By Brendan Moore
02.07.2010
NADA Used Car Guide and Kelley Blue Book, the two most popular used vehicle value guides for consumers, and two of the most often used wholesale vehicle pricing guides used by dealers and lenders, have both announced that they are dropping values for Toyota models affected by the current recall.
Black Book, a used vehicle guide used only by entities in the trade like auction buyers and used car managers has already seen it’s pricing for the affected Toyota models drop.
NADA Used Car Guide, used virtually by every dealer in every state, has dropped the wholesale (loan) values of used Toyotas a little over 3%. The retail values will drop a corresponding amount.
Just as a note to consumers, the NADA book that you can purchase at Barnes and Noble or Borders lists only the retail value amounts of vehicles; there is a different edition of the book printed that contains both wholesale and retail values that is only available to lenders like banks and credit unions, and, of course auto dealers of every stripe.
The company’s statement is: “NADA’s position is to lower numbers on most Toyota models in the short-term towards the lower range of prices that we have seen in the auctions. If we see significant downward movement in Toyota’s prices next week, it will be incorporated in NADA values since we expect the downward shift to last until the recall issue is completely resolved.”
Kelley Blue Book (KBB) has also lowered the values of Toyotas around 3%. KBB, although it enjoys high name recognition among consumers, is not used by most dealers or most lenders in most parts of the United States for determining used vehicle values.
It was only a short time ago in December of 2009 that Kelley Blue Book issued a press release stating that Toyota had the best resale value of any make.
As a real-world example of what the new pricing means in the market, a 3% hit in value to a $15,000 USD used car means a price drop of $450.
The factors driving the prices of used Toyotas down are simple; consumer demand for used Toyota vehicles has dropped off a cliff, and will continue to languish at least until the recall issues are resolved; and, the inability of dealers and dealer auction companies to sell any of the used Toyota models affected by the recall. These two factors have combined for an effective one-two punch to Toyota’s jaw in the market.
It is worth pointing out that the 3% drop could only be a temporary shift in pricing for used Toyotas; a quick resolution to the ongoing recall that has a positive perception among the public would restore most, if not all, of Toyota’s previous luster in the area of residual value.
However, in what could be an ominous development for Toyota, ALG (Automotive Lease Guide), a company most consumers have never heard of, but, which functions as THE source for vehicle leasing companies in setting future residual values for vehicles, is stating that it appears that Toyotas will lose approximately 5% of their previous residual values going forward.
ALG, in December 2009, awarded Toyota “segment awards” in their 11th Annual Residual Value Awards ranking, with the Sequoia taking the honors in the Large Utility Vehicle segment; the Tacoma garnering the award in the Compact/Midsize Pickup segment; and the Prius taking home the award for the Hybrid/Alternative Powertrain segment. In addition, Toyota’s Lexus division – the runner-up (Acura was the winner) for ALG’s Luxury Brand Residual Value Award – received two segment awards, for the Lexus LS (Luxury Car) and the Lexus RX (Near Luxury Utility Vehicle).
The precipitous drop in resale value of their cars is merely adding to the pain Toyota is sustaining these days. The company has recalled 8.1 million vehicles worldwide since last fall for unintended acceleration issues, and their reputation for quality and durability is under siege. Toyota is also now the subject of two separate congressional investigations in the United States, centering on what they knew about their vehicles’ safety deficiencies and when they knew it.
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This is good information, good to know when you’re in the new car market looking to buy something soon.
I predict that Honda and Ford will be the biggest benficiaries of Toyota’s fall. I’m willing to bet that Honda’s residuals on their cars is going up right now.
It will help Ford, too, but not even close to how it will help Honda. Toyota’s customers will seek safe harbor in another Japanese make that still has a reputation for high quality, and that is Honda.
If Subaru was more national in scope instead of being mostly a regional seller, they’d be next in line after Honda and before Ford, but they just don’t have the juice in terms of their dealer network to do that right now.
Good question, what did they know, and how long ago? I think the answers are going to surprise a lot of Toyota lovers in America.
I can’t say this makes me unhappy. I always thought Toyotas were overpriced as used cars, anyway, so it’s about time the prices came down.
@Beat-Nick
Good thing Toyota has a stake in Subaru then eh? Now would be a great time to increase it. Perhaps even move Subaru’s own dealer network to adjacent Toyota dealerships à la Scion/Lexus. And it’s a grand time to invest in Toyota stock too!
Now, let’s hope that the used car prices continue to plummet as the world continues to cry over this witch hunt. Their loss is really our gain in this department.
Also, Mr. Moore, how did you come across the dealer NADA guide? I know you’re involved in the auction business somehow but you’re not in the actual dealership business I presume.
Oh and after scanning through my sent email, I never thanked you either for your generosity directly. So this’ll be my grandiose way of saying Thank you! I’ve upheld my end of it as much as I could. And I never got that RX-8
.
Kelley Blue Book has always had Toyota vaues insanely high, so a 3 percent drop is nothing. Kelley Blue Book loves Toyotas.
KBB is used by dealers on the West Coast (only three states) where Japanese cars are king, and that is why the values of Toyotas in their book are higher than the actual values in the rest of the country.
And that’s also why dealers in the rest of the country use Black Book and NADA, because those books are a lot more accurate for the U.S. as a whole.
I’ve worked in dealerships in Los Angeles and other places in the country, and you’re just fooling yourself using KBB anywhere else except on the West Coast. But consumers don’t know any better, so that’s what they do. Dealers here in Texas whip out that Blue Book when they’re trying to sell a Toyta at full price, and use the NADA when they’re taking a Toyota as a trade-in, and want to show the customer that his car is not worth what he thought it was.
Looks like a perfect time for me to go shopping for a Toyota!
I want to trade my Toyota, but the two dealerships I went to told me I’d be better off waiting until after the recall stuff is over. I hope so.
I’d rather have a different car now, and I was going to get one anyway, so now it will just happen sooner.
I don’t believe this! I can’t see it, and I’ve been paying really close attention to the prices.
The prices of Toyotas where I live in Salt Lake City have not moved one single bit. I’m looking for a deal on a Tundra, but there is no deal to be had.
The prices here are the same as they were a month ago!