Depreciation is the single biggest cost of owning a vehicle, as it measures a car’s loss in value during the time you own it. In reality, it is what the car ultimately costs you. That’s why it’s important to have some idea of how well a car holds its value before you buy.
In making their predictions, value experts at Kelley Blue Book take into account a long list of factors. Among them: the past history of a given model or brand, how good the car is compared to its competitors, and how many competitors there are.
They also have to keep an eye on carmakers’ future plans. For instance, KBB predicts that small cars will begin losing their value faster than they have in the past. That’s because in order to meet new government fuel economy standards, automakers will be producing larger amounts of more efficient small cars at a low price — creating stiffer competition for used small cars down the road. However, larger models like the Taurus should continue to do well, because whatever the government says — American drivers have shown they still want big cars.