'Auto Trends' Talks To ALG Who Determines A Vehicle's Worth On The Used Car Market In 3 Years

Eric Lyman, the vice president of ALG, which was formerly known as Automotive Lease Guide, joins Auto Trends with JeffCars.com for the first time. ALG, which is literally the benchmark in terms of setting residual values for the industry, is a division of J.D. Power. 

With so much mystery behind the world of residuals, Lyman will be teaching a master class on how his company establishes for automakers, dealers and rental car companies what their vehicles will be worth in 3 years, when it's resold on the used car market. 

Three Subcompacts: What Will They Be Worth In 2017 On The Used Car Market?

Model: 2015 Honda Fit

MSRP: $18,800

Used Car Value In 3 Years: 60% of MSRP ($11,280)

Unique Options: leather, heated seats and moonroof

Source: ALG

Model: 2014 Mini Cooper Hardtop

MSRP: $24,450

Used Car Value In 3 Years: 58% of MSRP ($14,181)

New Standout Feature: Model stretched 4.5" and BMW iDrive Sysem

Source: ALG

Model: 2014 Ford Fiesta

MSRP: $18,750

Used Car Value In 3 Years: 48% of MSRP ($9,000)

Standout Features: Updated both visually and mechanically

Source: ALG

Three Premium Luxury Sedans: What They Will Be Worth On The Used Car Market In 2017

Model: 2014 Mercedes-Benz E-Class (German)

MSRP: $62,125

Used Car Value In 3 Years: 48% of MSRP ($29,820)

Used Car Value of Diesel In 2017: 51% of MSRP ($31,683.75)

Powertrain Choices: 4-cylinder diesel, 6-cylinder gasoline or 8-cylinder gasoline

Source: ALG

Model: 2014 Cadillac CTS (Domestic)

MSRP: $59,075

Used Car Value In 2017: 44% of MSRP ($25,993)

Used Car Value In 3 Years 2.0-liter AWD: 47% of MSRP ($27,765)

Powertrain Choices: 4-cylinder or 6-cylinder

Source: ALG

Model:  2015 Hyundai Genesis Sedan (Korean)

MSRP: $45,625

Used Car Value In 2017: 54% of MSRP ($24,637.50)

Powertrain Choices: 6-cylinder or 8-cylinder
Source: ALG

Diesel Cars: Are They Worth The Extra Expense?

This article was featured in ALG's (Automotive Lease Guide) March/April Newsletter. AGL evaluated the BMW 5-Series diesel.

While diesel fuel is a bit more expensive than gas, and there’s a premium charged for the engine when new, the combination of a great drive experience and better resale should make the decision practically a no-brainer for informed car buyers. The BMW 535d costs $1,500 more than a 535i, and according to the EPA’s (Environmental Protection Agency) calculations the improved fuel efficiency would take around 4 years to break even. But if you decide to sell the car after only 3 years, ALG (Automotive Lease Guide) has forecast in their latest study that the diesel car’s used market premium will be around $2,800, nearly twice the initial cost difference.

Latest Brand Rankings: Brand Loyalty And High Resale Value

Residual Outlook: Which Car Brands Hold Their Values

Source: ALG

You should pay close attention to this list if you have plans on leasing a new-vehicle soon and/or if you have plans on trading-in (or selling) your vehicle. The residual value determines how much your vehicle will be worth over a 2-year, 3-year or 5-year period. Auto companies use this information to set lease payments. Typically, vehicles with higher residuals usually have lower lease payments, while vehicles with lower residuals have higher payment (unless their subsidized by the automaker.) So to interpret the chart let's look at Mini brand, which tops the list. The Mini brand maintains 52.5 percent of its sticker price over a three-year period. On the contrary, both Chevy and Suzuki only retains 42.2 percent of its sticker price over a three-year period.

Also higher residual values determine what your vehicle will be worth in about three years, according to the chart. So,if you have no plans on trading-in your ride and you plan on driving your ride until the wheels fall off, this list should have no bearing on your next car purchase.

Furthermore, insurance companies also use this information to determine how much your vehicle is worth in case the vehicle is stolen or declared a total loss. 

Roller-Coaster Gas Prices Affect More Than What's Paid at the Pump

Source: ALG

Today's fluctuating gas prices affect more than the price one pays at the pump. The roller-coaster gas prices can also affect the value of one's vehicle (or to put in plain terms what a used vehicle is worth). The latest study by Automotive Lease Guide, a data mining organization which predicts what one's car will be worth in the future, reveals that based on a $1 increase in gasoline prices small, fuel-efficient vehicles (ie. Ford Fiesta, Chevy Cruze, Honda Civic, Hyundai Elantra) are worth more, while the price of gas-guzzling size, SUVs and pick ups (ie., Cadillac Escalade, Ford F-150, Toyota Tundra)  prices fall as much as 10 percent. This should be no surprise to many who are in the market to either buy a vehicle or trade-in one.

Ironically, convertibles are less impacted by gas prices, as they are not typically daily drivers. Often, these are the second or even third vehicle within a household and are driven more for pleasure than daily use, according to the folks at Automotive Lease Guide. Also gas prices also affect the amount of incentives automakers and dealers place on the hood of new vehicles too. These days both large trucks and large SUVs have more incentives (ie., cash rebates, low-financing) than smaller, fuel-efficient vehicles. In fact, a number of new, smaller vehicles are rolling off the lots these days with minimal discounts, if any at all, from the dealer or manufacturer.