Used vehicle pricing is a great example of the law of supply and demand. Vehicles that depreciate rapidly have a much greater supply than demand which obviously puts downward pressure on their pricing. They are readily available and not highly sought after, so essentially the only way to make them sought after – create demand – is to make the price overwhelmingly attractive. A 2006 Chevrolet Impala LTZ and a 2006 Honda Accord V-6 comparably equipped each cost about $25,000 when new. Today, about two years down the road the Accord is worth $4,000 more than the Impala.
Primarily because of fleet sales (sales to rental car agencies in particular) and heavily incentivized leases, there are many more Impalas returning to the market and little demand compared to the comparable Honda. The only way for the Impala to compete for the hearts, and dollars, of the retail consumers is to be priced significantly lower than the comparable Honda. A$4,000 savings can be very enticing for someone just looking for basic transportation.
The worst performing vehicles in terms of retaining value as used vehicles tend to be the domestic vehicles that are highly incentivized when new (they need to be in order to create demand vs. their more popular import competitors) and those with large fleet sales. Cars like the Chrysler Sebring, Chevy Malibu, Ford Taurus, vans like the Ford Freestyle, Chevy Uplander, Dodge Grand Caravan, and SUVs like the Chevy Trailblazer, Ford Explorer, and Dodge Durango are good examples. Compare a Ford Freestyle with a comparable Honda Odyssey or a Chevy Trailblazer with a comparable Toyota Highlander and you will see what I mean.
