Residual values play a key role in determining lease rates and become somewhat relevant when vehicles hit the used lots.
Volt Gets Residual Reduction Too
With that in mind, we're somewhat displeased to say that ALG, a world leader in predicting automotive residual values, has cut residual values for most plug-in vehicles.
ALG cites high incentives and price cuts for the reduction in residual values, which hit the Nissan LEAF especially hard. ALG says the recent reduction in residuals led to a $2,500 price cut on a three-year-old LEAF. But then again, that was bound to happen as the entry level LEAF is now $6,400 cheaper than it was last yet.
Other plug-in vehicles, including the Chevy Volt, Mitsubishi i-MiEV, Focus Electric and Fiat 500e were hit with reduced residuals by ALG.
Eric Lyman, vice president of residual value solutions for ALG, added this to the discussion:
"We have some concerns with demand seemingly shorter than initial expectations, and what it means after all those early adopters have met that demand."
Reduced residual values typically mean higher monthly lease payments, so it'll be interesting to see if these $199 lease specials stay around.
As for Nissan, the automaker doesn't seem too concerned over ALG's revised values.
Automotive News says that ALG's Lyman listed these concerns as chief amongst those that led to reduced residuals:
- Robust retail incentives on new EVs and plug-in hybrids. That puts downward pressure on the resale value of used vehicles.
- Steep price cuts on models such as the Ford Focus EV, Chevy Volt and Nissan Leaf.
- Fuel-efficiency strides for internal combustion engines, including the availability of next-generation three- and four-cylinder engines with turbocharging and direct injection, that could make EVs and plug-in hybrids less desirable.
- Increased competition and potential overcapacity. Automakers have ambitious plans to introduce additional EVs, plug-in hybrids and conventional hybrids in the United States.