GM's Ignition Recall and Its Impact on Used Vehicle Prices

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By USDR

Auction sales data indicates that General Motor’s well-publicized recall of approximately 2.6 million vehicles for faulty ignition switches has done little to affect used vehicle prices, says NADA Used Car Guide.

Initially announced on Feb. 10, GM’s recall addresses defective ignition switches that could inadvertently be switched off due to weight on the key ring or jarring road conditions, factors that could cause the engine to shut off and prevent airbag deployment in the event of a crash. The recall covers Chevrolet Cobalt and HHR, Pontiac G5 and Solstice, and Saturn Ion and Sky models produced for model years 2003 – 2011.

“Chevy Cobalt prices have continued to move in a manner similar to competitive models within the compact car segment,” says Executive Automotive Analyst, Jonathan Banks. “Cobalt prices haven’t declined any more dramatically than those of the Dodge Caliber or Ford Focus.”

On a sales weighted basis, prices of 2005 – 2010 Chevy Cobalts fell by 9.4% from March to June. By comparison, overall compact car segment prices declined by 10.6%. Prices for Chevy’s recalled HHR fell by a smaller 6.9% over the period.

It’s possible that the older age of GM’s recalled models, which range in age from 4 – 11 years old, is helping to prevent a distinct decline in prices.

“So far, price movement of GM models recalled for faulty ignition switches has been more-or-less consistent with recalls of older models in the past.” For example, used prices weren’t materially affected when Ford recalled approximately 4.5 million vehicles ranging from 7 – 17 years in 2009 to address faulty cruise control devices that could overheat, smoke or burn.

By comparison, used Toyota prices suffered when the automaker issued a series of recalls related to unintended acceleration between Nov 2009 and Feb 2010. Nearly 8 million vehicles were recalled in the U.S. covering a wide range of younger models aged between 1 – 6 years old.

The impact of Toyota’s recalls on prices of its used vehicles was clearly evident at the start of 2010. Toyota prices bottomed out by April, within two months of issuing the last recall related to the matter. NADA estimates that at its lowest point, Toyota lost roughly 40% of the price advantage it had held over its competitors prior to the recalls.

“At this point we’ve observed nothing to indicate that similar movement is occurring on affected GM models”.

Information contained on GM’s web site dedicated to the ignition recall states that 236,437 vehicles have been repaired as of June 24, 2014. GM is urging owners to remove everything from their key rings with the exception of the car key until the vehicle has been repaired. Additional information, including GM dealer locations and contact information, can be found at http://www.gmignitionupdate.com/.

About NADA Used Car Guide

Since 1933, NADA Used Car Guide has earned its reputation as the leading provider of vehicle valuation products, services and information to businesses throughout the United States and worldwide. NADA’s editorial team collects and analyzes over one million combined automotive and truck wholesale and retail transactions per month. Its guidebooks, auction data, analysis, and data solutions offer automotive/truck, finance, insurance and government professionals the timely information and reliable solutions they need to make better business decisions. Visit nada.com/b2b to learn more.