Richmond Hill, Ontario – Residual values for passenger cars and light trucks declined in 2007, according to industry analyst Dennis DesRosiers, which means that used car prices are going down relative to their original price and that consumers are getting less for their vehicles when they trade them in.
DesRosiers based the analysis on actual residual value data from Canadian Black Book as of January 2008, matching the current residual value to the original MSRP of each vehicle at yearly intervals.
The largest drop in residuals was for light trucks at 24 months, which declined from 54.1 per cent to 48.8 per cent. The least affected were 60-month residuals, which declined about a point and a half for both cars and trucks.
“If you look through the data to the longer-term history, there has been softening of residuals in Canada for most of this entire decade,” DesRosiers said. “There has been the odd year where residuals strengthen, but for the most part, residuals have been declining. Across most terms, residuals have declined by between seven and 10 points since 2000. These lower residuals eventually have to be reflected in leasing contracts, which pushes up monthly payments. If they are not, then lessees will face significant residual value losses at lease end.”
Among the reasons DesRosiers cites are supply and demand variables, fleet sales, incentives, lower new-vehicle prices, introduction of new models, changes in consumer tastes for specific segments, the number of used vehicles exported and imported to the U.S., and issues surrounding vehicle quality.
By brand, the top passenger car 48-month residual belongs to Mini, with the average model worth 53 per cent of its original MSRP in 2008. Toyota was second, Mazda third, Acura and fourth and Volkswagen fifth. Among light trucks, Lexus had the best 48-month residuals at 50.7 per cent, followed by Infiniti, Toyota, Hyundai and Honda.