As automakers rein in production to contain costs, the projected residual value of today’s vehicles has risen significantly. The estimated, future residual values of Ford Motor Company and General Motors Company vehicles have created an opportunity for the Detroit automakers to be more competitive with their leasing options.
Lower incentives and the current shortage of used vehicles have also driven the residual value of Toyota Motor Sales U.S.A. and Honda Motor Company vehicles higher in recent months.
According to Automotive Lease Guide, residual values of Ford and GM vehicles averaged less than 40% just five years ago. The Guide projects that 2010 Ford and GM vehicles will retain more than 40% of their original sticker prices after three years. Automotive Lease Guide estimates the average residual value of 2010 Ford trucks to be 43.4% after three years. Ford cars are projected to retain 48.8% of their original value after 36 months.
In addition to Honda and Toyota, a number of other Asian automakers, including Hyundai, Mazda, Kia, Mitsubishi, Subaru and Mazda have also seen increases in the residual values of their autos.
Automotive Lease Guide’s residual values are projections of what a particular vehicle in average condition will be worth at auction at the conclusion of a 36-month lease and are expressed as a percentage of the auto’s original price.
Residual values for 2010 Toyota vehicles remain flat compared with five years ago, at 51% while the residual value of Honda autos rose 2.3 percentage points to 53.7% over the last five years.
While residual values for Ford and GM products have risen, Chrysler Group’s lack of new products has apparently kept its residual values low. Automotive Lease Guide’s chief economist Matt Traylen said new products are a key factor in strengthening residual values. . “New models always have a price bump. The average is a 7 or 8 percentage-point bump for an all-new model compared with the old one,” he said.
Chrysler’s 2010 vehicles have the auto industry’s lowest projected aggregate residual values; just 39.4% after three years and 2.1 percentage points lower than five years ago. For Dodge, however, the story is quite different. Excluding Ram trucks, the Dodge brand has seen residual values soar 8.2 percentage points to 41.8% over 36 months.
In recent years, residual prices for Detroit’s Big 3 automakers has been lower, when compared to their Asian and European counterparts, because of the higher incentives they offered. For consumers, that has typically translated into higher lease payments since a large percentage of lenders use the Auto Lease Guide’s projections when calculating their monthly lease payments.
According to Edmunds.com, Ford’s incentive spending in April was down an average of $359 per vehicle compared with a year earlier. Incentive spending for General Motors and Chrysler was down $769 and $1,053 respectively.
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