NEW YORK -- Hyundai is attacking the nagging consumer perception that its vehicles depreciate faster than the competition's.
In another innovative marketing program, Hyundai agrees to pay fixed sums for Hyundai trade-ins in the third or fourth years of ownership when the owner buys a new Hyundai.
The program guarantees the trade-in value of new vehicles bought from Hyundai dealerships starting May 1. Values are based on residuals set by Automotive Lease Guide.
"Now, people erroneously think that -- and our competitors sell them on the fact that -- our cars depreciate more than their cars," said Dave Zuchowski, Hyundai's U.S. sales boss. "This isn't true, but the customer doesn't realize that."
The risk to Hyundai is modest because the program will boost new-car sales at trade-in time and increase service revenue at Hyundai dealerships.
In its 2011 Residual Value Awards, ALG ranked Hyundai seventh among volume brands, after Subaru, Honda, Mazda, Volkswagen, Nissan and Toyota.
Eric Ibara, director of residual value consulting at Kelley Blue Book, predicts the resale values of Hyundai's vehicles will do well. His data show Hyundai's residuals have climbed sharply just this year -- an improvement consumers may not have noticed yet.
In its May-June guide, Kelley raised its residual projections for the brand to 43.6 percent of sticker price after 36 months, a 4.4 percentage point increase over its year-earlier prediction.
Much of the increase is due to improvements in the redesigned Elantra and the redesigned Sonata. Kelley set its 36-month residual value projection for the Elantra at 49.3 percent, an increase of 13.7 percentage points over last year. The Sonata's average is set at 45.0 percent, a rise of 9.3 percentage points.
Ibara doesn't know the guaranteed values of the vehicles in Hyundai's program, but points out that the program sounds similar to leasing, which also relies on guaranteed values.
Referring to leases, Ibara says, "Manufacturers will sometimes enhance a residual -- in other words, go with a higher value than they think it's going to be worth -- and that can be a marketing tool."
The buyback guarantee requires that scheduled maintenance be performed at Hyundai dealerships, and that could help with an issue nagging the brand: absorption, the percentage of a dealership's overhead covered by gross profit from service and parts.
Zuchowski said Hyundai's average absorption rate is about 50 percent. Stores selling Honda, Toyota and Ford vehicles often have absorption rates above 80 percent.
Requiring that recommended maintenance be done at Hyundai dealerships will increase service traffic, and Zuchowski said his "conservative" goal is for the average absorption rate to top 60 percent in two years.
Hyundai's program is similar to one Subaru of America has offered on every vehicle since November 2009.
Subaru's Guaranteed Trade-in Program guarantees the minimum trade-in amount Subaru owners will receive when buying a new Subaru.
The program is good for vehicles up to six years from the start of the original warranty, beginning with 2004-model vehicles, if they meet mileage and condition criteria.
Arlena Sawyers and Diana T. Kurylko contributed to this report