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Learn how Autovista calculates residual values. Plus, discover why they are essential for success across the automotive industry.
Learn how to define a residual value and understand the difference between absolute and percentage values.
Understand why managing residual values is essential for automotive businesses across both new and used car markets.
Get examples of how automotive professionals take advantage of residual value to reduce risks and improve profit margins.
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What is a residual value?
In simple terms, a residual value (RV) is the value of a vehicle after an amount of time and distance travelled. Since this can cover any time and distance, there are an infinite number of potential age/mileage scenarios.
That means calculating accurate and comparable residual values demands a lot of complex data combined with local market expertise.
At Autovista Group, we are globally renowned for our robust methodologies and easy-to-integrate data. To learn more about our data accuracy standards, click here.
Absolute vs percentage residual values
Residual value can be understood in two ways:
- Absolute residual value: How much money a vehicle is worth after reaching a certain age/mileage milestone. This is typically used to predict actual costs.
- Percentage residual value: How much value a vehicle has retained relative to its price when new, presented as a percentage. This is typically used to compare and analyse market performance.
Percentage residual values make it easier to compare model performances and create pricing strategies.
Why it’s essential to monitor and manage residual values
Staying on top of residual value developments is critical to your financial stability – no matter where you are in the automotive chain.
OEMs use them to control price positioning and avoid B2B discounts. Leasing companies rely on them to determine around 85% of leasing rates. Remarketers use them to help decide when and where to sell.
But one thing remains the same. Boosting residual values enables you to sell more cars, more profitably.
Use residual value to accurately price used vehicles
Different vehicle models depreciate at different rates. There are a wide range of factors that influence a vehicle’s rate of depreciation, including:
- Equipment specifications (including optional extras)
- Service schedules
- Supply shortages
- Government regulations
- Much more
To calculate a vehicle’s residual value, apply these factors and look at how comparable models have performed historically on average.
Don’t have the time, or the data to do this? Our live retail pricing data lets you monitor the fastest-selling cars in real time. Talk to our experts to learn more.
Why residual values help you create more attractive vehicle models
Vehicles with higher residual values pose less financial risk and lower cost of ownership – making them a more attractive choice for both consumer and leasing customers.
So, when you understand the factors that impact residual value, you can build models that have a higher market appeal.
And since a 1% increase in residual value improves profits by €1million for every 10,000 vehicles sold, optimising residual values is essential for OEM profitability.
Our Car to Market team supports manufacturers with strategic residual value positioning up to 4 years before launch. Click below to learn more from our team.