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Residual Values Hold Up Through Bankruptcy

07 Jul 2009

When you have a car company going through the great unknown of bankruptcy, you take the good news when it pops up. For Chrysler, the good news is the way residual values for new Chrysler vehicles are not only holding up, but actually rebounding a bit from when the company first filed for bankruptcy. It is the kind of proof the supports the arguments from the White House and elsewhere that bankruptcy would help, not hurt, Chrysler and GM.

According to Automotive Lease Guide, the residual values for Chrysler vehicles are all up 3.5 - 5 % for July and August compared to May and June.

Specifically, here are the residual values for each brand and how much they have increased:

RESIDUAL VALUE INCREASE

Chrysler 32.5% 3.7%

Dodge 34.8% 3.5%

Jeep 37.4% 5.0%

Remember, the residual value is what percentage of the sticker price a new vehicle is expected to have in three years. Predictions are based on a number of factors, including the used vehicle market, how big the incentives are for new models currently in showrooms, and of course how the brand itself is doing with new car buyers.

That last point is one that many thought would sink Chrysler when it filed for bankruptcy.

The fear was prospective buyers would avoid Chrysler, Dodge and Jeep out of fear the parent company wouldn't honor warranties, etc.

President Obama took that fear off the table when he said, "I stand with Chrysler" and pledged the Federal government would honor all warranties. Since then, Chrysler sales have not plunged as many, including me, predicted long ago when we discussed the problem of Chrysler going bankrupt.

While rebounding residual values is encouraging, it doesn't mean Chrysler is out of the woods. It still has a long ways to go to get back on track. But, for the moment, it's clear the worst looks to have passed, and Chrysler vehicles should hold their value compared to their level before bankruptcy.

LINK: Residual Values Hold Up Through Bankruptcy - Behind the Wheel with Phil Lebeau - CNBC.com
 

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Chrysler residuals rise after quick bankruptcy exit

Chrysler residuals rise after quick bankruptcy exit

Posted Friday, Jul 10, 2009, 10:21 am in Employee News

The Automotive Lease Guide bumped up residual values for all three Chrysler Group brands in July, primarily because of the automaker’s rapid exit from bankruptcy, but the values are still lower than they were before Chrysler LLC filed for Chapter 11 protection, the Automotive News reported.

The higher values can help prop up vehicle sales. With higher residual values, monthly lease payments are lower, and Chrysler trade-ins will be worth more, the Automotive News said.

In the July-August period, the 36-month residual values were 32.5 percent for Chrysler, 34.8 percent for Dodge and 37.4 percent for Jeep®, the paper said. Jeep’s value increased 5 percentage points from May-June, Chrysler’s rose 3.7 percentage points and Dodge’s rose 3.5 percentage points, the story said.

Anant Kamat, senior manager of U.S. incentives for Chrysler, told the paper the company’s inventory redistribution plan and vehicle production cuts were critical to boosting residuals.

ALG lowered residual values for Chrysler, Dodge and Jeep immediately after Chrysler LLC filed for bankruptcy. The 36-month residual values for each of the brands dropped 6 percentage points, the story said. (Automotive News)
 

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Chrysler vehicle resale value

ALG increases Chrysler vehicle resale value

Posted Monday, Jul 13, 2009, 10:58 am in Employee News

One month after leaving bankruptcy court, Chrysler has slashed inventories without selling cars at fire-sale prices and already is seeing the estimated resale value of its vehicles increasing, said a story in the Detroit Free Press.

Suspending production for nearly two months and giving priority to retail sales rather than discounted deals with rental companies are beginning to pay dividends, the Free Press said.

Chrysler’s inventory is down to 71 days’ supply at the end of June, down from 114 days on April 30, the date of its bankruptcy filing, according to Ward’s Automotive Reports.

According to the Free Press, Automotive Leasing Guide (ALG) has raised the residual values for Chrysler vehicles with leases ending this month and in August. For Chrysler-brand vehicles, ALG boosted the residuals to 32.5% of original sales price from 28.8% on leases that ended in May and June. Dodge residuals increased to 34.8% from 31.3%, and Jeep jumped to 37.4% from 32.4% in the previous two months.

“During our restructuring and bankruptcy in May and early June, the company managed inventory of the dealers that no longer had dealer agreements with Chrysler and cut vehicle production while maintaining retail market share,” said Anant Kamat, Senior Manager of U.S. Incentives. “These efforts during this unprecedented time in the auto industry resulted in ALG making an upward adjustment to Chrysler residual values.” (Detroit Free Press)
 
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