How Will Mercury Discontinuation Impact Used Values?
DEARBORN, Mich. — Ford's decision to stop producing Mercury vehicles and wind down the 71-year-old brand marks the end of an era for the automaker, but don't expect too much change on the used-vehicle value front for the Mercury brand.
That's the viewpoint of one analyst, in particular, who gave his insight on the impact of Mercury's discontinuation, which the automaker said Wednesday is slated for the fourth quarter.
"We're kind of looking at it as a non-event for used-vehicle values," Jonathan Banks, senior director of editorial and data services for NADA Used Car Guide, told Auto Remarketing on Thursday.
In fact, the wholesale impact on Mercury vehicles will likely be more akin to the effects of Plymouth's wind-down roughly a decade ago than the discontinuation of Saturn and Pontiac last year, he said.
Essentially, there was a premium that consumers paid for Saturn and Pontiac vehicles (and more so for Saturn), and this wasn't the case with Plymouth.
"If there's a premium for that particular brand in the used market and it's based on perception, these negative events diminish the premium," Banks explained.
Without this premium, used values go down.
Case in point, the used values of 3-year-old Saturn and Pontiac models were relatively on par with direct competitors (at a brand level) prior to their discontinuation announcement, Banks noted.
Then, news of their fates broke, and used values of Saturns and Ponitacs eventually fell to a level 5 percent to 10 percent softer than that of their rivals by the time 2009 drew to a close, he added.
"They were almost equal and then that difference was almost 10 percent, especially on Saturn models," Banks shared.
However, when Plymouth discontinued, there was no real discernible negative impact on used values, because there was no premium that shoppers were paying for the brand.
A similar fate is likely for Mercury.
"That intangible premium that some brand get, Mercury didn't have," Banks noted.
He added: "Badge engineering is a thing of the past, and consumers don't pay a premium for an image, so to speak."
Impact from Liquidation?
The automaker told its dealers Wednesday about special offers designed to help them move remaining Mercury models in inventory and production.
While this could have a short-term impact on used values, overall used-value trends for the brand going forward should be relatively normal.
"Ford's strategy for liquidating its dealer inventory may affect used-car values in the near future, but long-term future values should resemble its historical patterns to a large degree," said Eric Ibara, director of residual consulting for Kelley Blue Book.