KBB: Toyota Residuals Likely to Climb Along with Consideration, Safety Perception
IRVINE, Calif. — In some good news for the embattled automaker, Toyota is likely to gain significant ground when Kelley Blue Book releases its May/June Residual Value Guide.
More specifically, KBB projects that the 36-month residual values of new Toyota will be up 4.2 percentage points from a year ago, on average.
Granted this underperforms the average overall upswing for the industry (6.2 percentage points), but Toyota's predicted increase is stronger than those of several other brands, officials noted.
In particular, changes within vehicle categories have been the major cause for the year-over-year residual changes, according to KBB.
Explaining Toyota's situation in more detail, in early February, KBB reduced its outlook for used models from the automaker after a big recall was issued. Values of affected models were down from 1 to 3 percent.
Then early this month, Toyota rolled out an incentive program designed to build its showroom traffic back.
These incentives and the recalls that dominate headlines have "raised questions about Toyota's residual values," officials noted.
However, KBB analysts suggest that incentive spending changes typically have a greater effect on current used values than on residual values.
KBB residual analysts expect, at the current moment, that Toyota isn't likely to keep zero-percent financing around permanently. As such, they don't project a big impact on values three or four years down the road.
"Incentives offering lower interest rates have less of an impact on future values than cash incentives," explained Eric Ibara, KBB's director of residual value consulting.
"Attractive lease payments can increase market penetration for certain models and create a larger volume of lease returns for the banks in the end," he added. "What remains to be seen is the larger volume of leases Toyota's incentives create, as the volume is what will have a detrimental impact on future residual values."
Continuing on, one area where incentives certainly appear to be helping the automaker is in shopper consideration. Data suggests that 7 percent of shoppers claimed they weren't interested in buying from the brand before the incentives, but have changed tunes once these deals were rolled out.
Not to mention, in the latest weekly data, only 13 percent of shoppers said they won't consider a Toyota again, versus 17 percent who said the same a week earlier.
Moreover, consideration and interest in the brand has shown a major upswing in the last week, according to KBB's Market Intelligence data. In fact, they have climbed back to heights that are above pre-recall levels.
Specifically, 45 percent of new-vehicle shoppers currently include Toyota on their consideration list, compared with only 32 percent the prior week.
Interestingly enough, before the mid-January recalls, Toyota consideration was at 38 percent, 7 percentage points lower than its current level
What's more, the percentage of shoppers considering Toyota has climbed 17 percentage points from its early February trough of 28 percent, KBB pointed out.
"Toyota may finally be turning the corner," stated James Bell, executive market analyst for KBB.
"Between their aggressive realignment of production to be more in line with demand, the company's current incentive offerings and the understanding that the recall issue while severe is statistically small; it's not surprising that Toyota is now on the road to recovery," he added.
Continuing on, KBB said the automaker has taken some small strides with regard to consumer perception of its safety.
The most recent KBB Brand Watch study data indicates that Toyota has been rated 6.8 (out of 10) "and is showing signs of continued upward movement."
This follows the automaker's score dipping all the way from 8.4 (before the recall) to 5.7 in the aftermath of Toyota's issues.