The recent news that Chrysler may merge with General Motors didn't come as a surprise to many, as Chrysler has been struggling for years. It can't negotiate a deal with GM fast enough to save it from going under, in large part because its poor-performing vehicles are a drag on overall sales.
It therefore shouldn't come as any surprise that when the performance of cars is examined according to their predicted reliability, recalls and rate of depreciation, Chrysler vehicles dominate the list of the poorest performers, with seven of the 10 models on our list. All the vehicles have multiple recalls, ranging from airbags to door latches, along with mediocre resale values and bottom-level reliability scores for market-research groups.
Owners of the current-model-year Dodge Avenger, for example, have had to deal with six recalls. The depreciation and true market value of Avenger only ranks at two stars (out of a possible five) in the Automotive Leasing Guide, which provides depreciation estimates for use in the automotive financing industry.
And experts see no signs of Chrysler making quality improvements across the board, because the company currently lacks the financial resources to do so. It also remains unclear if the company has the means to hang on until auto sales revive.
"I'm not sure Chrysler can weather the storm as an individual company," says Dan Edmunds, director of vehicle testing at Edmunds.com.
It's an entirely different story, however, for the two Japanese auto giants, Toyota and Honda. The best-performing cars, according to our rankings, are all made by these two carmakers, with Toyota claiming six spots and Honda four in the top 10.
In the sixth spot is the immensely popular Honda Accord. It earned the highest Insurance Institute Highway Safety crash test ratings, its predicted reliability is high and there are no recalls so far this year.
"Honda's manufacturing quality is strong, and the consumer's perception of quality is also strong," says Jonathan Banks, senior director of consulting services for Automotive Leasing Guide.
Behind the Numbers
To compile our list of 2008 best- and worst-performing cars, we looked at five factors, all pertaining to 2008 model-year vehicles: the number of recalls to date, according to the National Highway Traffic Safety Administration (NHTSA) database; reliability ratings from Consumer Reports; depreciation, in the form of Automotive Leasing Guide's (ALG) star ratings; safety from the Insurance Institute for Highway Safety (IIHS) crash test ratings; and fuel economy and annual fuel costs from the U.S. Environmental Protection Agency.
Fuel costs were based on AAA's national regular gas price of $2.42 and unleaded at $2.60.
Aside from a standout number of recalls, we looked specifically for below-average reliability, high depreciation and IIHS results of "marginal" or "poor" for worst performers. Of the vehicles that met at least two of these qualifications, we also looked at other factors, such as fuel efficiency and fuel cost per year of ownership, assuming 15,000 miles driven per year.
Leading the Pack
Just as Chrysler dominates the bottom of the list, Toyota reigns at the top, with six vehicles that have among the highest resale values and best reliability scores. And all of the top 10 are among the most fuel-efficient cars and SUVs on the road.
The fuel-efficient Toyota Prius hybrid tops the list with an "excellent" reliability rating, no recalls and a five-star-rated resale value. It has the highest fuel economy (1.61 km per litre) and the lowest annual fuel cost of any car on the list ($789).
Another top performer is Toyota's Scion xD , a hatchback introduced in the 2008 model year as a replacement to the xA hatchback. The xD has an "excellent" reliability rating, no recalls and good fuel economy (1.62 km per litre).
While the Scion is a solid performer, however, it isn't perfect. It earned an "acceptable" (second-highest) frontal crash-test rating but did score a "good" rating (highest) in side- and rear-impact crash tests. Also, its resale value is an average three stars.
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While there are no similar cars from U.S. automakers on the top half of the list, there are bright spots for 2009 and beyond, as GM and Ford Motor both plan to bring more fuel-efficient, nicely equipped small cars like the Chevrolet Cruze and Ford Festiva to the U.S. from other countries.
"There are things in the pipeline," says Edmunds, at least for those two companies. "I just don't know if Chrysler will be around to do it."
Trailing the Pack
Chrysler has carved out for itself a big space on our list of poor-performing cars, but the automaker has plenty of company.
When gas prices topped $4 a gallon this summer, consumers dropped gas-guzzling SUVs like the Nissan Xterra (1.6 km per litre), as sales plummeted 29.1% from January to October, compared with same period in 2007. The Xterra falls to sixth place among the worst-performing vehicles, as there have been three recalls on the car so far this year, not to mention its below-average performance in crash ratings in side (marginal) and rear (poor) tests, as well as its mediocre three-star resale value.
The Xterra's sales drop can't be chalked up to a general anti-SUV sentiment either, as the smaller Toyota Rav-4 rated fourth among best-performing cars and the Honda CR-V came in fifth. Unlike the Xterra, both cars deliver on fuel economy and resale value.
With the 2009 model year now in full swing (it kicked off Oct. 1), the 2008 model-year cars still sitting on dealer lots are loaded with incentives to make them more appealing to consumers. Chances are, says Banks, many poor-performing vehicles are among the ones with the highest incentives. But while you may save with a lower transaction price now, on a year-end deal, you're likely to be paying for it later.
"If it has a one- or two-star resale value, then it's not a great quality car," says Banks. "If it has a lot of recalls, then you may spend a lot of time in the repair shop. And when the vehicle warranty ends, you may face high repair costs."
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