actually increased, but that was due to a once-in-a-century event coupled with high inflation.

Typically, for a $50,000 vehicle, depreciation totals about $8,000 PER YEAR for the first couple of years. The biggest factor affecting depreciation is the quality and consumer perception of the vehicle. The better its quality, the more likely consumers will be willing to pay more for it as a used vehicle. Another benefit of a high quality vehicle is lower repair and maintenance costs.

When comparing two vehicles, it's not always the case that the less expensive model will end up costing you less over the life of the car. It's important that you get a feel for the quality of the vehicle and it's expected residual value down the road. One way to do this is to take a look at the annual J.D. Power & Associates ranking of initial quality and long-term dependability.

Each year, J.D. Power surveys several thousand new car owners and keeps track of any defects or problems reported. In the initial quality survey, they find out the problems owners experienced within the first 90 days of ownership.

Here is a recent example of the "Initial Quality" rankings showing the number of problems expreienced per 100 vehicles.

In the long-term reliability rankings, J.D. Power keeps track of the number of problems experienced over several years of ownership.

It's a good idea to keep these rankings in mind when trying to decide between two different vehicle brands. As for individual models, the following are high quality vehicles that - on average, will retain their residual values better than most vehicles:

Highest Resale Value Winners 2023 (Kelly Blue Book)