Toyota's residual values seen falling more than competitors
One of the strongest selling points that Japanese brand vehicles like Toyota and Honda have had going for them over the past decade or two has been the stronger resale values that have resulted from perceived higher quality. While increased depreciation doesn't matter much to people who buy their vehicles and keep them for more than a few years, it does hurt manufacturers. In recent years, a large portion of those pricey trucks and SUVs have been leased, where the monthly payments are largely based on the vehicle's expected residual value at the end of the term. When that residual is lower than expected, the automaker's financing arm loses money – a phenomenon that has been a particularly painful reality for Detroit's automakers.
Now, like the rest of the industry, Toyota is starting to get hit by falling residuals on both cars and trucks. Some of that is surely due to the general market conditions right now, but some critics suggest that the fact that Toyota's residuals are falling faster than other companies could point to growing awareness of quality issues. At the end of 2008, an average three-year-old Toyota was worth 46.5% of its original value compared to 50.5% two years earlier. Like other brands, Toyota's trucks have been especially hard hit, dropping from over 60% to just 45.4%. In particular, Tundra residuals are on a big downturn, nosediving to 40.1% from 59.5% just one year earlier. Despite the drop, the Tundra's resale value remains higher than Chevrolet's Silverado (39.8%, down from 49.6%) and Ford's F-150 (32.2%, down from 45.6%), so while all is not lost, the race for residual supremacy is getting tighter. Thanks for the tip, Leonard!
[Source: Automotive News - sub req'd]
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Reader Comments (Page 1 of 3)
Dave in MI 11:32AM (3/16/2009)
Welcome to the top of the pile Toyota.
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A-style 1:57AM (3/17/2009)
I know it's hard to read the whole story when they have a negative Japanese headline but if you look in the last paragraph it's still better than GM & Ford.
Luis 11:39AM (3/16/2009)
Trucks in general are taking a hit. Not to mention Toyota is flooding the market with Tundras - it's no surprise that resale value is dropping like a 1/2 ton of bricks.
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chconline 1:18PM (3/16/2009)
Haha, off topic but the effects of gravity on weight does not make it drop any faster than a 1/2 ton than a 2 ton. At that point aerodynamic drag is relatively negligible. :P
d=1/2gt^2
2d=gt^2
2d/g=t^2
sqrt(2d/g) = t
Where:
d is distance (height)
g = acceleration due to gravity (9.81m/s^2)
t = time in seconds
Randy 1:35PM (3/16/2009)
And add the fact that the Tundra is not even close to being the truck that the Ford 150 or Silverado are and you've got even further resale woes for Toyota!
I don't say this about many cars or trucks but the Tundra is NOT a work truck by any stretch of the word! I'd take an F150 that had been in a flood before I'd take a fully loaded Tundra! And that's purely based on capability! If I want to tow, move, work, haul or whatever, I know the F150 can handle it and I know factually the Toyota can't. I mean it CAN do hard work but the Tundra is highly more likely to fall apart because of its horrible design / frame / structure. (as admitted by Toyota's president when he said "This is an embarrassment to Toyota") How's that for resale influence! That's like someone having a commercial saying "Hey this is a POS but you should by one because we made good stuff before". Ya know?
I guess you have to use trucks to know the difference so my words might fall on deaf ears! Put it this way! Take a cinder block, drop it on the ground. Pick it up! Do it again! And again! And again! It's still rock solid right? That's how the F150 is. Rock solid!
Now take dried mud and water thats in the same shape! Drop it once! Then if it's in one piece, pick it up again and drop it again! That's what I'm digging to get at. Though that's a fairly extreme example, it does show the idea though. I use the extreme only to show polar opposites which I trust the reader will tighten up to be less dramatic.
On another note i think knowing your truck can handle the job (i.e. a Ford) is pretty important! Think of it in another market! Say, surgery! Would you go to a doctor that had sharp scalpels or ones that bent a few times and have rough connections on the handles! Now add 20,000 lbs to that scenario! The Tundra can't handle itself without a load in it, how on earth can it handle itself with a load in it AND then not breakdown due to stress on the shoddy framework etc.
I'd opt for the one you could chuck at a brick wall and know it will bounce back.
Okay I'm babbling now! :)
Jason 4:29PM (3/16/2009)
I pretty agree with Randy's post, but the analogy to a cinder block probably isn't the best... they tend to break when dropped. They're great for load-bearing though.
Enok 11:39AM (3/16/2009)
This is true for the Sequoia, Tundra, Sienna and Highlander in particular.
Others, like the Corolla and especially Prius, are holding well.
Camry, etc. are in between.
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Yikes 11:43AM (3/16/2009)
http://www.autobloggreen.com/2009/03/07/used-hybrid-values-have-fallen-off-a-cliff/
Hybrid values have fallen off a cliff.
Luis 11:46AM (3/16/2009)
Yes, that's what happens when people pay over sticker for a car like they may have done last year for a hybrid and this year no one is buying anything, let alone paying sticker for it. Hybrid sales will rebound when the economy ticks up and gas soars towards $3/gallon again. Then those who are getting great deals on hybrids today will be doing quite well.
sp 11:45AM (3/16/2009)
so you basically said that due to new car prices being low, used cars pricing are plummeting and that Toyota's used cars still hold best value, even the Tundra pickup, area where american competitors are the strongest?
okie dokie, lol.
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Enok 11:45AM (3/16/2009)
If you put down only $1100 plus the first payment, you can lease these Toyotas for well under $250/mo including tax, for 36 months at 12k miles per year -- at least around here in MA -- so residuls aren't all bad. Other companies have quit leasing.
Corolla
Matrix
Camry
RAV
Prius
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Yikes 12:13PM (3/16/2009)
Your post seem like SPAM.
Please provide a link backing up your claim that other car companies have quit leasing and only Toyota continues to do so.
why not the LS2LS7? 12:16PM (3/16/2009)
I have to pay $10,000 to drive a Corolla for 3 years (36,000 miles tops)?
That seems like a lot to me.
Even in the case of the Camry, that means the car is losing over half its value in 3 years?
I knows I'm not used to leasing, but if those aren't lousy residuals, I don't want to know what lousy residuals are.
If you sign up to lease a Corolla for 3 years at $10K, I think you should have a red flag set on your credit history and your credit card limit cut to $800.
Enok 12:17PM (3/16/2009)
I say these because I'm in charge of my company's lease fleet. I didn't say EVERY other company has quit leasing, either.
Randy 8:44PM (3/16/2009)
Lincoln has lease offers right now! They're on TV all the time!
"The Lincoln Launch Event"
Actually...(checking something)...
leasespecials.com has lease offers for almost everyone... ford, toyo, etc....
Farris 11:46AM (3/16/2009)
This was bound to happen after all the quality control issues they've had since growing so fast.
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Enok 11:46AM (3/16/2009)
Sequoia? 4Runner? Highlander? Don't even ask.
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Ed 11:49AM (3/16/2009)
Mommy, make the ugly blue monster go away!
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JZeke 12:04PM (3/16/2009)
So really, this illustrates that truck buyers, as of late have - been hooked on leasing?
Makes sense since the market was flooded with these vehicles. Don't get me wrong, theres a place for trucks. But when you start seeing trucks on the road with lift kits, leather interiors and are spotless every day of the week you have to wonder.
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Imag 12:09PM (3/16/2009)
That headline is pretty overdramatic, when you take into account the last sentence of your blurb:
"Despite the drop, the Tundra's resale value remains higher than Chevrolet's Silverado (39.8%, down from 49.6%) and Ford's F-150 (32.2%, down from 45.6%), so while all is not lost, the race for residual supremacy is getting tighter."
Sure, it's falling more than competitors, but it's still higher overall.
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