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How did Toyota and Honda used cars maintain their high values?


muscleman
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When I look at the new car sales, I see these two have a lot of leased cars as the % of new car sales. US cars have caught up in recent years but there is the concern that this year 3 million cars coming out of lease will damage the used car values.

 

Does anyone know how the Japanese cars maintained the values while having a high % of leases?

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If you even have to ask this question, then you have never owned a Toyota.  Picture buying a car with $16K miles, driving it until it has 252K miles and in all that time doing nothing but changing the oil about every 10K to 15K miles, replacing the breaks and tires when needed, and doing the timing belt once and a tune up once.  That was my experience with just one of the Toyotas that I've owned.  BTW I only got rid of it because I wanted a larger vehicle.  It still ran like new with over a quarter of a million miles on it. I'd pay a lot more for a Toyota with 200K miles than a Chevy with 60K miles, and so would anyone else in their right mind (see used car prices).

 

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I've never owned a Toyota, but part of it may be their long-term mindset (Rule #1 "Base your management decisions on a long-term philosophy, even at the expense of short-term financial goals."). If you treat your products and customers as long-term assets the market should value them similarly. I've heard from Subaru owners that the Subaru dealer network makes it so pleasant to own a Subaru that they have no reason to ever look at anything else. My mom has a Toyota and nothing has ever broken so it's hard to comment on the dealer experience!

 

I own a "certified pre-owned" BMW and they take the exact opposite approach. The dealer network (at least in Southern California where I was at the time) couldn't be more short term focused if they tried. Now it's off "warranty" so I take it to a private shop (in Colorado) that I've been happy with. Even between those two the difference in attitude is stark; "You bought your car at a different dealer so it's obviously a lemon" versus "That's an awesome car. Have fun you shouldn't have to see us for a long time".

 

The little things matter too.

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I agree with rkbabang 100%.  I guess the size of the off-lease pool will affect overall demand for used cars but I think you are overthinking this.  The cars are just very reliable and so they hold their value.

 

There are really two kinds of car buyers.  The new car people who like to buy or lease a brand new vehicle every 3-5 years and the used car people who like to buy a vehicle which is already 3 years old and drive it for 10+ years.  The new car people don't notice much of a difference between the various brands/companies and will tell you that American cars are just as good, or german cars are just as reliable, etc because almost any new car will be pretty good for the first 3 years, but the used car people know that there is a tremendous difference between the different makes.

 

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I agree with rkbabang 100%.  I guess the size of the off-lease pool will affect overall demand for used cars but I think you are overthinking this.  The cars are just very reliable and so they hold their value.

 

There are really two kinds of car buyers.  The new car people who like to buy or lease a brand new vehicle every 3-5 years and the used car people who like to buy a vehicle which is already 3 years old and drive it for 10+ years.  The new car people don't notice much of a difference between the various brands/companies and will tell you that American cars are just as good, or german cars are just as reliable, etc because almost any new car will be pretty good for the first 3 years, but the used car people know that there is a tremendous difference between the different makes.

rk is 100% spot on. I've bought about 12 cars for me and my family. All used. There is a lot of difference between brands. Toyota/Lexus is the king. The only other ones that come close to Toyota are Honda and Subaru. -- Maybe just a coincidence that Subaru is part of the Toyota family?

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I think pretty everyone know about the reliability difference.

 

How come the German and American auto companies don't  try to improve reliability? Their management just don't care?

I think with the Germans they don't care and I don't think it would make a big difference in their business.

 

With the Americans I think it's a combination of culture and don't care. But culture mainly.

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Hey all:

 

I and my family have owned many, many GM cars over the years, along with Ford's and German makes...

 

GM has no doubt improved their quality...but it is frequently BELOW what it should be, especially for their higher end models.  Why do we keep buying them?  Partially because we are stubborn...but even more importantly, because we can get them stupidly, unbelievably cheap. (used)

 

Sure, the quality is not as good as the Japanese, but when you get such a HUGE discount, it is hard to say no.

 

GM has a MAJOR, MAJOR, MAJOR problem with their dealers....some are actually OK, but a disturbing number are like carnival hucksters.  The stories I could tell!  I've never encountered dealers as stupid as GM dealers...

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I think pretty everyone know about the reliability difference.

 

How come the German and American auto companies don't  try to improve reliability? Their management just don't care?

 

It isn't as simple as German/American vs. Japanese, because there are Japanese companies which don't have the reputation for reliability (Mazda, Nissan, or Mitsubishi) and after a rough start Hyundai is pretty good now and it isn't Japanese. 

 

Since the only thing reliability effects is the re-sale value, which is not something new car buyers focus very much on, maybe the better question is why does Toyota, Honda, and Subaru bother making such reliable vehicles?  Surely there must be a point of diminishing returns with spending resources worrying about the 2nd and 3rd+ owners of your products instead of only on the people who buy them new?  I'm glad they do though.

 

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Have two Toyotas right now.  There are parts to fix, but no catastrophic failures like blowing a head gasket at 100k miles (every GM I've owned).  Things wear out, radiators, drive belts.  But we push our vehicles very hard too, towing, rough roads etc.  They hold up well and just keep working.

 

I take our vehicles to a local mechanic.  He said he doesn't recommend people do more than cursory repairs at 150k for GM/Ford, and 100k for Chrysler.  He said he'll do major stuff on Toyotas and Hondas to 250k or more.  With them as long as they aren't rusting out they'll continue to work forever.

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In the hobbyist CPU market, people literally track which factory and production run the chip was assembled in to determine quality.

 

I wonder why people don't do this with cars. There must be a german factory somewhere still pumping out quality BMWs. Same with toyota, honda, jeep, etc. And the same with some factory from the same automaker which is assembling garbage.

 

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In the hobbyist CPU market, people literally track which factory and production run the chip was assembled in to determine quality.

 

I wonder why people don't do this with cars. There must be a german factory somewhere still pumping out quality BMWs. Same with toyota, honda, jeep, etc. And the same with some factory from the same automaker which is assembling garbage.

They do so to some extent. I couple of years ago when I was looking to buy a Buick for my mom and I was doing research. The car was made at two factories - in Germany and in Canada. As I was doing my research I found out that people figured out that the ones made in Canada were more reliable and were looking to buy those ones - identifying them by their VIN.

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Hey all:

 

I and my family have owned many, many GM cars over the years, along with Ford's and German makes...

 

GM has no doubt improved their quality...but it is frequently BELOW what it should be, especially for their higher end models.  Why do we keep buying them?  Partially because we are stubborn...but even more importantly, because we can get them stupidly, unbelievably cheap. (used)

 

Sure, the quality is not as good as the Japanese, but when you get such a HUGE discount, it is hard to say no.

 

GM has a MAJOR, MAJOR, MAJOR problem with their dealers....some are actually OK, but a disturbing number are like carnival hucksters.  The stories I could tell!  I've never encountered dealers as stupid as GM dealers...

Using the discount on the used American cars makes sense if you have a way to get them fixed cheaply and easily (let's say you're a mechanic). But if they break down less than once in a blue moon, but if they break down more often and you need to take time off from work/find alternative transportation when they break then costs are piling up really quick and you blow through the discount in no time.

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reliability is a factor, fleet sales which affect supply and demand is also a factor

 

i think the fact 80's, 90's and early 2000 american cars are not so great is pretty well known (nothing new here), the question is how is it now and in the future.

 

at least from recent jd power some american cars are just as reliable if not more so than japaneses cars, obviously this depends on make and model. yes jd power is not testing for long term reliability, but i think we have to look at all the facts and if facts change we need to change our thinking as well.

 

here is a 2017-2013 version:

http://st.motortrend.com/uploads/sites/5/2017/02/2017-jd-power-vds-chart-1.jpg

http://d1arsn5g9mfrlq.cloudfront.net/sites/default/files/2016_vds_rank_1.jpg

http://d1arsn5g9mfrlq.cloudfront.net/sites/default/files/2015%20VDS%20Slide1_0.jpg

http://d1arsn5g9mfrlq.cloudfront.net/sites/default/files/resize/remote/0400f6f33bf4cb6c2a889772d4418934-720x960.jpg

http://autoguide.com.vsassets.com/blog/wp-content/uploads/2013/02/jd-power-graph.jpeg

 

EDIT: I believe honda does not sell to fleet, i think that is a important factor to their resale value

 

EDIT 2: I find it a little amusing, people here on this board are "value" investors, if we apply the same principles and way of thinking to cars, maybe there are cars that is undervalued (more reliable than perception) or overvalued (less reliable than perception) or do people think car values are pretty much right on the money? obviously there are other factor like brand, looks etc.

 

 

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Hey all:

 

I and my family have owned many, many GM cars over the years, along with Ford's and German makes...

 

GM has no doubt improved their quality...but it is frequently BELOW what it should be, especially for their higher end models.  Why do we keep buying them?  Partially because we are stubborn...but even more importantly, because we can get them stupidly, unbelievably cheap. (used)

 

Sure, the quality is not as good as the Japanese, but when you get such a HUGE discount, it is hard to say no.

 

GM has a MAJOR, MAJOR, MAJOR problem with their dealers....some are actually OK, but a disturbing number are like carnival hucksters.  The stories I could tell!  I've never encountered dealers as stupid as GM dealers...

Using the discount on the used American cars makes sense if you have a way to get them fixed cheaply and easily (let's say you're a mechanic). But if they break down less than once in a blue moon, but if they break down more often and you need to take time off from work/find alternative transportation when they break then costs are piling up really quick and you blow through the discount in no time.

You've got a point...but it depends on how much a discount you get....If you can buy a 8 year old Buick with 70k miles on it for $3k....you very well might be able to run it another 70k+ miles.  Will it be in the garage for repairs?  Yes, most definitely...but if this is kept to 1-2 days a year or so it is probably worth it. 

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A friend of mine owns a used car lot and he loves the older, small Japanese cars - can sell them no problem at a good price.  People want them because they are seen to be higher quality, their engines go forever, usually well over 300,000 miles and less worries about major repairs like transmissions.  He has a lot of younger buyers, like students, but also some older people who just want unflashy, cheap transportation.  He says he'd much rather get a 2007 Honda than a 201 Chevy.

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I think pretty everyone know about the reliability difference.

 

How come the German and American auto companies don't  try to improve reliability? Their management just don't care?

Different engineering philosophies

 

German: precision, handling, styling heritage.  they don't see upkeep as some tremendous failure -its part the course for the handling and precision they trumpet.

 

Japanese: reliability, efficiency above all else.

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About reliability, maintenance, Toyota and the future:

Toyota is shifting its offer to hybrid vehicles. While market share in Europe has been 4% since 2010, first quarter 2017 hybrid vehicle sales have been 39% of those.

 

In general, hybrid vehicles seem to have much lower maintenance and less accidents. Toyota has a much bigger experience in the area than other brands.

 

The thing is, if all brands accompany the shift to hybrid/electric isn't it possible that the reliability difference will fade? Will Toyota experience in hybrids allow them to keep on top in reliability?

 

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I think pretty everyone know about the reliability difference.

 

How come the German and American auto companies don't  try to improve reliability? Their management just don't care?

Different engineering philosophies

 

German: precision, handling, styling heritage.  they don't see upkeep as some tremendous failure -its part the course for the handling and precision they trumpet.

 

Japanese: reliability, efficiency above all else.

 

I would also describe it as a difference in engineering philosophy.

 

Here in Europe, we don't see distance the same way an American would see it. The distances we do are generally way, way shorter. I would assume that an American sees 200 miles as a distance that can be easily covered, while a Belgian is travelling across his entire country doing that. In general, we tend to drive a lot less, therefore putting less miles on our cars.

 

If you sell a car in Belgium, anything above 125.000 miles is already considered to be 'hard to sell' and most people assume that by the time it reaches that distance, it is to be written off completely. I would be surprised that the average Belgian puts more than 7000 miles per year on his car. In general cars that reach that mileage are 15 years old or something (just a guess).

 

German manufacturers put less weight on durability over a large amount of distance, because the main market for selling the cars doesn't put as high of a premium on that aspect.

 

G.

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Political Correctness be damn!!!

 

If you compare cars to woman, it goes like this:

 

Toyota and Honda are like Asian woman - Good looking/low maintenance and stays that way well into their 50s and 60s

BMW are like hot German blondes - Smoking hot and lots of fun in their 20s and maybe early 30s, after that it requires a lot of upkeep, i.e. botox and going under the knife

 

Unleash the SJW!!!

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Hey all:

 

I and my family have owned many, many GM cars over the years, along with Ford's and German makes...

 

GM has no doubt improved their quality...but it is frequently BELOW what it should be, especially for their higher end models.  Why do we keep buying them?  Partially because we are stubborn...but even more importantly, because we can get them stupidly, unbelievably cheap. (used)

 

Sure, the quality is not as good as the Japanese, but when you get such a HUGE discount, it is hard to say no.

 

GM has a MAJOR, MAJOR, MAJOR problem with their dealers....some are actually OK, but a disturbing number are like carnival hucksters.  The stories I could tell!  I've never encountered dealers as stupid as GM dealers...

 

Can you give an example of how you got a specific used GM stupidly cheap?

I noticed that American cars probably have huge discounts even for new cars. I bought a Ford Mustang in 2015. The MSPR was 27000 or 29000. I forgot. But I got it for 22000 plus 0 down 0 interest loan for 6 years.

 

Recently I was considering a Chrysler Pacifica limited. The MSRP was 44k and they said they could sell at 36k.

 

 

 

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My cars:

 

Pontiac Ventura:'garbage

Dodge Colt: ran two years for 950 dollars.  Mit. built them.

Chevy S10:  Actually dissolved

Mazda B210: okay, not great (by ford)

Mazda MPV: (ford): Garbage - dissolved as well.

Honda Civic: Actually made money from this vehicle driving for work and on resale.  Awesome vehicle.

Ford Escort: Need I say more. 

Honda Accord (awesome):  Oh, it just cost me money, for the rear brakes. 

Hyundai Sante Fe: good vehicle but some weird quirks. 

 

In summary:  Will not buy from German cos., or GM, Ford, Chrysler ever again.  Of all I hate GM so bad it will take a generation of extreme quality to convince me they have changed. 

 

Its got nothing to do with where the vehicles are made.  The Civic, and Corrola, are both made close to Toronto.  Its the company culture.  Honda and Toyota have a reputation for quality and reliability.  They can charge more for the new vehicle and dont have to discount to sell vehicles.  People have to order Subaru's in advance. 

 

Its no different than any other business with high up front costs.  People who have more money and patience will wait for the good contractor rather than go with the cheap contractor. 

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Cars we've owned in order purchased:

 

Ford Mustang

Jeep Cherokee

Chevrolet Suburban

Volvo S60

VW Passat

Toyota Land Cruiser

Porsche 911

Range Rover

 

Still have the Range Rover and Land Cruiser.  Will likely only buy Toyotas (or Lexus) for now on.

 

Thanks

Lance

 

 

 

 

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