For years Toyota and Honda have been able to boast that their vehicles retain their value longer than their many of their competitors due to their higher perceived quality, but times are changing.
At the end of 2008 a three-year old Toyota was worth 46.5% of its value compared to 50.5% two years earlier. Critics are suggesting that the reason Toyota's residuals are dropping is due to a growing awareness of quality issues. Large SUV and truck values have been hit very hard across the industry and Toyota is no exception with values dropping from over 60% to 45.4%. Tundra residual values have managed to drop from 59.5% a year ago to 40.1%. Tundra residual values are still higher than the Silverado and F-150 at 39.8% and 32.2% respectively.
The main issue for automakers is that residual values are tied to lease rates. Monthly payments for leased vehicles are largely based on their expected residual value. When a vehicle loses more of its value than expected, the automaker has to eat that loss.
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