August 24, 2006 It doesn't matter what you call it – residual value, retained value, depreciated value – it's the key variable in the cost of ownership of any car and it would be folly to purchase any vehicle over another without first investigating the amount of money you're likely to get for it when you sell it. Lex is the UK's largest contract hire provider of company cars and vans, owning a fleet of 180,000 cars and vans and supplying over 20,000 businesses across the UK, including two thirds of the FT-SE 100 companies. Given such a rich database of information, each year it compiles a list of the ten vehicles with the greatest retained value after three years and 60,000 miles on the road. Traditionally, the Porsche Boxter is the car to beat, winning the title of the highest retained value (54% last year) four years in a row, from 2002 (results), 2003 (results), 2004 (results) and 2005. Last year the German manufacturers had a clean sweep of the top 10 with an amazing six BMWs, two Mercs and two Porsches beating out all other nationalities of manufacturer. This year Lex has produced its first-ever Top 10 residuals list for cars in three price sectors - below UKP15,000, UKP15,000 to 30,000 and above UKP30,000. The results underline the wide choice of vehicles available to today's company car drivers and show that style, individuality and build quality are now the key factors in enabling a car to retain its value. German cars are still strong, but Japanese, English and Swedish manufacturers are also now well represented.
Using a typical three year/20,000 mile per annum contract, Lex looked at the cars which it believes will be the most attractive used car proposition across three price sectors – under £15,000, £15,000-£30,000 and £30,000-plus.
In the Under £15,000 sector, trendy, funky cars are dominant, with the popular MINI at the top of the pile, and the Honda FRV proving the top choice for family transport.
In the £15,000-£30,000 group head-turners such as the Audi Cabriolet and Mercedes SLK are favourites, with the ever-present BMW 3-Series in third spot. Volvo's C70 makes the charts for the first time, along with a couple of 'first foot on the ladder' 4x4s – the Honda CR-V and Toyota RAV4 - and the mighty Toyota Landcruiser, proving that practicality combined with style is a winning combination.
The Mercedes SLK is king in the over £30,000 sector, and the rest of this group is a mouth-watering mix of all-out sports cars and grand tourers such as the Porsche Cayman and Jaguar XK and top of the range 4x4s - demonstrating the increasing popularity of off-roaders, despite their 'gas guzzler' label. The Porsche Boxster that has topped the residuals league in past Lex surveys creeps in this sector at number 10.
Jon Walden, managing director of Lex, which runs a fleet of 180,000 vehicles, said, "More than ever before, company car drivers are taking the opportunity to go for a car which suits their lifestyle. This means a varied group of cars enter the used market three years down the road, and buyers find them equally appealing and are willing to pay good money for them. Stronger residual values mean less depreciation, and lower monthly costs, a rule that applies to private buyers just as much as company car drivers."
Used car buyers respond to build quality and reliability, but exclusivity is great news for residual values, and the reason that expensive cars have dominated previous Top Ten lists. Analysing the lower priced sectors highlights that new models, and cars in short supply have the strongest residual values. Brand new models take time to work their way into the used car market, and are a great way for buyers to ensure they get the best return on their new car when they sell in three years time.
"Previously we've produced just one residual Top Ten list, and when you don't analyse individual sectors, the upmarket cars tend to dominate – as we saw in 2005 when all the top ten places were taken by aspirational German models," said Walden.
"By looking at the top ten performers in three individual price sectors we can see much more accurately which are the 'wise buys' for all budgets. German cars are still strong, but Japanese, English and Swedish manufacturers are also now well represented."
The 2005 Survey
German cars dominated the Lex used car survey in 2005 with values calculated from a nationwide (UK) fleet of 123,000 vehicles. All 10 places in the survey were taken up by German manufacturers with the Boxster topping the list for the fourth successive year. After three years and 60,000 miles - a typical annual company car age and mileage - the Porsche Boxster was calculated to be worth 54% or £19950 of its original cost new. The BMW Z4 and X3 were joined in joint second place by the MINI, while the X5 came in at number five. Given that the MINI is a BMW brand, the BMW marque had every right to feel pleased with itself, scoring five of the top six placings, and six of the top eight placings across all cars. Cars dropping out of the 2004 top 10 and indeed the top 20 included the Beetle Cabriolet, Lexus SC430, Mazda RX8 and Audi Cabriolet.
The 2004 Survey
The Porsche Boxster won the accolade for the third year in a row with values calculated from a nationwide (UK) fleet of 120,000 vehicles. Lex calculated the Boxster to be worth 60% of its original purchase price after three years and 60,000 miles - a typical company car age and mileage - more than any other car on its books. That meant a typical 2.7 litre Boxster would be worth around £19,000 after a three-year period, a figure, which was remarkable considering the car, had been available for eight years in the UK at that time. Second and third in the Lex top 10 were the BMW Z4 and X3 4x4.
'The Boxster has the all important Porsche badge on the front which is important for user choosers, but the restricted number of vehicles sold each year and the affordability for the entry level 2.7 litre model has made it hugely popular both new and used,' explained Steve Jones, Pricing Manager at Lex Vehicle Leasing. 'The same goes for both the Z4 and X3. Both cars are new to the market, the Z4 has already made a big impact in the sports car sector and the X3 looks like a smaller version of the X5 and already has a strong order bank. Both cars are in high demand and supply is relatively limited so appeal both new and used is very high,' he added. Fourth on the list was the Mercedes CLK, which had not been outside the top 10 over the previous three years. Two new entries onto the list were the Mazda RX8 and the Audi Cabriolet.
The 2003 Survey
The Porsche Boxster retained its position as the car that depreciates slower than any other three-year old car based on calculations over the Lex Vehicle Leasing fleet of 97,000 vehicles. In a survey of the residual values of thousands of cars covering a typical annual mileage of 60,000 miles, the Boxster was worth £18,000, or 57% of its original cost new. Coupes and 4x4s led the way in this survey with seven making an appearance in the top 10, while the Audi TT, Jaguar X-Type and BMW 3 Series were among the cars that dropped off the list.
In second and third places respectively were the Mercedes CLK and SLK, reinforcing the German car maker's reputation for stylish sports cars, and superb build quality. The highest new entry for the year was the Volvo XC90, which had already sold out its 2003 dealer allocation, while the Land Rover Defender moved up two places to number five.
'The Porsche maintains its desirability in the second hand market; despite the earliest examples dating back to 1996, nothing else can offer that combination of stunning good looks, super-car badge and Teutonic reliability. The introduction of the latest CLK gives a strong premium over the outgoing model, as used buyers will be keen to snap up the first second-hand examples' explained Steve Jones, Pricing Manager at Lex Vehicle Leasing. Two new VWs, the Beetle Convertible and re-styled Polo appeared for the first time at number six and seven, while the Mercedes E-Class made its debut on the list at number eight.
The 2002 Survey
Three door Coupes and sports cars were the lowest depreciating company cars on UK roads according to the Lex Vehicle Leasing Residual calculations. Lex identified that seven out of 10 fitted this description when researching the three-year old cars on its fleet with the strongest residual values, with the Porsche Boxster coming out at the top of the pile. In second place was the Honda S2000, while the Mercedes SLK and CLK follow close behind in third and fourth place.
'The Boxster is very desirable in that it is the first three year old Porsche that many motorists will have ever been able to afford. The Honda is quite rare and has a strong following, while demand for used Mercedes SLK and CLKs continue to outweigh supply, thus keeping residual values strong,' explained Steve Jones, pricing manager at Lex Vehicle Leasing. The first mainstream car on the list was the then recently launched Jaguar X-Type, while a surprising entry in seventh place was the Land Rover Defender.
'Strong residual values keep down whole-life costs whether you're buying or leasing; cars with good residuals are normally desirable, reliable and have a strong brand image. Lots of cars have a cheap purchase price, but will be disappointing when it's time to sell; choose well though and you'll have plenty of capital to put into your next car. Take the BMW 3-series – great looking, well put-together and with one of the best badges in the business – its buyers enjoy excellent residual values' explained Jones.
'For many the Defender is a surprise entry into the top 10, but year after year this car doesn't lose its appeal. Even at 10 years of age this car is usually worth more than 50% of its original list price, which reinforces the extraordinary strength of the Land Rover brand and this four wheel drive workhorse.' he added.