How Hyundai is Using Customer Loyalty to Cut Down Leasing Costs

By Joel Arellano | April 13, 2012
Both car buyers and dealerships like high residual values on vehicles. Car owners like them because it makes it easier to sell their vehicle for a good price later, and dealerships like them for pretty much the same reason. All automakers covet such an accolade on their brand (witness Toyota, Mercedes-Benz, and Porsche) but know it can take years to build such a reputation. Hyundai has been on a hot streak upward—in both cars sales and reputation—the past few years in the states. Though selling cars worldwide since 1967, the Korean automaker didn't make its first sale here in the states until 1986. U.S. Hyundai sales have gone up and down since then, but much of it under the public's radar, though not the auto news industry. In 2007, Hyundai announced it had sold more five million vehicles in the U.S. and was the world's sixth largest automaker. Events really took off for Hyundai a couple of years later with the introduction of all-new products like the 2010 Hyundai Tucson crossover and the 2011 Hyundai Sonata sedan. The latter, especially, surprised the public and even members of the mostly jaded car press, who considered Hyundai more of a "discount" car make than a serious competitor to stalwarts like Toyota, Honda, and Ford. Hyundai not only saw sales up that year, but consumer loyalty rose rapidly in that period of time as well, even beating Toyota and Honda owners. According to Hyundai CEO John Krafcik, current owner loyalty to the brand is between 55 to 60 percent, with J.D. Power and Associates estimating the figure to be around 64 percent, the highest among car brands. Such loyalty translates to more leasing from consumers, which in turns drives up residual values. Higher residual values actually cuts monthly lease payments, because the figure is based on how much the lessee paid in upfront cost, and how much the vehicle will be worth. Hyundai vehicles, which cost less than most of the competition, generate very good rates for both the lessee and the automaker. ALG Inc. predicts Hyundai vehicle residual value averages around 49 percent, just  behind BMW's Mini lineup, Subaru, Honda, and Toyota's Scion brand. States Krafcik, "Our residual values have been coming in very, very high."'s take: Experian Automotive, in a study done in 2008, said that an automaker will see around 15-percent of its customers will be repeat buyers. That translates to more than $400 million in yearly sales for an automaker with ten million vehicles on the road. As car shoppers continue to see fewer and fewer differences among automotive makes and models, it's imperative they take steps to ensure continue to stay within the brand. What keeps you going back to your favorite brand(s)? Residual value? Reputation? Specific offerings like hybrid vehicles? Let us know in the comments below. Source: Automotive News (Subscription required)