Did you see the disparity in resale/residual values between American and Japanese makes as reported in the WSJ earlier this week?
November 11, 2003
Will Your SUV Hold Its Value?
In New Study, Big U.S. Models Lose Ground
To Japanese: Toyota Tundra vs. Dodge Ram
By KAREN LUNDEGAARD
Staff Reporter of THE WALL STREET JOURNAL
In a new study of how well car values hold up, General Motors Corp., Ford Motor Co. and DaimlerChryslerAG's Chrysler Group are losing even more ground to the major Japanese and European brands.
The biggest surprises were in areas once dominated by Detroit: big SUVs and pickup trucks. In those key categories, the new study projects that Japanese brands such as Honda Motor Co., Toyota Motor Corp. and Nissan MotorCo. will have better resale values after three years than competing U.S. brands such as Chevrolet, Ford and Dodge.
Indeed, the top-ranked vehicles in four categories of SUVs and two categories of pickups were all imports. The best full-size pickup according to the study? The Toyota Tundra. Its worst? The Dodge Ram 1500. While it took Japanese auto makers awhile to understand minivans, they now control the category in terms of projected resale value, accounting for the top three models -- Honda Odyssey, Toyota Sienna and Nissan Quest.
The study was released Monday by Automotive Lease Guide, whose figures are widely used by banks and finance companies to set prices for leases. The lower the resale value, the higher the monthly lease payment.
....
Discounts are a big reason for the disparities in resale values. "Three years ago the incentives were nonexistent on full-size SUVs and trucks," says Raj Sundaram, president of Automotive Lease Guide. Today, they typically exceed $3,000. While such incentives have helped propel a period of extremely strong sales for car makers, they have hurt domestic brand models when the time comes to trade them in.
Residual values, the term often used for projected resale figures, take into account a long list of factors including how long a vehicle sits in a showroom before it is sold, what it sells for compared with its asking price, production levels and quality.
General Motors, whose brands such as Chevrolet, Saturn and Cadillac ranked below industry averages, said residual values are often misinterpreted. Residuals are based on a vehicle's asking price, not its selling price, so in this incentive-heavy era, domestics will of course be hurt in such rankings.
Comment: What that tells you is that the domestics create an artificially high sticker price (I call it a fake price) and then give you a "deal" by offering many thousands off that price. The used car market sees through that to what the cars are really worth.
Some examples:
Honda Accord
MSRP 23760
After 3 years 12875
vs.
Dodge Intrepid
MSRP 23495
After 3 years 7200
Toyota Sequoia
MSRP 35695
After 3 years 21075
Ford Excursion
MSRP 42065
After 3 years 16375
Consumers have caught on to the fact that the true "cost" of the car is not the price the dealer charges or even the price you pay; it's the difference between the cost you pay now and the price you sell it for when you get rid of it, divided by the number of years you have it. Using the Sequoia/Excursion comparison above, the Sequoia costs less than 5K per year for the first three years of depreciation; the Excursion costs nearly 9K per year. And most drivers rate the Sequoia as a better vehicle to drive. |
