Our colleagues at J.D. Power write today after its purchase of ALG from TrueCar that it will increase its “vision” of automotive residual value forecasting. This is important to Power, automakers and dealers as the industry prepares to launch many new electric vehicles. Along with this comes increased vehicle automation and other emerging technologies – all with uncertain levels of consumer acceptance, as well as variables caused by increasing government regulations and incentives along with resulting market dynamics.
The money involved right now is breathtaking. Determining an accurate residual value – the value of a vehicle at the end of a lease term is the underpinning of auto leasing because it allows dealers and manufacturers to set the most competitive lease terms today, while protecting their profits tomorrow. About one-third of new vehicles sold each year are leased, typically for a three-year term. At any point in time, the value of vehicles in outstanding lease portfolios is estimated at $500 billion by Power.
“The industry is about to experience a product shift unlike anything it’s ever seen before with new EV models and other new technologies quickly gaining adoption over the next several years and beyond,” said Dave Habiger, president and CEO, J.D. Power, not without self-interest.
J.D. Power claims to be a global leader in data analytics and consumer intelligence, while ALG is the industry specialist on automotive residual value projections in both the United States and Canada. ALG is being integrated into the data & analytics division of J.D. Power.
Power is betting its existing market performance-based values and individual vehicle configurations will become an increasingly esteemed or necessary business tool as the electric vehicle segment grows. The focus on new vehicle technologies and retail channels provides an opportunity for significant evolution.