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Toyota Recall Already Denting Residuals, Resale Values

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2010 Toyota 4Runner Trail

2010 Toyota 4Runner Trail

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Some of the most respected companies that look at depreciation are predicting that Toyota (NYSE: TM) vehicles won't be worth as much as much as previously predicted when customers go to trade them a few years from now.

Yes, even the ones that aren't recalled. But how much they'll fall in value depends much on how well Toyota Motor Sales addresses the recall effort, sources agreed.

According to Automotive Leasing Guide spokesman Fernando Ubeda, the recall has already docked most Toyota products between a half and three-quarters of a percent in unrecoverable long-term value.

"So far the adjustments aren't very dramatic," Ubeda told "What's really going to affect values in the long term is how well Toyota approaches the recall."

Between the Toyota quality issues and the initial hit due to this recall, Ubeda says that Toyota products could potentially take up to a three-point reduction in their three-year residual. That could, for Toyota's more expensive products, like the 2010 Toyota Highlander, Sequoia, or Avalon, amount to more than $1,000 in the long run for those who plan to keep their vehicle for just a few years.

ALG had already adjusted Toyota values downward by about a percent across the board because the firm has seen that recent quality survey results—including the ALG's Perceived Quality Score—had started to affect the brand's reputation.

From an internal survey of 406 shoppers, Kelley Blue Book found that 46 percent had been considering a Toyota prior to the recent recall. Afterward, 21 percent of those who had been considering the brand dropped the Toyota from their consideration.

In that same Kelley Blue Book poll, 60 percent of Toyota owners erroneously thought that since their Toyota wasn't affected by the recall that it won't lose any value. ALG attributes some of a vehicles resale value to its brand equity, which will remain bruised for years due to this recall, even for vehicles unaffected by the recall.

Kelley Blue Book predicted a cumulative depreciation of 4 to 5 percent on used Toyota vehicles by the time the recall effort is complete—which could potentially lead to an increase in value for some vehicles that directly compete with Toyota models.

"A continuing focus on volume could signal that future recalls from Toyota will continue," KBB cautioned in its February market report. The company also predicted that inventories of used Toyotas would build, in a turn of event that could temporarily push down trade-in values.

KBB points to the building supplies of used Toyotas as a worrisome trend: "Additionally, as manufacturers such as GM, Chrysler, Ford, and Hyundai continue offering additional conquest trade-in credit for used Toyotas, the supply of unsellable used Toyotas will continue to grow."

Toyota is currently managing a recall that affects about 5.4 million vehicles in all, with 2.3 million covered for sticky-throttle issue, 4.2 million for a pedal-entrapment issue with floormats—with 1.7 million vehicles covered by both recalls. Toyota is reportedly working out the details of a third recall, affecting the brakes of the company's iconic Prius.

Toyota Recall: Everything You Need To Know

[USA Today]

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Comments (15)
  1. This should even out the Craigslist playing field

  2. Thinking that this will probably "undent" after a period of time ?

  3. Maybe 5 percent altogether? Ouch! What I'm wondering is how Toyota dealers are going to keep up with this recall thing, because their dealers were already so overloaded as it is.

  4. Though this thing is all over the media, I have to wonder if it will really affect long-term value that much. Just as there's huge animosity toward U.S. companies for 20-30 of substandard cars, I think Toyota still has an owner pool who are pretty happy with their cars. But Tony's right; a lot of it depends on whether the company can clean up its PR act and the dealers can cope with all the recalls in reasonable time. Stay tuned ...

  5. I hope Toyota burns for this. The arrogance of the company to ignore such a crucial problem even after people died. And they are still acting so slow.

  6. in the market now for a prius- Ill see if this can help me with price...

  7. Toyota has always manufactured a cheap,ugly, crappy car. The only reason people bought them is to make themselves feel hip, cool and un-American.
    The TV campaign is really stupid and to Eric-no, I doubt this will, "undent," anytime soon.
    And to all the people who used US taxpayer money to buy a Toyota during cash for clunkers-good luck.

  8. OK, that may be the first time I've heard someone explain Toyota sales using the terms "hip" and "cool".

  9. I heard about the pedal recall I had no idea it affected my NON toyota car good thing I found more info here
    searched for my make, model, year and found my car had been recalled so look out! it could save a life maybe yours

    don't understand how serious or what the car pedal recall is about?
    just watch this video at the end it also shows how to stop a out of control car very useful

  10. I can't say that I feel bad for Toyota because this is just the consequence of the automaker's mistake in producing quality vehicles. It is natural that many consumers will avoid buying a vehicle produced by Toyota after the company has faced a number of recalls within the previous months.

  11. The most important of all these recalls is what if this pedal fix Isn't the only problem. If they continue to have sudden acceleration problems then they will really be in a mess

  12. It's amazing how a little sloppiness can take a giant down a peg or two. You hear too much inside talking that the brake problem was fairly common knowledge for dealers and factory reps and the like. A company has got to get on problems like this quickly or they become very big problems in the end.
    Good article,

  13. General Motors conducted himself the same manner in the 60's. But if you want Toyota aswering questions before congress, forget about it. Jay Rockefeller developed frendship with the Toyoda family during his early age and he is a member of transportation comity. Also, Toyota give thousand of jobs in america.

  14. In two months my dads 1996 Toyota Tacoma basic shortbed truck with less then 70000 miles on it has dropped from 5000 private party value to 2900. I had checked it in early February and again in March. Toyota is GONE FOREVER!

  15. It's amazing how a little sloppiness can take a giant down a peg or two. You hear too much inside talking that the brake problem was fairly common knowledge for dealers and factory reps and the like
    PLR Review

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