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 America's Most Overpriced Cars
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America's Most Overpriced Cars
Hannah Elliott, 07.01.09, 4:00 PM ET
These days, car buyers have the upper hand when they walk into the showroom. They have access to dealer invoice prices and day supply data on the Internet--not to mention a recession that has spurred lowest-ever financing deals and unprecedented cash-back incentives.
But that doesn't mean every vehicle is a bargain; plenty are still overpriced. Right now, according to Vincentric, a firm that tracks vehicle ownership costs for the auto industry, several cars on sale now have market values far below their manufacturer's suggested retail price.
In Depth: America's Most Overpriced Cars
The Jeep Liberty, for example, has a true market value 20.9% lower than its MSRP; the Dodge Ram 2500 is worth 26% less; and the Chevrolet Trailblazer is worth 16.4% less than its MSRP.
Those three models, in particular, tell the story of the most overpriced autos currently on the market: Our entire list is comprised of vehicles manufactured by Detroit's Big Three. No foreign brands make the list, as those automakers' cars tend to be priced fairly when considering supply and demand as well as their high rankings on consumer-satisfaction surveys.
Behind the Numbers
To find America's most overpriced vehicles, we first looked at market price figures supplied by Vincentric. These are updated each month to reflect marketplace inventory, demand, rebates and incentives, and to represent the price that a buyer typically pays. We ruled out any vehicles where the gap between market price and MSRP was less than 10%--a natural breaking point in the data that left a list of about 150 overpriced vehicles to pare down.
We then used two pieces of customer-satisfaction information to better determine whether certain vehicles meet the expectations their brands promise--essentially, whether they justify their sticker price.
We used J.D. Power's 2008 Automotive Performance, Execution and Layout (APEAL) survey results, and ruled out vehicles that won their segments or scored better than two-and-a-half stars out of five: Any vehicle that scores less than 50% is likely not delivering on the thousands a consumer must shell out to buy it.
The list was further shortened by Consumer Reports' Owner Satisfaction results, data from a survey that asks owners--considering a wide range of factors, including price--whether they would buy a particular car again. Vehicles that scored less than 50 (on a scale of 100) made our list. We then ranked the remaining 15 vehicles by the amount overpriced (the difference between market price and MSRP).
The three most overpriced cars are the Dodge Ram pickup (worth 26% less than its MSRP), Mercury Grand Marquis (worth 21.4% less) and Jeep Liberty (worth 20.9% less).
Close the Gap
When it comes to the price of a car, the most important factor to consider is market value vs. MSRP, says Dave Freed, a managing partner for Vincentric. Even big cash rebates or 0% financing won't ensure you're getting the best deal on the lot, he says, and Vincentric's true-value information should give you a sense of how tough a negotiator you can be.
After that, research the top factors that cause a price to balloon out of proportion: availability, depreciation and gas prices. These points, in particular, are why American-made models comprise our entire list. Fleet sales and overproduction by GM and Chrysler has led to a dilution of resale value--and to dealers' lots overflowing with identical models. The Dodge Nitro is one of the worst offenders of this, according to Ward's, an automotive data and analysis firm.
Some cars tend to be overpriced partly because of their weakened brand image, which can lead to poor resale value. Vehicles that have this problem include the $17,430 GMC Canyon pickup truck, which has a resale value of 11.9% less than its MSRP; as well as GMC Envoy, with a resale value of 16.1% less than its MSRP. "Where you might pay a higher price for a Honda Civic, you get it back at the end because it has a high resale value," says David Zoia, the editorial director for Ward's.
Lack of Luxury
While luxury vehicles cost thousands more than their non-luxury counterparts, none made our list. They all invariably receive extremely high satisfaction rates and APEAL scores. A Mercedes-Benz CL550 may cost a lot ($107,900 to be exact), and the E-Class costs a more reasonable $48,000, but the people who drive these cars think they're worth the price. It doesn't hurt that Mercedes keeps a tight rein on production levels too--you won't see a CL550 at your local Enterprise office anytime soon.
The $29,270 Mercury Grand Marquis sedan, however, is one to watch. Its market value is 21.4% lower than its MSRP, and it received low APEAL (2) and satisfaction (43) scores as well. So someone with her heart set on this vehicle shouldn't--in theory--pay more than roughly $23,000.
The Grand Marquis is the victim of a general move in the market away from larger, heavier sedans, says James Clark, general manager of Automotive Lease Guide, a California company that compiles automotive residual values. Those cars get worse gas mileage and cost more to insure, meaning they cost more to own in the long run. Similarly, U.S. consumers' move away from trucks and SUVs--also prominent on our list--has driven down those vehicles' true market values as well.
"It's a shift that we've experienced this past year due to the high gas prices we had last summer," says Clark. "With trucks and SUVs, a lot of those are showing up at the top of the list in terms of the highest cost to own."
Forbes.com
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