Because automakers are trying not to produce more vehicles than the market needs, the projected residual values of today's cars have risen dramatically.


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Residuals for General Motors Co. and Ford Motor Co. vehicles, in particular, are improving, giving those companies opportunities for more competitive leases. Traditional residual-value leaders Toyota Motor Sales U.S.A. and American Honda Motor Co. remain strong. But lower incentives and a shortage of used vehicles are lifting the residuals of several Asian brands, as well as those of GM and Ford. Automotive Lease Guide projects that 2010 vehicles from continuing GM brands and 2010 Ford brand cars will retain more than 40 percent of their sticker prices after 36 months. Five years ago, the residual forecasts for those brands' cars except Cadillac were under 40 percent. Automotive Lease Guide separates ratings for Ford and Chevrolet cars and trucks. Historically, those brands' trucks have had higher residuals than their cars and did not change greatly over the five-year period. Other fast risers were Asian brands Mazda, Hyundai, Suzuki, Kia, Mitsubishi and Subaru. Aggregate residual values for 2010 Honda vehicles were 53.7 percent, an increase of 2.3 percentage points. For Toyota, aggregate residual values were 51.0 percent, flat from five years ago. At GM and Ford, well-received new vehicles have garnered higher projected residuals. Chrysler Group isn't faring as well as its Detroit competitors; the automaker has lacked new product, and new models usually help boost residual values. Matt Traylen, Automotive Lease Guide's chief economist, says a fresh product lineup is a key to strong residuals. "All new models always have a price bump," he says. "The average is a 7 or 8 percentage-point bump for an all-new model compared with the old one." Chrysler brand 2010 vehicles, in aggregate, have the industry's lowest projected residual among continuing brands at 39.4 percent after 36 months, 2.1 percentage points lower than its 2005 projection. But the aggregate residual value for Chrysler Group's Dodge brand is up a dramatic 8.2 percentage points to 41.8 percent. This does not include Ram brand trucks.

Source: GM, Ford lead spike in residuals

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