Resale: The New Fuel Economy

Carmakers Tout Residual Values, Which Consumers Cite as a Top Reason to Buy

By Published on .

Car and truck buyers who got a good price deal when they flocked to Detroit's employee discounts in the summer of 2005 could be in for a rude awakening when they go to trade in or sell their used vehicles-and that's prompting automakers to try to promote their brands' resale value.

Some owners will discover the depreciation on those discounted models was greater than they anticipated, said James Bell, publisher of Primedia's IntelliChoice.com, which analyzes the cost of vehicle ownership and car values. Resale values "are on the cusp of getting a lot more interest" from American car buyers, he said.

Tom Peyton is well aware of that. The senior manager-national advertising for the Honda brand said consumers often rank resale value as high as the No. 4 reason to buy. "It's just one of the things that help your product's image. It's one of the reasons people buy our cars," he said.

And it's why Honda advertises its high resale values. A regional TV commercial for the Accord from RPA, Santa Monica, Calif., touts the fact that Honda tied with sibling Acura as the top brands in the 2007 Best Resale Value Awards from Kelley Blue Book's kbb.com (see chart).

Late last year, Automotive Lease Guide handed the Honda marque its Industry Brand Residual Value Award; ALG projected Honda's 2007-model vehicles would retain the highest percentage of their original price three years down the road. It was Honda's fourth straight year winning the accolade, and the brand's Odyssey minivan was honored for the sixth consecutive year as best in its category.

GM won its first ALG best-residual award since 2000 for its redone 2007 Chevrolet Silverado and sibling GMC Sierra full-size pickup, plus the Pontiac Solstice in the sports-car segment.

Steve Rosenblum, marketing director of GMC, said residuals are important to consumers, which is why he is advertising Sierra's ALG award in ads from Interpublic Group of Cos.' Lowe, New York.

The movement among brands and segments in ALG's latest awards demonstrate how enhanced products and disciplined pricing can improve residual value, said a spokesman for the guide. ALG, which ranks only brands with above-industry-average residuals, said Chevrolet, Buick, Chrysler, Dodge, Ford, Hyundai, Jeep, Kia, Mercury, Mitsubishi, Pontiac and Suzuki were below average .

Now, however, Chevrolet will be on the offensive after winning 10 of IntelliChoice's annual Best Overall Value of the Year awards for the 2007 model year, named at the Chicago Auto Show two weeks ago. The awards honor vehicles that cost significantly less to own than models in the same segment and provide the best return on investment. (Toyota Motor Sales USA captured 11 IntelliChoice awards, the most for any company this year.)

Mr. Bell said 10 awards for Chevrolet is a major feat for the GM brand.

Edward Peper, general manager of Chevrolet, said he'll likely advertise a broader resale or residual-value claim but wasn't prepared to discuss it further. "Residuals are extremely important to owners because it helps them measure their cost of ownership," he said. "When someone knows their Silverado will be worth more than a [Toyota] Tundra after three years, it validates their purchase."

Jim Sanfilippo, exec VP of auto consultant AMCI, believes resale values will move to the top of the list as a reason to buy. He said resale values would be "the new determinate for purchase" that will "drive brands on your list to the top of your list."
In this article:
Most Popular