Toyota Trucks Top Residual Value Rankings – 2013 ALG Report
The Toyota Tacoma and Tundra top the residual value rankings, once again proving that consumers looking for the best value in trucks should look at Toyota. These awards join the multitude of accolades both trucks win year, after year, after year, after year …
The top residual value rankings come from a company called ALG that forecasts lease values for the automotive industry. The lease values are estimates of what the trucks will be worth after the lease term is up and is a key piece of a leasing purchase.
Having a high lease value is a boon for shoppers since these buyers will ultimately pay less during the lease term for their vehicle. Here is an example of what residual value is from Edmunds.com.
When you lease a car, you pay for that portion of the car’s value that you use. In other words, let’s say you leased a $20,000 car for three years, and it was worth $10,000 at the end of the lease. In this scenario, you’ve used $10,000 worth of the car’s value, or 50 percent of the car’s original price. Your payments would be $10,000 divided into 36 monthly payments of $277 (plus interest, tax and related fees).
That is just one example of the importance of residual value. The other is in the choices truck buyers have with leasing. A little known fact of leasing is that when your lease is up, you can sell your vehicle outright. That’s right. There are three leasing choices: buy outright, turn it in (worst option) or selling outright. With the Tundra holding its value so well, it is possible to sell your Tundra outright before your lease is done and actually turn a profit (I am doing this).
What about Ford, GM or Ram? The reality is that these residual value awards really speak to the difference in strategy between the truck makers. Ford, GM and Ram heavily market their trucks as “work” trucks. This means they are trying to sell a ton of volume to fleet buyers and tradesman. These buyers typically lease vehicles because it is good for business tax deductions and maintenance costs. However, when these lease terms are up, it creates additional supply of cheap ex-fleet trucks on the market. This depresses the residual value of those brands pickups.
Ram has the additional problem of its brand’s perception of low quality. A typical lease term is three years which typically coincides with the ending of many warranties (3 years or 36,000 miles). With Ram products not having a good perception of having long-term quality, used truck buyers expect to pay less for a used Ram truck. This hurts their residual value number.
A bright spot for Toyota with this award is that the known Tundra problems of air injection pump failure, blown steering racks (2010-12 models) and the whole unintended acceleration paranoia haven’t hurt its brand at all. Actually, this is also good news for a consumer. By Toyota fixing these problems and the paranoia subsiding, Toyota owners are reaping the benefits.
In the end, the Toyota Tundra and Tacoma are really built for consumers not commercial companies. This is great for consumers since it keeps the used car market value higher. It is also good news for lease customers because it gives them more value and options at the end of the lease term.
Thoughts on residual values and/or the competition?
Filed Under: Tundra News