The Best Car DealAuto makers can give customers a deal in a variety of ways -- cash upfront, discounted interest rates, free gas cards. But the brands that are doing best in the U.S. market are those that offer buyers a payoff not at the time of purchase, but at trade-in time.

In its annual review of projected resale values for new models, due out later this week, Automotive Lease Guide ranks BMW, Lexus, Honda and Toyota at the top among major, high-volume auto-industry brands. These same four brands were the best last year, and the year before that. ALG ranks BMW and Lexus rank No. 1 and No. 2 among luxury brands in terms of projected resale value; Honda and Toyota are No. 1 and No. 2 among non-luxury, or mainstream, brands.

According to ALG's forecasts, a 2006 model BMW will hold 53.6% of its value after three years, on average. By contrast, ALG projects that a 2006 Jaguar, last place among the brands surveyed, will hold just 38.1% of its value after three years. The latest Honda models are projected to retain 53% of their sticker price after three years; at Buick, the last-place mass-market brand on ALG's survey, models are projected to hold 37.9% of their value on average.

Put another way, ALG is saying that if you pay $25,000 for a Honda, you should be able to get about $13,400 for it within three years at trade-in. But a $25,000 Buick will probably be worth just $9,475 -- a difference of $3,925.

Consumers are smart -- they're demanding a good chunk of that difference upfront. The evidence: The average rebate for a GM vehicle in November, according to Autodata estimates, is $2,715 more than the average Honda rebate.

The names at the top of ALG's projected-resale-value lists generally are among the brands that are holding or gaining share in a tough U.S. market. Despite their generous and heavily promoted red-tag sales and family-plan deals, General Motors and Ford are losing money and market share in the U.S. this year. Poor resale value -- and consumer awareness of that problem -- exacerbate their problems.

Chrysler outspent GM and Ford on discounts last month, according to Autodata. But Chrysler has managed to gain share, and make money, in large part because of well-designed, smartly promoted products such as the Chrysler 300 and the Hemi engine. But Chrysler faces challenges. The Chrysler brand was above average on ALG's 2005 projected resale list, with an average projected resale value of 43.9% But for 2006, ALG says the average among mainstream brands has gone up to 44.5% from 42.5% a year ago, and the Chrysler brand has slipped to 43.3%.

Resale value "has become one of the biggest competitive advantages," says Raj Sundaram, president of ALG.

ALG's forecasts for a car's residual value -- the value of the vehicle at the end of a lease -- guide a lot of finance companies when they structure terms for a lease. To oversimplify, if you want to offer a customer a three-year lease at $299 a month (a total of $10,764 in payments) it's a lot easier for manufacturer to do that if the $25,000 car in question is likely to be worth $13,400 when the three years are up than if it's only likely to be worth $9,475.

With interest rates rising, Mr. Sundaram says leasing will likely again become an attractive way to structure deals around the industry's magic monthly-payment price points ($299, $399, $499.) Without strong projected resale values, weak brands will likely get weaker and strong brands stronger.

This isn't just a Detroit problem. According to ALG, luxury brands with below-average projected resale values include Jaguar, Saab, Volvo and Audi. Among mainstream brands, Korea's Hyundai and Kia and Japan's Suzuki join Detroit names such as Ford, Chrysler, Chevrolet, Mercury, Dodge, Pontiac and Buick below the average 44.5% residual-value mark.

But the Detroit brands have a huge need to turn around the negative perceptions of their vehicles and pricing strategies, a bad impression that's creating a vicious cycle. Consumers expect Detroit cars to lose their value faster than a Honda or a BMW, so they demand bigger price breaks up front, which in turn drives down the future resale values of the Detroit brands.

Breaking this cycle is one of the main reasons GM, Ford and Chrysler have tried to wean buyers off big rebates by promoting "value pricing." Again, to oversimplify, all three companies are trying to launch new models with comparatively reduced sticker prices or more features in hopes that customers will perceive the vehicles as inherently good deals without another $4,000 in the glove box. So far, this effort isn't going so well: October and November sales for GM and Ford were dismal.

But Mr. Sundaram says there are signs that the industry's troubled brands can turn around resale-value problems if they deliver compelling, well-designed vehicles at rational prices and then stick to their guns.

Mr. Sundaram says GM's forthcoming generation of large SUVs, represented by the Chevy Tahoe, could be among the top three models in the large-SUV segment, with a projected residual value of 52% after three years. That's just behind the Toyota Sequoia, No. 1 in the large-SUV segment at 55% projected residual value. Mr. Sundaram's reasoning for giving a high mark to the new Tahoe: "It's a hell of an execution," even though the large-SUV segment as a whole is challenged by higher gas prices and slumping sales.

Paul Ballew, GM's executive director of market and industry analysis, says the relatively strong residual-value prediction for the new Tahoe is a good start, but adds that over time GM hopes to improve that model's performance. Overall, Mr. Ballew says, GM prefers to base calculations of likely resale value on transaction prices, not sticker prices as ALG does. But Mr. Ballew says "residual values are extremely important." To lift the performance at Buick, he says, GM is overhauling the brand's model lineup and intends to cut back on sales of Buicks to daily rental-car fleets -- a practice that pushes up market share in the short run, but generally pushes down resale values over the long haul.

Brands can rehabilitate themselves. Land Rover, for example, will be the No. 4 luxury brand for 2006 models, joining BMW, Lexus, Mercedes, Acura and Infiniti in the group of above-average luxury brands. In 2005, Land Rover was below average. The difference: Land Rover has a strong new model in the LR3, and the Ford brand slashed its average upfront discount in November by $2,027 to just $870 -- less than half BMW's $2,070 per vehicle level. (The industry-average discount in November was $2,363 a car, according to Autodata.)

Cadillac has also improved in recent years and is now just below average for 2006 model luxury brands. Good cars such as the CTS make a big difference. If Cadillac could just sort out the problems with its SRX crossover utility, they'd be at the average, Mr. Sundaram says.

The Ford Fusion midsize sedan will get a 46% residual rating, which is comparatively strong, Mr. Sundaram says.

The Big Three Detroit brands "are coming around -- they want to improve," he says, but adds that there's a problem: "The top guys are not necessarily making any mistakes."

2006 LUXURY RESIDUAL RANKINGS
Brand Residual
BMW 53.6%
Lexus 52.5%
Land Rover 51.2%
Mercedes Benz 50.8%
Acura 50.4%
Infiniti 50.0%
Luxury_Avg. 49.4%
Audi 48.7%
Cadillac 47.8%
Volvo 44.9%
Saab 43.8%
Lincoln 40.2%
Jaguar 38.1%
Source: Automotive Lease Guide

2006 MAINSTREAM RESIDUAL RANKINGS
Brand Residual
Honda 53.0%
Toyota 51.8%
Volkswagen 50.6%
Subaru 50.5%
Nissan 48.6%
Jeep 46.8%
Mazda 46.5%
Saturn 44.6%
GMC 44.6%
Average 44.5%
Chrysler 43.3%
Hyundai 42.9%
Pontiac 42.1%
Ford 41.8%
Chevrolet 41.7%
Mitsubishi 41.5%
Mercury 41.4%
Dodge 40.0%
Suzuki 38.2%
Kia 38.1%
Buick 37.9%
Source: Automotive Lease Guide