GM’s Ignition Switch Recall Exposes Little Resale Price Volatility

Despite the recent setbacks facing General Motors caused by the recall of 2.59 million vehicles for ignition switch-related troubles, GM’s cars will not experience significant hits to their resale values, according to ALG, the auto industry benchmark for future vehicle values.

The GM recall involves the Chevrolet Cobalt, Pontiac G5, and Saturn Ion, among others. ALG has found the Cobalt’s transaction price has fallen a negligible $300 versus the segment average since the February 2014 recall announcement.

“Similar to Toyota’s widespread ‘unintended acceleration’ recall from 2009, GM has seen short-term impacts to its resale values,” said Eric Lyman, ALG vice president of editorial. “It’s unlikely there will be any long-term effects, however, and ALG has no reason to forecast lower values than previously projected.

“In fact, the data ALG has recorded since 1964 has proven that few ripples in the market have substantial long-term sales implications. We expect GM’s values to mimic what happened to Ford and Toyota after their mass recalls, with the affected vehicles hurting little more than GM’s reputation for several years.”

With past mass recalls, Ford and Toyota suffered value drops across their lineups. After the Ford Explorer’s 2000 and 2001 Firestone Tire recall, used-market values of the entire Ford Trucks brand fell below the industry average through the mid-2000s in terms of ALG’s Brand Pricing Score. Toyota’s above-average resale value has dipped eight percent from 2009 to 2014. But a more in-depth look at industry trends, including those of close competitors, indicates that larger shifts were in progress that may simply have been magnified by these events. ALG has recorded no slumps in GM’s resale prices outside of those recalled.

Since ALG’s Industry Report went to press, GM announced recalls for an additional 2.7 million vehicles, but ALG has not issued any further adjustments to resale values. ALG will continue to monitor the situation and consider adjustments if market conditions change.

The effects of GM’s ignition switch recall are covered in greater detail in ALG’s Industry Report, a macro look at the U.S. economy and the drivers in vehicle pricing, including gasoline prices, durable goods and interest rates, as well as trends in jobs reports and consumer confidence.

To obtain a copy of the ALG Industry Report, or for more information about ALG and its products, visit www.alg.com.

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