Toyota To See "Large" Hit From Used Car Values

Illustration for article titled Toyota To See Large Hit From Used Car Values

The Wall Street Journal reports this morning the super number one awesome best automaker from the land of the rising sun said it will set aside major reserves for its first quarter to cover losses from vehicle leases in the U.S. And with that, Toyota now follows Chrysler, GM and Ford into the land of plummeting used car values.

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Although Toyota spokespeople claim they're "going to have to make large provisions," they don't appear ready to comment on how much those charges might be as the automaker plans to report its fiscal first-quarter results for the period ended June 30 on Thursday.

Jalopnik Snap Judgment: Of Toyota's total vehicles sold in the U.S., about 16% were sold on lease compared to approximately 20% for the Detroit automakers. Still, that's enough of a liability to cause even the great and mighty Toyota to feel some pain on used car returns off leases. At a time of $4-per-gallon gas, those Tundra truck and big Highlander SUV buyers aren't going to want to be buying those cars back at the end of their lease term wethinks. [via WSJ (sub. req.)]

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DISCUSSION

@rlj676: I would like to point out that the European Makes actually do very well in their lease portfolios because of the following reasons:

1) Almost all of their offerings have a "want it" factor, rather than a "low lease number" factor. People routinely step up to the plate to lease a BMW, Volvo, or Benz, rather than being enticed by the latest detroit "fire sales".

2) To keep the residuals high, each of the European makes has an excellent "Certified" used car program. When a dealer takes in a lease turn in, they have a chance to either buy it off the captive leasing company, or have the leasing company run through "targeted" auctions. The dealer then "certifies" the car by performing the necessary 150 point inspection process, and brings the car up to that standard, all on the manufacturer. Then they offer an outstanding warranty on it. Toyota (Lexus), and Honda (Acura) also does this very well.

3) Most of the residual losses are confined to the rather large, fuel guzzling SUVs and trucks. Yes, BMW, Benz, and even Volvo will take a hit on those vehicles, with Mercedes probably taking the biggest hit because of the ML, G, GL, and R class trucks. The XC-90 will probably hold up better than most SUVs, as will the BMW X-3.

Of the new big 3 (Toyota, Honda, Nissan), Honda will likely escape the residual crisis unscathed. Yes the Ridgeline and the Pilot might take a big hit, but the Civic, Fit, and CR-V have actually increased in value. Nissan is taking a hit on their largely US manufactured Trucks, but their Altima, Versa, Sentra, and Rogue values have increased.

Also be aware that NONE of the Imports are as heavily dependent on the sales of Trucks and SUVs as the Detroit 3. The ratio of Trucks to Cars for Detroit has been roughly 60% Trucks / 40% cars. The highest ration of the import brands belongs to Toyota with a 70% Cars / 30% Trucks mix, and the ratios of cars to trucks in the rest of the import brands are even greater.