If you've read The Car Pro Jerry Reynolds' 8 Car Leasing Terms to Know or are a Car Pro Show listener, you're familiar with term "Residual Value". Reynolds' describes it as the car's wholesale value at the end of the lease as projected at the beginning by the lease company, and an important factor when shopping for a lease that impacts your monthly payments. Higher residual values translate to lower monthly payments, but increase the cost to buy the car at lease end. As Reynolds explains, this number is set in stone and you will know how much the residual value is when you enter into the lease.
2022 J.D. Power ALG Residual Value Awards
That brings us to the new 2022 J.D. Power ALG Residual Value Awards that recognize which brands and models are projected to hold the highest percentage of their manufacturer’s suggested retail price following a three-year period of ownership.
“Accurately forecasting residual values in the auto industry is a key factor in assessing an estimated $225 billion lease portfolio of vehicles in the United States,” said Eric Lyman, vice president of ALG. “The brands and vehicle models that rise to the top demonstrate that they score well across the award program’s criteria, including manufacturers’ superior design and quality.”
J.D. Power says residual value underscores an automaker’s success in the areas of long-term quality and design, as well as the overall desirability of automotive brands and their models. It also helps shoppers as it helps forecast a vehicle’s resale value once they sell or trade-in the vehicle for a new one, consistently cited as an important purchase consideration by shoppers.
Lexus, Honda Top Premium, Mass Market Segments
This year, 19 brands receive awards in 29 different segments following an evaluation of 284 models in which J.D. Power says it analyzed used-vehicle performance, brand outlook and product competitiveness. To be eligible for a brand award, a manufacturer is required to have model entries in at least four different segments. To account for differences across trim levels, model averages are weighted based on percentage share relative to the entire model line.
Lexus and Honda win top honors in the premium and mass market segments, respectively. In Honda also takes home three model-level awards, while Lexus has one segment-winning model.
“The achievement of Lexus speaks to an impressive, industry-leading continuity of residual value across its entire lineup,” Lyman said. “It’s like a decathlete who wins only one of the 10 individual events but scores enough points in each of them to stand atop the podium.”
Honda and Hyundai share the most model-level awards, with three each. They are followed by a diverse list of manufacturers winning in two categories: Audi, Kia, Land Rover, Mercedes-Benz, Subaru and Toyota.
- Honda: Civic, Passport and Odyssey
- Hyundai: Accent, Kona and Kona EV
- Audi: A6 Allroad and Q3
- Kia: K5 and Telluride
- Land Rover: Range Rover Velar and Discovery
- Mercedes-Benz: AMG GT 4-Door and Metris
- Subaru: WRX and Forrester
- Toyota: Tacoma and Tundra
J.D. Powers says noteworthy for 2022, the Mercedes-Benz AMG GT 4-Door tops long-time segment leader Lexus LS in the Premium Executive segment, while the new Ford Bronco beats out perennial winners Jeep Wrangler and Toyota 4Runner for top honors in the Off-Road Utility segment.
The Kona EV wins the Mass Market Electric segment and the Tesla Model Y takes top honors in the Premium Electric segment.
To see all the winners click here.
Understanding Residual Value
J.D. Power says a number of variables affect the actual residual value of a vehicle over a multi-year lease term. Examples include:
- options and feature sets
- weather and macroeconomic environment.
Since these factors need to be taken into account in order to accurately forecast residual values, the more granularity and greater the understanding of the effect of each variable, the better equipped manufacturers and lenders are able to maximize profitability. The combination of J.D. Power insights and data with the deep experience of ALG in residual values allows for even more accurate end-of-lease forecasting capabilities.
Photo Credit: Honda.