Residual Perception

Ford is prepping an ad campaign to tout its vehicles’ residual values.

For years, trade-in values for Ford cars were hurt by hefty discounts and fleet sales. Now that the manufacturer has better aligned inventory levels with demand, those resale values are climbing. According to recent data from Automotive Lease Guide and RL Polk, the average residual value on a three-year old 2010 Ford car or truck will be $1,310 higher than for a 2009 model. The reasons: improved quality, new features, and popular redesigned products.

In fact, Ford claims that the trade-in value of its Fusion sedan is $687 higher than that of a comparable Toyota Camry, and the resale value of a 2010 Flex commands is $1,800 higher than that of a Toyota Highlander.

It will be interesting to see whether the ad campaign affects consumers’ buying habits for Ford vehicles, and whether it bolsters lease volume, in general.

Tags: ford, resale, residual, toyota, trade-in

Comment by Jeff Cook on December 21, 2009 at 12:34pm: That is great news! Any idea who at Ford is behind this? After years of cannibalizing their residuals with hefty incentives, subventions and fleet sales, it is great to see one of the Detroit three make a concerted effort to shore up residuals.

Comment by David J Pilcher on December 21, 2009 at 1:13pm: There have always been several factors discussed when talking about what affects residual values . I believe that the level of front end rebates and incentives are the "result of" the greatest determining factor that influences a vehicles residual value. Marcie hit on the most important economic fundamental that influences this whole residual discussion, "matching supply with demand". At the center of the incentive philosophy is a very simple and accurate notion. The fundamental reason for an incentive is to increase demand so that sales will reach the supply. If the supply was too high to begin with, this imbalance follows the model through its economic life and continues to create downward pressure on the ongoing value of the unit. The most effective way to enhance residual value is to be more accurate in matching initial supply and demand. The more accurate this balance, the less need for front end incentives. The more accurate this balance the better the ongoing residual value is enhanced. I strongly believe that most, if not all, the OEM's now realize that volume takes a back set to profitability. Core profitabilty is grounded in the proper balance of profit per unit at a volume that matches supply with demand. Case in point--look at Honda bottom line versus the rest of the industry (including Toyota) over the last 4 or 5 years. They truly understand this concept better than everyone else. I believe you will start to see this same trending with others and one of the first is Ford. My 2 cents worth

Comment by Marcie Belles on December 21, 2009 at 1:18pm: Jeff -- I've searched around a bit, but haven't yet been able to find any more specific details. I'll keep you posted.