Romina Eaton’s 2015 Volkswagen Jetta runs strong, but after she makes the final car payment this year, she won’t have any regrets about trading it in for a new model.
“I’m looking for a vehicle that’s more capable in winter since I had trouble getting to work this past season,” Eaton says, adding that she has to watch the bottom line. “Price is always a factor, but the total cost of ownership over the long term is paramount.”Vehicle depreciation has become part of her decision process, knowing that cars that lose their value quickly can impact the household budget. The pain comes into focus when shoppers visit a dealer to buy a new car and learn just how little their present vehicle is worth.
Many consumers don’t know that the single largest new-car expense is depreciation, the invisible menace that erodes the value of their vehicle. Determining which models maintain their value well is the specialty of Canadian Black Book (CBB), the country’s go-to automotive data and analytics provider for the past 60 years.
To help steer car shoppers towards the brands and models that hold their value well, CBB established its annual Best Retained Value Awards 15 years ago. The firm tracks the valuations of four-year-old used vehicles at wholesale auctions in Canada and compares those values to their original sticker price.
Last fall’s data revealed 2017-model-year vehicles were fetching an average 64 per cent of their original price at auction, up substantially from 52 per cent just two years ago – thanks to the COVID-19 pandemic that sparked supply-chain turmoil, which in turn led to unprecedented demand for used vehicles as new-vehicle inventories dried up.
Having perfected its data collection to find which automotive brands preserve their value best – last year it was Honda for cars, GMC for trucks and Porsche for luxury models – CBB is now trying its hand at forecasting residual values four years into the future.
“We’ve got our leading analytics tools and we know the Canadian auto market best, so it was time to take the next logical step by establishing our first-ever Canadian Black Book Residual Value Awards,” says James Hancock, CBB’s director of OEM strategy and analytics.
To produce solid forecasts, Hancock says the process is 80 per cent data-driven and 20 per cent “art.” Typical data collected by CBB includes wholesale auction prices, manufacturers’ info, auto loan data, as well as macroeconomic indicators such as consumer confidence, exchange rates, and forecasts for fuel prices, inflation and interest rates.
The art side of the equation involves more subjective qualities, such as vehicle design and innovations that CBB editors take the time to assess by “touch and feel,” according to Hancock. The approach is especially helpful for all-new models and nameplates that didn’t even exist a year ago.
“The historical data doesn’t rate alone. We examine consumer wants and whether the new models deliver. We try to capture the unknowables,” explains Hancock. A case in point is the all-new Ioniq 5 electric vehicle (EV) introduced by Hyundai.
“There’s enough intelligence gathered regarding EVs and what consumers want – useable range of 350 to 500 kilometres on a full charge, for example – that we can produce a forecast,” he says. As a result the Ioniq 5 clinched first place in the EV SUV Below $45K category, the first time Hyundai has ever earned a CBB award.
The overall brand winner for best residual values in cars is Toyota; in SUV/trucks it’s Cadillac; in the luxury segment it’s Lexus; in zero-emission vehicle it’s Kia; and for “most improved” it’s Cadillac. Hancock confirms there’s a close correlation between product quality and residual value.
“Historically, Hyundai and Kia have not scored well in our Retained Value Awards,” he says. However, Kia did win the most improved award last year, recognizing that the automaker and its corporate cousin, Hyundai, have made great strides in vehicle quality in recent years. What the Residual Value Awards reveal is that the two South Korean automakers are driving the EV transformation in the Canadian market.
“We have put so much more emphasis on EV categories – growth in EV options and consumer acceptance are hugely influencing today and tomorrow’s market,” Hancock says.
The Residual Value Awards offer no less than four categories in the zero-emissions vehicle segment. The electric Kia Soul wins for best EV Car Under $45K; Volvo’s Polestar 2 wins in the Above $45K category, while the Ioniq 5 wins best EV SUV Under $45K and the electric Volvo XC40 wins the higher price category.
Not surprisingly, the two Canadian Black Book awards programs are inextricably related. For example, the Toyota Tacoma won for Retained Value last year and wins this year’s Residual Value Award in the small pickup category, and has the highest residual value forecast of all models. The Chevrolet Corvette, which took top spot in the luxury sport car category, rated second-highest in expected residual value.
While it’s never easy predicting anything – such as the upcoming weekend weather – for automobile shoppers like Romina Eaton who have an appreciation for depreciation, it may very well be advantageous to pay attention to Canadian Black Book’s newest crystal-ball analytics.
2022 Canadian Black Book Residual Value Award Winners
Overall Brand Awards
Zero-Emissions Vehicle: Kia
Most Improved: Cadillac
Main: Toyota Camry
Luxury: Lexus IS Series
Prestige: Lexus LS 500
Sport Car Awards
Main: Toyota GR Supra
Luxury: Chevrolet Corvette
Sub-Compact/Compact: GMC Terrain
Mid/Full-Size: Ford Bronco
Luxury: Cadillac Escalade
Pickup Truck Awards
Small: Toyota Tacoma
Full-Size: RAM 2500
Commercial Van Awards
Compact: Ford Transit
Full-Size: Chevrolet Express
Zero-Emissions Vehicle Awards
EV Car Below $45K: Kia Soul
EV Car Above $45K: Polestar 2
EV SUV Below $45K: Hyundai Ioniq 5
EV SUV Above $45K: Volvo XC40