LAS VEGAS -- When figuring a vehicle's residual value, the traditional rule has been straightforward: The newer the technology on board, the faster the car or truck will depreciate.
General Motors President Dan Ammann thinks it doesn't have to be that way.
Whether you agree with his contrarian view or not, it's worth pondering.
The industry faces an unprecedented influx of technologies: from electrification to increasingly autonomous vehicles. That means higher sticker prices. The ability of financing companies to offset those rising stickers with attractive lease terms depends on residual values. So Ammann's theory matters.
First, here's where that traditional rule came from. Let's say an automaker adds a head-up display to its flagship nameplate. If the feature turns out to work poorly, nobody will want that car at auction three years later. If it works well, further refinements may make that initial version look dated in three years.
Either way, the folks who predict residual values know that the car is likely to hold its value less than its peers because of the new technology. And that impacts the lease terms that financing companies will offer, unless the automaker subvents the lease.
But Ammann, meeting with reporters after giving the keynote speech at the American Financial Services Association's annual Vehicle Finance Conference last month, said the changing nature of technology could alter all that.
Citing GM's Super Cruise semi-autonomous highway driving system available on Cadillac cars, he said automakers will be able to upgrade technologies over the air. Instead of a technology becoming outdated, and dragging down the car's residual value, this means "it gets better over time," he said. Those upgrades "arguably could have a positive impact on residuals" and on the values of certified pre-owned vehicles, he said.
That's unlikely anytime soon. But if Ammann is right, at some point the companies that underwrite leases may have to rethink their assumptions.