In the latest ALG Industry Report, residual values didn’t change much from the previous edition. However, the future used-car supply situation could shake things up a bit.

ALG has upped its outlook on used market supply, meaning lower residual values could be on the horizon.

“At the industry level, our supply forecast has increased, leading to a 0.2-percentage point drop in residuals,” ALG said.

The report specifically examines the rise in new-vehicle supply for midsize and compact cars that has been fostered by numerous redesigns.

“With current incentive levels rising around $200 in the industry overall versus the previous edition, this data could portend a drop in future values for those segments,” ALG noted.

The firm’s vice president of editorial, Eric Lyman, added: “Historically, when we have seen supply increase in specific segments, it puts downward pressure on residual values. This is something we’re watching closely, as today’s sales battles typically contribute to lower prices and values.”

Residual Projections for ‘Reboots’

Elsewhere in the report, ALG focuses on forecasting residuals for three 2014 model-year “reboots” that are, as the firm put it, aiming for a “fresh start.”

ALG began with the all-new Acura RLX, which it projects will command a 36-month residual of 49 percent. That would be consistent with the premium full-size average residual, but lower than the 53 percent brand average for Acura.

“Adding an ‘X’ suffix to the model name, Acura hopes to erase negative perceptions of the outgoing RL, as well as to command a price/value relationship commensurate with more upmarket German brands,” the firm noted. “Despite a face bejeweled in full-LED headlights and seats saddled with Milano leather, the proportions are perhaps too familiar.

“Competent ride/handling and abundant technology bestow a more modern experience than the RL; however, to return to Legend-like glory, the front-wheel drive, V6-only Acura RLX ultimately faces an uphill battle.”

Next up was the 2014 Kia Cadenza, the brand’s re-entry into the full-size market.  It is projected to command a better 36-month residual (52 percent) than the full-size segment average (48 percent), and fall under the brand residual average for Kia (53 percent).

“Kia decided to wait a full four years after the Amanti’s sunset before introducing a new full-size offering, rechristened the Cadenza,” ALG said in the report. “Catering to two less-demanding demographics — rental fleets and the elderly— models in this segment have historically endured minimal product development investment.

“Today’s full-size landscape has transformed into a batch of attractive pseudo-luxury products, such as the new Impala and Avalon,” the firm added. “The Kia Cadenza’s striking styling, rich interior, and robust feature set should help prospective buyers turn a blind eye to the ancient and uncompetitive Amanti of old.”

As for the remaining model, the 2014 Nissan Versa Note, it is projected to hold a 47-percent residual value after 36 months, compared to the 55 percent brand average for Nissan. There was no subcompact segment average provided.

Nissan actually redesigned the Versa for 2013, but the hatchback body-style was carried over, ALG noted.

“For 2014, the hatch — called simply Note in overseas markets — deviates from the sedan entirely, receiving a distinct platform,” the firm explained. “Versa Note is positioned above the Versa sedan, which, like its predecessors, is priced towards the lower end of the subcompact class.

“Space-efficient packaging and more appealing proportions are reminiscent of the Honda Fit, right down to the irregularly-sized windshield wipers,” it added. “One salient characteristic standing in the way of Versa Note’s divergence from Versa is that the interior looks and feels much like a carbon copy of the sedan’s.”

Full commentary and the complete report can be found here: https://www.alg.com/julyaugust-industry-report.