Hyundai's 'huge' rise in residuals may spur leases

Jim Henry
Automotive News -- January 18, 2012 - 12:01 am ET

The Hyundai brand made a big jump in predicted residual values for calendar 2012, according to ALG Inc., a widely used benchmark for residual values on leases.

Hyundai's residual values have risen as the brand's quality has improved and as Hyundai Motor America has rolled out new models, ALG said.

In the long run, that should make it easier for Hyundai to do more lease business, said Eric Lyman, director of residual solutions for ALG, in an interview last week.

"We don't usually see that much movement in only a year," he said. "That's a huge improvement."

Specifically, the Hyundai brand ranked No. 3 in ALG's 2012 Residual Value Awards, based on ALG's forecast for January 2012 through December 2012. It was No. 7 a year earlier. ALG made its 2012 forecast late last year.

Subaru and the Honda brand were No. 1 and No. 2, respectively, the same as a year ago.

A higher residual value implies lower monthly payments. In leasing, the customer in effect borrows the difference between the upfront cost of a vehicle and its predicted residual value at the end of the lease.

Lease penetration for the Hyundai brand averaged 17 percent for 2011, up from 12 percent in 2010, Hyundai spokesman Dan Lienert said. According to the Power Information Network, industry average lease penetration was 19 percent in the third quarter.

The Hyundai Elantra won ALG's compact car segment for the highest residual value. Meanwhile, the Elantra was also named North American Car of the Year this month at the North American International Auto Show in Detroit. Separately, the Elantra also won a 2012 Polk Automotive Loyalty Award with a customer-retention rate of 27 percent.

Despite favorable residual values, Subaru's lease penetration is below average. ALG said Subaru's lease penetration was only around 12 percent. Honda brand lease penetration was about 28 percent, ALG said.

Lyman said Subaru leasing is probably low because on average Subaru owners keep their cars a long time, so they're probably not that interested in leasing. The Subaru Outback won the Polk Automotive Loyalty Award for mid-/full-sized cars earlier this month, with a customer retention rate of 35.8 percent.

Said Lyman: "Subaru is getting to be kind of a cult brand."

You can reach Jim Henry at autonews@crain.com. Readers are solely responsible for the content of the comments they post here. Comments are subject to the site's terms and conditions of use and do not necessarily reflect the opinion or approval of Automotive News. Readers whose comments violate the terms of use may have their comments removed or all of their content blocked from viewing by other users without notification.

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