The 2010 Toyota Prius
Despite lower residual estimates for the fuel-efficient segments and a drop in overall brand value of 3.9 percentage points from 2009, Toyota still takes the 2010 award for Best Resale Value: Brand.
“Values in the compact, fuel-efficient segment dropped severely, which hit Toyota, known for fuel efficiency, quite hard,” said Eric Ibara, director of residual consulting for Kelley Blue Book. “While the Yaris, Corolla and Matrix residuals are down double digits from 2009, the brand was given a boost by its versatile line-up—residuals in the truck segment were up 2 to 3 percentage points year-over-year, helping the brand to maintain value leadership.”
Crowded Compact Market Casts Shadow on Past Winners
While popularity of small, fuel-efficient vehicles peaked last year when prices at the pump skyrocketed to more than $5 a gallon in some areas of the country, the significant drop in per-gallon prices below $3 has slowed demand. Crowding in this segment is expected to occur with the introduction of new models to meet both the rush in consumer demand when gas prices were pinching wallets in 2009 and CAFE standards. This plethora of consumer choices in is a major contributor to the drop in residuals in this segment. Kelley Blue Book forecasts stabilization in fuel prices and an increase in the number of vehicles in the segment. Manufacturers with several 2010 products concentrated in the uel-efficient segment suffered and can expect a stiff competition in the years to come.
Honda is one of the brands affected by the overcrowded compact segment. It won the top spot as Best Resale Value: Brand for both the 2007 and 2009 model years; however, Honda’s 2010 models have dipped down by 6.5 percentage points to 38 percent. With heavy competition in the compact market, a majority of this drop can be attributed to the double-digit declines for the brand’s Fit and Civic models of 15 and 14.5 percent points, respectively. Even with declines across the industry, these reductions in residual values have only pushed Honda down to third place behind winners Lexus and Toyota. Brand perception and quality for Honda products still rank high across the board.
The Best Resale Value: Brand winner in 2008, Volkswagen, also has seen values drop 8.5 percentage points year-over-year due to a drop in the car segment. The Beetle (32.5 percent), Jetta (32.0 percent), and EOS (37.0 percent) are major contributors to the brand’s drop from Best Resale Value: Brand in 2008 to 14th place among all brands in the 2010 standings. Volkswagen’s projected residual values are above the industry average. The overall decline was due in part to the aging of their product line. The Beetle was last redesigned in 1998 and the Jetta in 2005. As previously mentioned, the compact and subcompact sedan segments also are getting more crowded, which means it is more competitive to play in this market. Finally, the relatively high price of the EOS gives consumers some very competitive alternatives.
MINI, with its wildly successful Cooper, has maintained the highest residual value of any vehicle since it came to the U.S. market in 2002. However, its value is also being hampered by gas prices and competition. The brand is down nearly 13 points year-over over year to a 45.9 percent 60-month residual, but still would have won Best Resale Value: Brand if it offered more than four nameplates. The only two MINI models sold in the United States, the Cooper and Cooper Clubman, both rank among the Top 10 vehicles with highest residual values for 2010. MINI has achieved high residual values every year, a significant accomplishment given its strategy of appealing to young customers looking for a cool car.
“Kelley Blue Book expects to see a lot more vehicles introduced into the compact and subcompact segments in the coming years, along with more hybrids. All of the forecasts we’ve reviewed show oil holding steady at $90 a barrel over the next five years,” said Ibara. “That being said, we do not expect the demand for fuel-efficient vehicles to match the increase in models and volume in the compact segment as long as gas prices remain under $4 a gallon. With softer demand, manufacturers may look to implement incentive programs to assist in depleting inventory.”
Another avenue already being pursued by many of the manufacturers is improving fuel efficiency through technology. As an example, the 2010 Camaro V6 puts out more horsepower than the original 327 cubic inch V8, and almost as much horsepower as the 1967 V8 SS. The 2010 Taurus SHO is equipped with a 3.5L EcoBoost engine with an output of 365 horsepower and gets 28 mpg on the highway. Kelley Blue Book expects more diesel engines to play a role in bringing larger, yet more fuel-efficient cars to U.S. roads, although American consumers may need to be convinced that these clean-burning, fuel-efficient engines are not the diesels of 30 years ago.
Another solution to this issue of a crowded compact market may be that some manufacturers will pay the fines that come along with not meeting CAFE and continue to build vehicles that are in demand and compete better in the market. This decision will depend on the pricing and the mix of vehicles each manufacturer brings to bear.
Residual values of vehicles produced by the domestic automakers saw an uptick versus last year. With several new-model launches from the domestics and the strength in the truck market compared to last year, each of the Detroit Three have vehicles with exceptional resale value.
|General Motors Brands||31.3||29.5|
Ford Motor Company
Ford, the only domestic auto manufacturer not to partake in bailout funds from the Federal government, seems to be in a good position from both a cash-flow perspective and now positive projected resale values. On the strength of the truck and SUV market, the Ford brand gained 2.4 points from last year reaching a 32.8 percent brand average. Ford went from being ranked 25th in resale value among all brands last year to 12th this year. The Blue Oval also saw a lift due to redesigns of popular products such as the Mustang and the Taurus.
Other Ford brands including Lincoln and Mercury did little to lift the Ford brands’ future values. A rise in both of Lincoln’s SUVs, Navigator and MKX, helped to offset the heavy downward pull of the Town Car value, ending mostly flat year-over-year with a brand average of 27.1 percent. Mercury dropped 4.1 percentage points to a 28.1 percent projected residual average for 2010. The Mercury brand’s decrease was due in part to the aging Mercury Marquis.
General Motors went from nine brands to four in just the last five years. Despite the last tumultuous year, General Motors increased its combined residual average of the four remaining brands to 31.3 percent, up 1.8 percentage points from last year.
The now-defunct brands, Hummer, Saab, Ponitac and Saturn, were at 32.4 percent last year. Those brands have a 2010 average residual value of 27.7 percent, an immediate year-over-year drop of 4.7 percentage points.
|BRAND||RESIDUAL AVERAGE PERCENTAGE||CHANGE YOY|
After emerging from bankruptcy, Chrysler struck a deal with Fiat and introduced the possibility of bringing some of Fiat’s smaller European designs to the United States under the Chrysler group. However, the uncertainty of those future product plans and vehicle designs have cast a shadow over the future values of new Chrysler products. With no new redesigned Chrysler products for 2010, and an uncertain product future, the company’s overall residual average for 2010 comes in at 29.5 percent.
Bankruptcy/ Defunct Brands
Kelley Blue Book reports that the bankruptcy filings themselves had little impact on residual and used car values. In fact, kbb.com observed an increase in Web site traffic for General Motors and Chrysler vehicles during the bankruptcy filings, finding consumers primarily interested in finding a good deal and not necessarily resale value, servicing or warranties down the road. Bankruptcy has left two brands in its wake so far; Pontiac and Saturn. Both of these brands are projected to meet different fates. Kelley Blue Book already is seeing other GM dealers buying used Pontiacs at auction, helping the brand to maintain its values. Pontiac’s projected 2010 residual average for remaining products comes in at 25.6 percent.