The most significant cost of owning a new vehicle comes down to depreciation. That means every buyer could benefit from knowing which makes and models will hold their value the best.
Luckily, we have the research team at J.D. Power and ALG to share their expert findings. ALG’s Residual Value Awards recognize vehicles in 29 segments that are forecast to retain the highest percentage of their Manufacturer’s Suggested Retail Price (MSRP) after three years. ALG is known for its automotive lease guides and forecasted values of vehicles in the industry. J.D. Power acquired ALG in late 2020.
We spoke with Eric Lyman, the vice president of ALG, to get the scoop on the 2021 Residual Value Awards. He outlined the hottest new vehicles on this year’s list. The 21st annual awards showcase the highest quality, the most durable, and the 2021 model-year vehicles with the best reputation for NOT getting you stranded on the side of the road, Lyman said.
“Vehicle depreciation is the single highest factor in the cost of ownership, and it’s a concept most consumers don’t pay too much attention to. So, it’s a good topic for consumers to learn about,” Lyman said. “Considering depreciation is very important, it will ultimately impact how much money comes out of your pocket.”
Highlights from the 2021 Residual Value Awards
Mainstream Brand Winner: Subaru
Subaru is a perennial winner with many years at the top of the list. Their unique approach to all-wheel drive on each of their models has earned them an enthusiastic fan base who loves how well the vehicles drive in inclement road conditions. For years, the demand was almost higher than the brand’s supply, Lyman said.
“Subaru recently expanded their portfolio and have been able to grow without sacrificing their enthusiastic customer base,” he said. “They have been disciplined with their production, which is still in high demand, and that has allowed Subaru to eliminate discounting and cash rebates which preserves the high residual values. You have to find that sweet spot, so you’re not oversaturating the market.”
Premium Brand Winner: Lexus
As the luxury division of Toyota, Lexus has an excellent reputation for reliability and a lower cost of maintenance. While Lexus has always had a lot of volume, they focus on price points to drive that volume, which is basic supply and demand, Lyman said.
“Lexus offers their products at a discount to some of the other luxury European vehicles,” he said. “Because Lexus offers a lower upfront price, they have higher retention than the BMWs and Mercedes of the world. Lexus can leverage their reputation for quality and durability. With the lower price, Lexus represents a stronger value while still offering the technology and offerings you would expect in a luxury sedan.”
Passenger Car Subcompact Winner: MINI Cooper
This niche brand captivates the spirit of its customer base. Lyman said that customers love the character of the car and the ability to create an image with customization.
“To have a persona over your brand and sort of captivating your customer in that way is a great way to add value,” he said. “It’s a fun vehicle to drive. A lot of MINI owners build the vehicle exactly how they want it, to have its own personality. MINI owners are probably naming their vehicle too.”
Passenger Full-Size Winner: Dodge Charger
According to Lyman, Dodge flipped the script on the mainstay Charger to be about performance, aggressive looks, and horsepower – instead of just comfort.
“Dodge owns the full-size category in terms of performance,” he said. “They’ve carved out a niche. Their customers don’t seem to care too much about fuel economy since gas prices are low.”
Passenger Midsize Winner: Hyundai Sonata
This is a significant achievement for Hyundai this year since they’ve been in the market for decades trying to compete against mainstream Japanese brands. The Sonata is now beating out the Honda Accord and the Toyota Camry in this category for the first time, Lyman said.
“Hyundai has had high quality for many years but hasn’t gotten the recognition from the mainstream public like Honda or Toyota,” he said. “Sonata has truly arrived. This is a redesigned look. The newness causes a bigger look in residual value.”
Utility Premium Full-Size Winner: Cadillac Escalade
The Escalade is all-new this year, representing the latest in technology, styling, and design. The Escalade has always been a strong performer. It has the refinement but also has space, Lyman said.
“This is the modern iteration of the limousine. That image of people being chauffeured in an Escalade is what drives dollars,” he said. “The new styling for 2021 is very elegant but aggressive with the big, bold grill with menacing, glaring headlights. It has a certain, domineering presence, and consumers are loving it.”
Off-Road Utility Winner: Jeep Wrangler
The Wrangler wins year after year. It has an enthusiastic fan base, and no one is building a product quite like the Wrangler. The customization options reduce the amount of turnover because consumers are less inclined to resell a vehicle after they’ve made it their own, Lyman said.
“They say there’s two types: The ones who will buy a Wrangler and keep it forever. And the others who will only own it for a year,” he said. “The Wrangler isn’t the most comfortable or quiet. Some people are willing to put up with it, while others just want a quiet, commuter vehicle. The Wrangler has the enthusiasm all automakers want.”
Full-Size Pickup Truck Winner: Chevy Silverado HD
The Silverado was redesigned this year. It has excellent high-tech features, especially around towing and camera aids, Lyman said.
“This is a segment all about functionality,” he said. “They’ve really invested in features that make towing much easier for the driver.”
Minivan Winner: Honda Odyssey
The Odyssey and the Toyota Sienna typically see-saw on this award. Both have a consistent approach historically. Honda has more momentum on its side this year with power-folding doors and versatile space inside. You can take out all the seats and fit a 4×8 sheet of plywood and a 10-foot surfboard inside, Lyman said.
“The Honda Odyssey is unrivaled in flexibility and functionality,” he said. “If you think about a minivan, the durability, quality, and functionality are the most important. Honda has always had a high-quality vehicle and has always been an innovator in functionality.”
Full-Size Commercial Van Winner: Mercedes-Benz Sprinter
The Sprinter redesigns the full-size commercial vehicle. The Sprinter has been popular during the pandemic with the growing number of nomads and consumers who want a larger car to go camping in. Lyman said the 7-foot roof is tall enough for people to stand up inside – with enough room for a bed and all sorts of applications/customizations available to turn it into a camper van.
“There’s a crazy amount of interest in these Sprinter commercial vehicles,” he said. “People are using it for their personal life. Search for #vanlife. This is also the unofficial vehicle for surfers. San Diego parking lots are jam-packed with these Sprinter vans. Ski resort parking lots also are filled with Sprinters.”
Premium Electric Winner: Tesla Model Y
Tesla is a startup brand with lots of anticipation. The Tesla models are all doing well. If it weren’t the Y model, it would have been the Model 3 in this category. The Model Y has less supply and is a newer vehicle, so it’s in a hotter segment, and consumers like the hatchback utility vehicle – putting it in higher demand, Lyman said.
“Teslas are for early tech adopters and environmentally-minded people,” he said. “Even the SpaceX tie-in influences Tesla demand. With a personality figure like (Tesla Motors CEO) Elon Musk, Teslas are associated with a visionary. Some view it as a statement of American ingenuity and engineering in the automotive industry. Tesla is an innovative American brand supplanted by a lot of European luxury brands. It all contributes to an image.”
So, there you have it! If you’re buying a new vehicle in 2021, these makes, and models are the most likely to hold onto their value and maximize your hard-earned dollars. Happy shopping!