The Toyota Sequoia topped the Chevrolet Suburban for retaining its value among 2001 full-sized sport-utilities, another sign that import brands are trampling the former Big 3 preserve of light trucks.
Automotive Lease Guide, an industry benchmark for residual values, was expected to give an award today, July 2, to the 2001 Sequoia for the highest predicted residual value of any full-sized sport-utility vehicle - a category that General Motors has dominated.
For the first time, import brands won every category in Automotive Lease Guide's awards - cars or light trucks.
Another Toyota truck, the Tacoma pickup, was this year's compact truck winner. Last year's winner in that category was the Dodge Dakota Quad Cab. A higher predicted residual value is a huge competitive advantage in leasing.
When leasing a vehicle, the customer in effect borrows the difference between the up-front cost and the predicted residual. A higher predicted residual means lower monthly payments.
'It's a definite advantage,' said Raj Sundaram, Automotive Lease Guide vice president, who added that the award is based on the average residual in the last eight months.
For a 36-month lease, Automotive Lease Guide predicts in its residual value guide for July-August 2001 that the Sequoia will retain 51.5 percent of suggested retail compared with a segment average of 48.7 percent.
The sticker price for the 2001 Sequoia Limited model is $42,755, plus the destination charge, so every 1 percent of sticker price represents $427.55.
The Chevrolet Suburban was a close second, at 50.5 percent of sticker.
Automotive Lease Guide has sharply cut back its predicted residual values this year out of concern for a glut of off-lease vehicles and because growing incentives on new vehicles could further depress the value of used vehicles.
Sport-utilities have been hit especially hard. In the Automotive Lease Guide for November-December 2000, the segment average for full-sized sport-utilities was 55.3 percent compared with 48.7 percent today.
The Chevrolet Suburban had a residual of 57.3 percent of sticker in the November-December guide. With a sticker price of $31,545, reducing the predicted residual from 57.3 percent to 50.5 percent in the July-August guide means that Automotive Lease Guide has cut the predicted residual by $2,145 this year.
Similarly, the Sequoia had a 54.5 percent residual in the Automotive Lease Guide for January-February 2001. Six months later, the present residual of 51.5 percent represents a drop of $1,283 for the Sequoia Limited.
Sundaram said that in response to lower Automotive Lease Guide residuals, some automakers are diverting incentive money into low-interest loans and/or cash rebates.
Some automakers are sticking to residuals that are higher than Automotive Lease Guide's, but they are more careful to set aside money for expected losses on off-lease vehicles, he said. Off-lease vehicles that are returned to the lessor are likely to generate a loss when they are resold at a wholesale auction.
Said Sundaram: 'On the residual side, (automakers) are being very, very careful. Those you see that are (using predicted residuals) over us, are setting aside reserves. Before, they were over us, and they just didn't care.'