This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Review our Privacy and Cookie Notice for more details. X

NADA Used Car Guide: Brand Value Impacts Used-Vehicle Pricing

NADA Used Car Guide: Brand Value Impacts Used-Vehicle Pricing

By Philly Murtha, October 07, 2016

A recent special report published by NADA Used Car Guide—a division of J.D. Power—finds that consumers have strong opinions about certain automotive brands, which can impact their decisions when buying or leasing a used vehicle. For instance, the report concludes that consumers are more likely to purchase a Porsche brand model because of its exterior styling and also less likely to avoid considering a Porsche for the same reason, based on data from the J.D. Power U.S. Avoider Study,SM 2014-2016. Interestingly, the mainstream Mini brand is purchased for exterior styling, but also avoided by consumers for the same reason.

Based on U.S. Avoider Study findings, exterior styling is less of a purchase driver for brands with reputations for durability, such as mainstream Honda, Subaru, Toyota, and premium Acura and Lexus. Perception doesn’t always match reality, however. These same five Japanese brands have strong reputations for making durable vehicles, but actually received below-industry-average scores in one or more recent editions of the annual J.D. Power U.S. Vehicle Dependability StudySM (VDS) that examine owners’ experiences with their 3-year-old vehicles.

Auto Sales photo

In a recent white paper, “Value Discovery: How Automotive Brands Affect Used Vehicle Prices,” the Guide’s team reports that Avoider Study data shows that consumers were less likely to avoid purchasing these five Japanese brands due to concerns about reliability. In contrast, consumers were more apt to avoid Chevrolet, Buick, Lincoln, and Cadillac brands based on their perceptions of these brands’ reliability—although these brands’ performance in the VDS were well above industry average.

What Makes Up Brand Value—Perceived and Real?

In addition to discussing factors like perceived and real new- and used-vehicle purchase drivers, NADA Used Car Guide’s team identifies factors they consider to set brand value and used-vehicle pricing that could be useful in buying a used vehicle. These include:

  • Measuring a vehicle’s physical features—body type (sedan, convertible, SUV); powertrain (hybrid, diesel); and performance stats (horsepower, torque, and EPA mileage ratings)
  • Market factors, including incentives; design year; and long-term durability ratings
  • Vehicle age and depreciation
  • Past 5 years of new- and used-vehicle sales data plus wholesale deliveries of all cars and light trucks for 8 years


How Do Brand Value and Pricing Interconnect?
At the industry level, NADA’s Used Car Guide team explains that they start with an average price for wholesale used vehicles of $18,000. A mass market used vehicle averages $15,000 and a luxury used vehicle averages $25,000. All factors highlighted above are examined to come up with a premium for a used-vehicle price. For example, luxury brand Porsche has a “sterling reputation for design, performance, and image of excellence,” according to U.S. Avoider Study results. NADA Used Car Guide therefore determines that Porsche receives a top 23% brand value premium, which translates into a $5,700 premium for a used Porsche vehicle over the $25,000 average price.

Among other luxury brands, Lexus ranks second with an 8% used-vehicle brand value premium, followed by BMW (5%), Land Rover (3%), plus Audi and Mercedes-Benz (2% each), according to NADA Used Car Guide’s valuation. In contrast, there are perceived quality concerns identified for two U.S. premium brands that influence pricing. Cadillac (-10%) and Lincoln (-4%) brand values and average used-vehicle prices are reduced by $2,625 and $3,475, respectively.

Among mass market brands, Mini (+21%) and Toyota (+13%) fare the best. Mini has a smaller customer base, but those consumers admire the brand’s performance and fuel economy, which means a used Mini is priced $3,100 higher than the overall used-vehicle average of $15,000. Toyota’s used vehicles also may have an average premium of $1,900 added. An interesting outlier in used-vehicle price valuation is Jeep (+8%), which has a higher average premium than Honda (+7%) due to Jeep’s reputation for “off-road capability” and its emotional image. Like Mini, Jeep’s image is highly rated in the U.S. Avoider Study.

Kia and Hyundai Post Changes That Improve Brand Value
During the past decade, NADA Used Car Guide’s team reports on significant changes in brand value and used-vehicle pricing. Two Korean brands—Hyundai (-16%) and Kia (-21%)—rank below the mass market mean, but their brand value and used-vehicle pricing averages have improved during each of the past 10 years: +3.5 percentage points ($460) per year. The team suggests that this change is consistent with both brands’ steady improvement in initial quality, reliability, and design, along with positive awareness based on J.D. Power study results. One more example: avoiding these brands due to reliability concerns has improved by 6 points over the past 5 years, while concerns about depreciation have fallen by 7 points—a best among mass market brands.

Additional Research:

Untitled Document

Subscribe to J.D. Power Cars Newsletter

* indicates required

View previous campaigns.


Advertisement
Advertisement
Advertisement
Advertisement









Get A Quote
Get a Quote