ALG: Employee Pricing Won't Affect Long-Term Residuals
SANTA BARBARA, Calif. -- Leasing is back on the rise, according to Raj Sundaram, president of Automotive Lease Guide, AutoRemarketing.com reported.
SANTA BARBARA, Calif. -- Leasing is back on the rise, according to Raj Sundaram, president of Automotive Lease Guide, AutoRemarketing.com reported. And while the domestics' big incentives of 2005 hurt residuals in the short term, he said there will not be a longer impact if the incentives are avoided in the future.
"Incentives are definitely negative for residual values," Sundaram told AutoRemarketing.com. "By itself, employee-discount pricing did not damage residuals because incentives were so high to begin with, especially for the domestics. The discount pricing caused some short term negative impact. We saw a big decline in used car values for a couple of months. Overall, these programs definitely hurt resale values in the short term, but they have recovered now.
"Domestics appear to be taking a different approach this year, as the market for new vehicles is clearly challenged," he continued. "It appears more and more that incentives have run their course and the automakers realize the need to take a different approach. GM is doing it as well as Ford. We'll all get to see if that succeeds or not. Incentives not only reduce the image of the brand, but they can hurt residuals quite a bit."
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