Recall difficulties affecting resale value of used Toyota-brand vehicles

The Canadian Press ~ The News
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TORONTO - Toyota's wilting reputation is beginning to affect the resale value of its vehicles, with one used-auto pricing service cutting its valuations by US$200 to $500, depending on the model.
Kelley Blue Book, the U.S.-based company that helps consumers determine how much their used vehicles are worth, says it has lowered the resale value for the Toyota vehicles involved in the company's massive January recall by one to two per cent.
The affected models include the popular Camry, Corolla and RAV4.
The recall created a unique set of circumstances for KBB, but the devaluation ultimately came down to the fundamentals of demand and supply, said Juan Flores, director of vehicle valuations at KBB.
Toyota recalled 270,000 vehicles in Canada and millions more in the U.S., Europe and Asia due to reports of a defective pedal that can stick and take longer than usual to return to the idle position. This will likely impact demand for used Toyotas, particularly given that the problem has been linked to wear and tear on older vehicles.
In a survey on KBB's website, 20 per cent of people who were intending to buy a Toyota before the recall are no longer considering the brand, Flores said.
On top of weaker demand, the Japanese automaker briefly halted sales and production of the affected vehicles until it found a fix for the pedal problem.
"As the dealers are having to hold onto their inventory of vehicles and as the manufacturing plants have halted production, this is really building up supply inventory," Flores said.
"If you implement a basic supply-and-demand analysis, we know that when the supply returns, it will flood the market and that will put further pressure on prices."
The business manager of a used-car dealership in Oshawa, Ont., said he thinks the negative publicity that has engulfed the company over the last couple of weeks has been overblown, but he expects it will have at least a short-term impact on the value of used Toyotas.
"It's human nature, right? It's a fear, and I don't know if I would call it justified, but it's an emotional reaction to, 'All of a sudden, I can't drive this vehicle because it becomes a liability,"' said William Smith of RER Automobiles.
"Now people are rushing to get rid of them, and that would create an influx, a large number of vehicles all of a sudden for sale."
Smith said he's beginning to question how much he should pay for a vehicle that could be hard for him to sell.
"I'm the same. I'm purchasing them and thinking, 'I don't know. I'm not sure how much I should pay for a vehicle like that because of the situation,"' he said.
However, he added that the used-car market is "very volatile," and things can change quickly.
The potential damage the recall has done to the value of used Toyotas is part of a class-action lawsuit launched by Merchant Law Group, which argues that "the value of all affected Toyota and Lexus vehicles is decreased."
However, the number of searches for Toyota vehicles on Autotrader.ca has stayed steady, indicating consumers are still interested in the brand - and perhaps even think they can get a deal.
"Demand seems to be consistent to what it's been in the past. It's one of our top-searched brands on the site," said Scott Neil, director of online marketing at Trader Corp., which runs Autotrader.ca as well as the Auto Trader publication.
Neil said he hasn't noticed a change in pricing for used Toyotas on the website, adding the brand's reputation for quality seems to be powerful enough to offset temporary crises like the one the automaker is currently experiencing.
"I think their brand and their position in the market is resilient enough that this isn't really affecting consumers' opinions or their shopping patterns, at least on sites like ours," he said.
Toyota Canada dealerships began repairing priority vehicles last week and expect to replace all the defective accelerator pedals within the month. The solution is a simple one - installing reinforcement bars to eliminate excess friction - and only takes about 30 minutes to complete. Sales of the affected vehicles resumed on Friday.
The recall includes the 2009-10 RAV4 crossover, the 2009-10 Corolla sedan, the 2009-10 Matrix hatchback, the 2005-10 Avalon, the 2007-10 Camry, the 2010 Highlander crossover, the 2007-10 Tundra pickup and the 2008-10 Sequoia SUV.
The pedal recall is separate from another Toyota recall involving floor mats that can bend and push down accelerators. While the floor mat recall didn't affect Canadian vehicles, the two recalls combined affect more than seven million vehicles worldwide.
The company is also facing problems with the braking system in its iconic Prius hybrid, but has not yet issued a recall for that vehicle.

Organizations: Toyota Canada, Lexus

Geographic location: U.S., TORONTO, Canada Europe Asia Oshawa

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