J.D. Power, a data analytics and consumer intelligence firm widely known in the auto industry has an agreement to purchase ALG, Inc., from TrueCar, Inc., for $135 million by year end. ALG is an industry specialist on automotive residual value projections in both the United States and Canada.
The acquisition is predicted to augment offerings from the data & analytics division of J.D. Power. It is subject to the necessary regulatory approvals. Upon approval and close, all 40 ALG employees will join J.D. Power.
“We believe ALG will bring complementary strengths and value to J.D. Power and its clients,” said Dave Habiger, president and CEO of J.D. Power. “For more than 50 years, ALG has made accurate and reliable residual value forecasts. Adding that component to our extensive data assets, valuation and analytic tools will enable us to provide even more value to our clients.”
Residual values are, of course, the foundation of auto leasing and are used across multiple segments of the industry. Almost 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. Accurately predicting the value of vehicles at the end of the lease term is an essential for automakers and finance companies.
Variables influence the actual residual value of a vehicle over a multi-year lease term. Examples include mileage, quality/reliability, options and feature sets, weather and the macro-economic environment. Since these factors need to be considered to accurately forecast residual values, the greater the understanding of the impact of each variable, the better makers and lenders can maximize profitability.
The combination of J.D. Power’s capabilities and data with ALG’s deep experience in residual values will allow for even more accurate end-of-lease forecasting capabilities it’s claimed. See JD.Power.com/business. The J.D. Power auto shopping tool can be found at JDPower.com.