Remarketers faced with the problem of accurately determining residual values of vehicles with aftermarket accessories and options are about to get some help.
About 30 people representing automakers, Automotive Lease Guide and others will gather at a Dec. 5 forum in California to discuss the need for standards to predict accurate dollar values for these items.
Consumer demand for accessories is driving the effort.
Steven Alan Fry, CEO of Motor Vehicle Atmarket of Irvine, Calif., said lessor portfolios are forecast to lose $7 billion to $11 billion because of overaggressive pricing and the large volume of off-lease vehicles re-entering the market. Portfolio managers attribute about 20 percent of those losses to depreciation of option packages and accessories.
'This is not a small trend,' he said.
Fry, whose company is working to create the software to generate these residual values, said the forum is significant because it is the first time automakers will gather to discuss standards.
Consumers spent more than $21 billion on aftermarket parts and accessories in 1999, according to the Specialty Equipment Market Association. Of that, 90 percent were sold somewhere other than at a dealership.
Raj Sundaram, vice president of Automotive Lease Guide, a Santa Barbara, Calif., company that forecasts residual values, said residuals are based on many factors.
Purchase price, whether the accessories are installed as part of an option package or separately and whether the items are factory-installed or dealer installed are among the factors affecting residuals.
'Prices vary by manufacturer,' Sundaram said. 'What Ford charges for a CD changer is different from what Toyota charges.'
Joe Poi, residual risk manager at Fort Motor Credit, said Ford predicts residuals for dealer-installed accessories because the parts are usually from Ford or a well-known supplier and installed by factory-trained technicians.
Poi plans to attend the forum - held at the headquarters of Tustin, Calif., marketing and consulting firm AutoPacific - because he wants to enhance his capabilities to predict residual values.
Cindy Heximer, director of relationship services at Remarketing Services of America in Amherst, N.Y., said it would help if the industry came up with a way to keep track of what factory trim levels and dealer-installed options and accessories were on a vehicle when it was purchased new.
Her company handles vehicle remarketing and lease maturity management for auto manufacturers, banks and other financial institutions.