Oldsmobile used-car prices have remained relatively stable since General Motors announced in December that it will phase out the brand, but off-lease residual values could begin to tumble as early as next month.
Leasing company executives, dealers and used-car experts say it is only a matter of time before the pending demise of Oldsmobile - coupled with industrywide reductions in residual values - drives the brand's residuals lower than those of comparable vehicles in their segments.
Lower used-vehicle prices and corresponding lower residual value - the estimated value of a vehicle at the end of a lease - could make new Oldsmobiles less attractive to consumers because monthly lease payments likely would rise.
Falling residual values could sting lease companies, too, because they lose money if a vehicle is worth less at the end of the lease than originally predicted.
The popularity of leasing has helped auto manufacturers set sales records the past two years. The downside has been a glut of used cars on the market. That depresses prices.
'There is no significant difference, but we will continue to watch this,' said Ricky Beggs, editor of the Black Book wholesale pricing guide, of residual values on Oldsmobiles. For example, in an analysis of auction prices of a dozen 1999 domestic vehicles - including the Olds-mobile Intrigue - Beggs found:
From Jan. 1, 2001, to Feb. 12, 2001, the prices of those vehicles declined an average of $345; the Intrigue dropped $200.
From Jan. 1, 2000, to Feb. 12, 2001, the prices of those vehicles decreased an average of $2,427; the Intrigue decreased $2,400.
Black Book generates its pricing information from actual prices paid for vehicles at wholesale auctions.
Look for adjustment
Raj Sundaram, vice president of Automotive Lease Guide, said his company is working on its next residual guide, due March 1. While he did not say how much Oldsmobile residuals will be adjusted, he did say they 'won't be improved.'
He said a big concern about Oldsmobile residuals is whether GM increases incentives on new vehicles. If it does, 'that would be detrimental.'
Economist Tom Kontos, a vice president at auto auction ADESA Corp. of Indianapolis, said he thinks the Oldsmobile phaseout eventually will have some negative impact on Oldsmobile's used-car prices and heavy new-car incentives won't help.
GM is offering up to $4,500 on a 2001 Bravada and up to $3,500 on all other 2001 Oldsmobiles. Oldsmobile spokesman Gus Buenz said the company feels that the vehicle's five-year, 60,000-mile warranty should help hold the line on used-car values.
'We strongly feel that after three or four years, a (comparable) Oldsmobile, Buick and Pontiac will be close in value,' he said.
Chip Doering, president of Doering Leasing Co., an independent leasing company in Milwaukee, said he has seen Oldsmobile residual values drop $1,000 to $1,500 since the phaseout announcement.
More than anything else, Doering attributes the decrease to industrywide cuts in residual values, but since GM's announcement, he has advised customers not to lease Oldsmobiles.
For those who do lease Oldsmobiles, Doering sets the residuals 15 percent to 20 percent lower than leasing guides recommend.
Jerry Duffy, vice president of Jefferson Leasing, an independent leasing company in Crofton, Md., no longer recommends Oldsmobiles to his clients, either.
'We pick and choose vehicles by market condition,' he said. 'Why should I recommend cars with anticipated lower resale value?'