If you own one of those Toyotas that was just recalled, your vehicle could be worth less now than it was a few weeks ago.
USA Today said two of the most important auto valuation services, Kelley Blue Book and ALG, estimate that the recalls could lead to an estimated 5 percent depreciation value over the period of time it takes to fix the recalled vehicles:
“That’s the verdict of two carefully watched services, Kelley Blue Book and ALG, that make a business out of estimating the value of used cars. For decades, Toyotas have been among the strongest vehicles for resale value. But now, with safety shortcomings in some of the vehicles laid bare, it may become harder to resell their new cars when they go on the used-car market. Residual values could suffer.
“KBB and ALG seem to agree that Toyota’s public-relations nightmare, unless somehow miraculously corrected, could result in about 4% to 5% additional depreciation value on the vehicles it currently has on the streets.
“It’s not just about the models being recalled. The bad reputation would permeate the entire line. Safety problems could wind up costing Toyota owners a bundle.”
The New York Times said that given the low demand for the brand at the moment, it is a terrible time to trade in your Toyota. The Times interviewed Phil Reed, senior consumer advice editor at Edmunds.com, about the issue:
“Regardless of the exact percentage, the drop in the resale values of recalled Toyotas means that the $1,000 trade-in incentives other car makers are offering to Toyota owners aren’t necessarily good deals. ‘I would strongly caution anybody against responding to those incentives,’ said Mr. Reed of Edmunds.com (see more tips from Edmunds.com for owners of recalled Toyotas here). ‘While car dealerships are saying they are going to give $1,000 extra, it could be $1,000 over a very low price.’
“In addition, if history is any lesson, resale values tend to drop soon after major recalls and then eventually rise again. After the recall of Ford Explorers earlier this century because of tire failures, the resale values of the models dropped 2 to 3 percent or so initially and then gradually caught up again five to six months later, according to a preliminary Kelley Blue Book analysis.
“With Toyota’s long reputation for safety, quality and reliability, car industry experts at this point expect Toyota’s resale values will similarly return to some level of consistency within three to four months.”