General Motors Company (GM): Why Does It Care About Used Car Prices?

Put another way, GM can raise its residual values, it could save up to $200 million a year just on its leasing business – never mind the added potential benefits, like more sales and increased customer loyalty.

So how will GM raise those values?
What GM needs to do is what Ford Motor Company (NYSE:F), whose residual values were a little ahead of GM’s last year, has been working hard to do: Make better cars and trucks that can command premium prices with lower sales incentives. That’s the formula for improving resale values, in a nutshell.

General Motors Company (NYSE:GM)’s cars and trucks are getting better. It’s the pricing that will require discipline, as Ford has discovered. Even though Ford – which is ahead of GM on the product improvement front – is building some seriously nice vehicles, and has mostly achieved parity with the industry’s best on the quality front, its incentives are still higher than those paid out by rivals like Toyota.

Ford has already reduced its incentives considerably over the last few years, and most expect the company to continue to ratchet them down over time. For General Motors Company (NYSE:GM) to make gains on residual values, it’ll have to stay focused on following suit.

The article Why Does GM Care About Used Car Prices? originally appeared on Fool.com and is written by John Rosevear.

Fool contributor John Rosevear owns shares of General Motors and Ford. Follow him on Twitter at @jrosevear. The Motley Fool owns shares of Ford. Motley Fool newsletter services recommend Ford and General Motors.

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