Is the US plug-in vehicle market going to be derailed by a vicious cycle of lower sales and their impact on residual vehicle values? That's one question that may be worth asking after ALG Inc. reduced residual values – the valuation of vehicles that are returned after leases end – for plug-ins and hybrids.
The most notable model that ALG took the hatchet to was the Nissan Leaf EV, whose 36-month residual value was cut by about $2,500, Automotive News reports. Values for other plug-ins like the Chevrolet Volt and some standard hybrids were also reduced, though by lower amounts.
ALG says it cut the values due to a combination of three things: recent price reductions on new alt-fuel vehicles, a possible oversupply of such models and the fuel-efficiency gains of gas-powered vehicles, which could cause potential hybrid and plug-in buyers to stick with gas-powered cars. The vicious cycle part comes in because, as residual values are reduced, dealers will be forced to hike the monthly payment amounts on new cars. This, in turn could (wait for it) cause demand to drop. Whether these reduced residual values actually have an impact on new-car sales remain to be seen. Thus far in 2013, plug-in vehicle sales have jumped thanks to increased demand for both the Leaf and the Volt.
The timing of ALG's re-appraisal isn't exactly fortuitous. Nissan didn't respond to Automotive News' request for a comment on the value reduction, but is recently announced it will soon start making used Leaf vehicles available under the automaker's certified pre-owned vehicle program.