Lawsuits Planned Over Toyota’s Dropped Resale Values

By Brendan Moore

02.12.2010

Toyota logo-smallAt least 60 consumer class-action lawsuits have been filed in at least thirty-two states so far over the precipitous drop in resale values of Toyotas, according to public statements from some attorneys representing the plaintiffs.

As if Toyota doesn’t have enough legal problems with the forthcoming personal injury suits stemming from the unintended acceleration issues in their cars, now they face suits in United States federal court for economic damages for diminished value or lost use of transportation suffered by owners of Toyota vehicles.

Simply put, the lawsuits over diminished value exist as a result of the fact that anyone with a used late-model Toyota has a vehicle that is now worth quite a bit less than it was worth only two weeks ago.

Toyota vehicles have dropped in resale value since the recalls involving 8.5 million vehicles were announced, with more decreases expected in the future. It has been suggested that the average Toyota may lose an extra 5% – 8% of its original projected residual value this year. As an example of what that could mean to the average consumer, 5% of a $15,000 USD used Toyota is $750.

Toyota’s resale values, which derive from their reputation for safety and reliability, are one of the major reasons many people in the United States buy a Toyota. Toyotas are generally not purchased because their owners consider the cars fun to drive, or, because of their attractiveness. Any large, sustained drop in residual value of used Toyotas would be disastrous for the company from a future sales perspective.

This type of class-action litigation is only expected to grow in the next few months as more consumers become aware of the legal actions against Toyota, and then decide to participate in the class action complaint.

The most recent similar example occurred in 2008, when Ford Motor Company settled with 800,000 customers in a class-action lawsuit over the diminished value of their Ford Explorer SUVs after a recall of the factory-equipped tires used on the SUV. Those customers received discount vouchers ranging from $100 to $500, which could be used against the future purchase of another new Ford. That class-action suit by 800,000 customers started out the same way as this one – with only a few dozen consumers.

“This has the potential to be the biggest product liability case in the automotive industry,” said Richard Cupp, a professor at Pepperdine University School of Law in California.

As a sidebar to this legal activity, a class-action suit was filed in federal court in Los Angeles earlier in the week on behalf of United States shareholders of Toyota stock that accuses Toyota of deliberately misleading investors as to the risks the company faced in the market. The United States operating arm of Toyota is based in California.

2009 Toyota Matrix side

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Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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16 Comments

  1. That guy at Pepperdine could be right about it being the largest ever. Multiply the decrease in value over the number of cars affected, and that’s a number in the billions of dollars. And if a federal judge believes that Toyota was aware of these defects while the cars were being sold new, the punitive damages added to that could be huge as well.

    Toyota executives must be hating life right now.

  2. Okay, I can see the legal action over deaths and injuries, but for loss of value? Isn’t that the chance you take when you buy any product?

    Should people who own Isuzus sue because they pulled out of the American market and their resale values crashed?

    Should Pontiac owners and Saturn owners sue because GM shut the brands down and now those cars are worth less in book value than they would have been?

    Should people who bought Microsoft Vista sue? Should people who bought a house during the mortgage boom sue the federal government for not reining in the Federal Reserve?

    This could go on and on.

  3. I agree with Beat-Nick. Just because a vehicle (or anything else) has historically had a high resale value doesn’t mean that it will do so moving forward. With the exception of collector cars, vehicles are always depreciating assets. Such lawsuits are ridiculous, frivolous wastes of time and money.

  4. “You pays your money, you takes your chances”

  5. Strange as it might be, it’s been mentioned before…

    http://www.thetruthaboutcars.com/the-best-of-ttac-the-audi-5000-intended-unintended-acceleration-debacle/

    Audi took this one up the arse, a lawsuit in Toyota’s hands would be even more damaging and disastrous.

    It’s merely a prime opportunity to cash in on the crisis. So indulge damn it. INDULGE. Hop on the bandwagon and maybe you’ll get your piece of the pie too. That’s the American way in how we go about things isn’t it?

    Also;

    “We’ve found a witch, may we burn her?”
    “How do you know she is a witch?”
    “SHE LOOKS LIKE ONE!”

  6. These class action suits for diminished value are a peculiarly American thing. People (and lawyers) in other countries don’t do this sort of thing as a general rule.

    I have to agree with some of the other comments here, if there was negligence involved that caused death or injury, then have at it. Sue the beejesus out of them.

    But diminished value? Are you kidding me?

  7. I see that I wrote:

    People (and lawyers) in other countries…

    I guess I was implying that lawyers are not really people. Just a slip on my part.

    I think.

  8. Ah, lawyers in America. Little pirhanas with sharp little teeth attacking an animal en masse that was in the wrong place at the wrong time.

    It’s only justice, they say. My client lost money on this car, they say. Surely that shouldn’t happen to anyone, they say.

  9. I say get them for every penny this has been one company who thought they could get away with all of the hidden things Sorry for the workers but not the managment…

  10. I know it makes me look like a shallow person, but I am taking a great deal of pleasure in Toyota’s problems. They’ve been on top so long and got there by selling the most boring products in the world to Americans that are completely devoid of any appreciation of good design. Forgive me if I rub my hands together with glee at their predicament.

    This schadenfreude is only natural. I’ve been forced to look at their drab product for decades, it’s everywhere I go. It would be wonderful if there was less of it to look at in the future.

    Here’s hoping Toyota loses lots of customers, money and market share.

  11. @javahound:

    Couldn’t have said it better myself.

  12. Toyota will gut it out and return to a normal state within six months. This will all seem like a bump in the road as they continue on to auto market domination.

    All you haters, enjoy this situation while you can, because Toyota is going to be around a very long time. And it’s going to be back on top before you know it.

    You guys just crack me up, with all your wishful thinking and statements of doom about Toyota.

    And another thing, it doesn’t matter if you think Toyota makes boring cars because millions of their customers buy a new one over and over again for decades.

  13. The actual cause of unintended acceleration is not known. Toyota has no clue and does not know how to solve the problem. They comes with excuses in typical Japanese style, like blaming users and stick accelerators made of course not in Japan but by stupid American engineers and workers.

    But reality will continue to bite, you cannot get rid of problem if you do not know how to solve it. So drama will continue, may be year after year. Toyota may be forced in the end to abandon drive by wire and reinstall cable in every single car and it means millions of cars. I can easily see ten of billions $$ lost. In the end they may decide that US market does not worth it. Consumer laws are too harsh in US, they can do much better in less developed markets. How about BRIC?

  14. PF Flyer is right then Toyota will be around for a long while. However it won’t be the dominant force it was once, with Hyundai and Kia who offer a interesting bang for the bucks, Buick who can give to Lexus a run for its money, Ford who can have a good fuel mileage with its Fusion, Focus and upcoming Fiesta. It’ll be more harder.

  15. I’m with Beat-nick, this is ridiculous:

    Toyota’s has been 3rd or 4th place in quality for several years now. It was inevitable that the resale value would eventually go down. It just took multiple massive recalls for people to finally notice.

    Once you buy something, it’s used. There is no guarantee of residual value.

    Ford, Hyundai, and Honda are going to be the only winners in this mess, not Toyota, and not Toyota owners.

    And the lawyers of course. The lawyers when no matter what.

  16. Good, I hope they lose beaucoup money.

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