Is the US plug-in vehicle market going to be derailed by a vicious cycle of lower sales and their impact on residual vehicle values? That's one question that may be worth asking after ALG Inc. reduced residual values – the valuation of vehicles that are returned after leases end – for plug-ins and hybrids.

The most notable model that ALG took the hatchet to was the Nissan Leaf EV, whose 36-month residual value was cut by about $2,500, Automotive News reports. Values for other plug-ins like the Chevrolet Volt and some standard hybrids were also reduced, though by lower amounts.

ALG says it cut the values due to a combination of three things: recent price reductions on new alt-fuel vehicles, a possible oversupply of such models and the fuel-efficiency gains of gas-powered vehicles, which could cause potential hybrid and plug-in buyers to stick with gas-powered cars. The vicious cycle part comes in because, as residual values are reduced, dealers will be forced to hike the monthly payment amounts on new cars. This, in turn could (wait for it) cause demand to drop. Whether these reduced residual values actually have an impact on new-car sales remain to be seen. Thus far in 2013, plug-in vehicle sales have jumped thanks to increased demand for both the Leaf and the Volt.

The timing of ALG's re-appraisal isn't exactly fortuitous. Nissan didn't respond to Automotive News' request for a comment on the value reduction, but is recently announced it will soon start making used Leaf vehicles available under the automaker's certified pre-owned vehicle program.


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    • 1 Second Ago
  • 5 Comments
      CoolWaters
      • 2 Days Ago
      Some ill-logic going on here. There's no way a hybrid buyer, paying $30 per fill up, is going to come back to a conventional car. Simply Not Going to Happen. What will happen is he/she may move to an EV or Plugin.
      Yang
      • 2 Days Ago
      No. The math is simple, if you cut the car's price by $5000, and reduce the residue value by $2500, the _deprecation_ (price minus residue value) is still another $2500 less than before. That, plus interest and amortized to 36 months, is what the lessee would need to pay. Never mind that many people do not pay the "standard" lease: instead, they pay $199/month during special promotions. Both me and two of my friends leased Volts at this price. The lease term sheet looks ridiculous: residue value is about $27k, and you know Ally (the lessor) will claim Federal tax credit on its own. But heck, at $199/month, who cares.
      throwback
      • 2 Days Ago
      "This, in turn could (wait for it) cause demand to drop" For new cars perhaps, but used EVs may see their values go up.
        GoodCheer
        • 2 Days Ago
        @throwback
        That's what I was thinking... comparing apples and oranges, in a sense.
      MTN RANGER
      • 2 Days Ago
      I see this as a positive for the EV market. As lessees unload their cars when the lease ends, they will either buy or lease a new EV. The used cars will now be auctioned off to people who would not otherwise afford new EVs. This will expand the market. Personally, I feel that if I lease every two-three years, it is better for the EV movement than buying an EV and keeping it for ten years.