Kelley Names Toyota, Lexus Best Brands For Resale Value

December 9, 2009

Residual value is a common concern of car buyers, especially during tough times like these. Accordingly, shoppers might be interested to know that Kelley Blue Book's kbb.com® 2010 Residual Value Study has given the Toyota brand its Best Resale Value Award. (Curiously, this is the first time that Toyota has received the honor.) Toyota's upscale sibling, Lexus, nabbed the Best Resale Value Award for luxury brands.

But Toyota Motor Corporation wasn't the only winner of the day. On the make and model front, Kelley singled out ten vehicles for their superior resale value: the 2010 Audi A5, the 2010 BMW M3, the 2010 Chevrolet Camaro, the 2010 Chevrolet Corvette, the 2010 Honda CR-V, the 2010 MINI Cooper, the 2010 MINI Cooper Clubman, the 2010 Toyota Prius, the 2010 Toyota RAV4, and the 2010 Toyota Tacoma. Although no Ford or Chrysler vehicles made Kelley's top ten list, the Ford F-Series Super Duty and the Ford Taurus did come in at the top of their categories (full-size pickup and full-size car, respectively). We should also note that Jeep was named the top domestic brand, with its models retaining almost 36% of their value after five years.

At the bottom end of the scale, we find an assortment of Hyundais, Kias, Mitsubishis, and two Ford cars. From Kelley's release:

 The 2010 vehicles with the lowest projected resale value after five years of ownership include: Hyundai Azera, Kia Amanti, Kia Optima, Kia Rio, Kia Rondo, Kia Sedona, Lincoln Town Car, Mercury Grand Marquis, Mitsubishi Endeavor and Mitsubishi Galant. Half of these 2010 model-year vehicles are projected to maintain less than 20 percent of their original MSRP after five years of ownership.

Generally speaking, 2010 models are projected to fare slightly worse than their 2009 predecessors. According to Kelley, "In 2009, the average vehicle maintained 34.2 percent of its original value after five years in contrast to 2010 models, which are projected to maintain an average of 32.6 percent of their original Manufacturer's Suggested Retail Price (MSRP)." That's good information to know -- particularly now that our wise investments need to be just a tad wiser.

Check the full press release below for more information.

* * * * *

KELLEY BLUE BOOK’S KBB.COM® RELEASES 2010 RESIDUAL VALUE ANALYSIS

Toyota and Lexus Claim Top Honors for 2010 Models, U.S. Brands Improve Resale Values

IRVINE, Calif., December 2, 2009 – Kelley Blue Book www.kbb.com, the leading provider of vehicle values and forecasts, today announces the 2010 model-year vehicles projected to retain the greatest amount of their original retail prices after five years of ownership.  Kelley Blue Book’s residual values are a reflection of current vehicle data, market conditions for each vehicle, competition in each segment, expectations of the future economy and the combined experience of Kelley Blue Book’s team of statisticians, economists and pricing analysts.

Using information gained from Kelley Blue Book’s analytical and predictive models for both new- and used-vehicle values and its economic forecasts, the company determined one overall brand and one luxury brand as having the best projected overall resale value across their respective 2010 fleets, named resale value leaders in 16 major vehicle segments, and honored the top 10 overall residual value leaders for 2010.

 2010 BEST RESALE VALUE: BRAND
Toyota

2010 BEST RESALE VALUE: LUXURY BRAND
Lexus

2010 BEST RESALE VALUE: TOP 10 MODELS
Audi A5
MINI Cooper
BMW M3
MINI Cooper Clubman
Chevrolet Camaro SS
Toyota Prius
Chevrolet Corvette
Toyota RAV4
Honda CR-V
Toyota Tacoma

2010 BEST RESALE VALUE: BY VEHICLE CATEGORY
MID-SIZE PICKUP: Toyota Tacoma
HIGH-PERFORMANCE CAR: Chevrolet Camaro SS
FULL-SIZE PICKUP: Ford F-Series Super Duty
HYBRID/ALT. FUEL CAR: Toyota Prius
COMPACT UTILITY VEHICLE: Honda CR-V
COMPACT CAR: MINI Cooper Clubman
MID-SIZE UTILITY VEHICLE: Toyota Highlander
MID-SIZE CAR: Honda Accord
FULL-SIZE UTILITY VEHICLE: Honda Pilot
FULL-SIZE CAR: Ford Taurus
LUXURY UTILITY VEHICLE: Lexus RX 350
NEAR-LUXURY CAR: Lexus IS
HYBRID/ALT. FUEL UTILITY VEHICLE: BMW X5 Turbo Diesel
LUXURY CAR: Audi A5
VAN: Toyota Sienna
SPORTS CAR: Nissan 370Z

(All values based on the November/December 2009 Kelley Blue Bookâ Residual Value Guide. Top 10 models appear in alphabetical order).

 A Look at 2009 and 2010 Residual Forecasts

For the last several years, the average vehicle has maintained close to 35 percent of its original value after five years.  The downturn in the economy has hit the automotive sector hard in the last year.  Consumers are feeling the pinch not just in the depreciation of their home, but also in the value of their vehicle, as Kelley Blue Book is seeing residual values of new cars suffer compared to last year.  In 2009, the average vehicle maintained 34.2 percent of its original value after five years in contrast to 2010 models, which are projected to maintain an average of 32.6 percent of their original MSRP.

The last 18 months have been extremely volatile from both a sales and valuation perspective.  However, based on Kelley Blue Book’s latest valuation methodology and forecasting abilities, the company’s analysts project that the New Year should mark a return to more normal depreciation patterns.  Additionally, it is expected that the lower rental volume will contribute to a more limited supply of used cars, which may result in rising values in some segments in the coming years.

While the government took its time declaring the nationwide recession, it has been quick to announce that economically, we have turned the corner.  As data shows a healthier economy in 2010, Kelley Blue Book analysts expect that recovery in the auto industry will be gradual and prolonged.  One factor helping the industry is stabilizing gas prices.  Kelley Blue Book is forecasting that gas prices will be stable through the next three to five years with per-gallon prices remaining between $2.66 and $3.50.  This predicted long-term stability in fuel prices reduces market variability and allows financial institutions to better manage their lease portfolio.

Best Resale Value Brands

This year’s 2010 overall Best Resale Value: Brand award goes to Toyota.  For the first time, Kelley Blue Book also named a Best Resale Value: Luxury Brand, and that prestigious honor is awarded to Toyota’s upscale sibling, Lexus.  On average, 2010 vehicles under the Toyota nameplate are expected to maintain 38.8 percent of their MSRP after five years, and Lexus vehicles are projected to maintain 39.3 percent.

For 2010, the brands projected to best maintain their value should be congratulated for making it though a volatile marketplace defined by economic uncertainty and significant drops in fuel prices.  On the 2010 list, the gap between the brands at the top and the rest of the pack is closing.  Overall, products are getting better in quality and in value, driving greater competitiveness and slower depreciation.

Criteria for Kelley Blue Book’s Best Resale Value Awards require a brand to have a minimum of four nameplates in its portfolio, a factor that eliminates the highest-ranking brand performer year-after-year, MINI, which carries an average five-year residual percentage of 45.9 percent for its 2010 models.

Below is a look at some of the brand ranking changes over the last year:

Top 10 Brands: Best Resale Value 2010

Top 10 Brands: Best Resale Value 2009

1.  Lexus                 39.3 1.   Honda                       44.5
2.  Toyota               38.8 2.   Toyota                      42.7
3.  Honda                38.0 3.   Volkswagen              40.9
4.  BMW                 37.2 4.    Subaru                      39.4
5.  Subaru               36.6 5.    Lexus                        38.7
6.  Jeep                    35.7 6.    BMW                        38.0
7.  Acura                 35.2 7.     Infiniti                      37.3
8.  Infiniti               34.5 8.    Acura                        36.8
9. Audi                 34.2 9.    Audi                          36.5       
10. Nissan              33.7 10.   Nissan                      36.5

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.

Domestics

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.

MANUFACTURER 2010 2009
Ford Brands 32.4 31.7
General Motors Brands 31.3 29.5
Chrysler Brands 29.5 28.0

 

 

 

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

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
Chevrolet

31.4

+ .6

Cadillac

29.4

+ 2.0

Buick

27.5

- 2.3

GMC

31.8

+ 4.1

Chrysler 

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.

Kelley Blue Book expects the impact will be more severe for Saturn, whose residual average is down 5 percentage points to 28 percent.  Saturn is currently projected slightly higher than Pontiac because its two remaining models, the Outlook and the Vue, compete in the more stable SUV category.

Kelley Blue Book performed an analysis on used-car values for Oldsmobile as a case study for the possible outcomes for both Pontiac and Saturn.  This included the impact of mileage, condition, seasonality, market conditions, volume, demand, competition and a number of other factors.  The shutdown of Saturn is similar to the shutdown of Oldsmobile, but the two scenarios are still quite different.  Oldsmobile shut down over a period of more than three years and continued to introduce new products, including the Bravada, even after the closure announcement.  With Saturn, production was halted almost immediately and the sell-down of inventory is expected to occur faster.  Like Oldsmobile, the impact will differ by model, where more differentiated vehicles like the Sky can expect less of an impact.  The impact of the shut-down for Saturn is expected to be less severe than it was for Oldsmobile.

Vehicles with Low Resale Value

Many of the vehicles considered to be fast depreciators include vehicles with long life-cycles, high production levels and models with heavy representation in the fleet market.

The 2010 vehicles with the lowest projected resale value after five years of ownership include: Hyundai Azera, Kia Amanti, Kia Optima, Kia Rio, Kia Rondo, Kia Sedona, Lincoln Town Car, Mercury Grand Marquis, Mitsubishi Endeavor and Mitsubishi Galant. Half of these 2010 model-year vehicles are projected to maintain less than 20 percent of their original MSRP after five years of ownership.

Vehicles that have not received a full redesign in more than five years are typically at risk of ending up at the lower end of the scale.  Examples on this year’s list include both the Lincoln Town Car and the Mercury Grand Marquis, both of which last received new lines and looks more than a decade ago in 1998.  Other vehicles with the same fate include Mitsubishi’s Galant and Endeavor, as well as Kia’s Amanti, all last redesigned in 2004.

“A major factor in a vehicle’s residual value is the number of vehicles sold into daily rental fleet service,” said Ibara.  “This is an effective way to ‘move the metal,’ because thousands of vehicles can be sold in one phone call; however when these cars flood the market when they come out of service the prices for these vehicles can drop significantly.”

Alternative-Fuel Vehicles

On average, 2010 60-month hybrid-car residuals dropped nearly 8 points to 31.2 percent, while hybrid trucks dropped less than two points to a residual average of 29.6 percent.

Year-over-year, dedicated hybrids as a sub-segment lost almost 10 points, from 51.0 percent last year to 41.6 percent in 2010.  Just like in the compact segment, dropping demand for fuel-efficient vehicles and a forecast of stabilizing oil prices has weakened the outlook for hybrids in the future.  Last year there was only one dedicated hybrid in the group, the Toyota Prius.  This year, the Prius came with a welcomed redesign, improved fuel economy by three miles-per-gallon and included a price reduction of $1,000 from its predecessor.  For 2010, there are three dedicated hybrid nameplates, the Toyota Prius, the Honda Insight and the Lexus HS.  There also were 18 hybrid sisters (models that have both a pure gasoline-powered and hybrid-powered version) last year and more than 22 in 2010, also bringing a sense of crowding to this newer powertrain segment.

“Predicting values for powertrain technologies beyond conventional hybrids is very speculative at this moment,” said Ibara.  “The reason for this is because the performance of the engine technology is untested, particularly with regard to consumer acceptance, cost of ownership, range and reliability.”

Pricing of these vehicles and the availability of government subsidies will be major consideration factors for consumers considering any new-vehicle technologies coming into the market.  However, should one or several of these technologies take off within the next five years and become widely accepted, it could cause conventional hybrid values to plummet.

About Kelley Blue Book® Residual Values

Based on projections by Kelley Blue Book’s expert staff of market analysts encapsulated in the Kelley Blue Book Official Residual Value Guide, the prestigious Kelley Blue Book Best Resale Value Awards honor vehicles expected to maintain the greatest proportion of their retail prices after five years of ownership.  Low-volume vehicles and vehicles with a Manufacturer’s Suggested Retail Price of more than $60,000 are excluded from awards consideration, except in the High Performance and Luxury categories.

While the company’s Official Residual Value Guide has been published since 1981, Kelley Blue Book established its annual Best Resale Value Awards in 2003.  Kelley Blue Book reports projections based on current vehicle data, sales data, market conditions for each vehicle, competition within vehicle segments, expectations of the future economy and the combined experience of Kelley Blue Book’s team of market and pricing analysts.  Kelley Blue Book’s residual values are used by banks, financial institutions, governmental agencies and the automotive leasing industry.

For more information about Kelley Blue Book’s Best Resale Value Awards, please visit www.kbb.com/BRVA2010.

About Kelley Blue Book (www.kbb.com)

Since 1926, Kelley Blue Book, The Trusted Resource®, has provided vehicle buyers and sellers with the new and used vehicle information they need to accomplish their goals with confidence.  The company’s top-rated Web site, www.kbb.com, provides the most up-to-date pricing and values, including the New Car Blue Book® Value, which reveals what people actually are paying for new cars.  The company also reports vehicle pricing and values via products and services, including software products and the famous Blue Book® Official Guide.  According to the C.A. Walker Research Solutions, Inc. – 2009 Spring Automotive Web Site Usefulness Study, kbb.com is the most useful automotive information Web site among new and used vehicle shoppers, and half of online vehicle shoppers visit kbb.com.  Kelley Blue Book’s kbb.com also is a W3 Gold Award winner, sanctioned by the International Academy of Visual Arts.  Kbb.com is a leading provider of new car prices, car reviewsnews, used car Blue Book Values, auto classifieds and car dealer locations. No other medium reaches more in-market vehicle shoppers than kbb.com. and

 

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