Troy’s J.D. Power Acquires ALG, Strengthens Vehicle Lease Values

J.D. Power has acquired ALG and expects the move will broaden its automotive residual value forecasting abilities. Stock photo

Troy-based J.D. Power today has completed its acquisition of ALG in California from TrueCar Inc. and expects the acquisition will broaden its vision of automotive residual value forecasting. Terms of the deal were not disclosed.

J.D. Power says the addition of ALG will be especially important as the industry prepares to launch more electric vehicle models, along with autonomous platforms and other emerging technologies.

ALG is the industry authority on automotive residual value projections in both the United States and Canada. It will be integrated into the data and analytics division of J.D. Power.

“As the automotive industry continues to face several technological, environmental, and economic factors, the significance of what ALG brings to J.D. Power data and analytics capabilities provides additive value to our clients,” says Dave Habiger, president and CEO of J.D. Power.

“The industry is about to experience a product shift unlike anything it’s ever seen before with new EV models and other new technologies quickly gaining adoption over the next several years and beyond. Having ALG’s expertise in forward-looking residual value forecasting will enable us to provide dynamic new product offerings that focus on new vehicle technologies and retail channels.”

Determining an accurate residual value, or the value of a vehicle at the end of a lease term, is the foundation of auto leasing because it allows dealers and manufacturers to set the most competitive lease terms while securing their bottom lines in the future. About one-third of new vehicles sold each year are leased, typically for a three-year term.

At any point in time, the value of vehicles in outstanding lease portfolios is estimated at $500 billion. The combination of ALG’s expertise in residual values with J.D. Power’s data and analytics on market performance values and individual vehicle configurations will become increasingly valuable as the electric vehicle segment continues to grow.

“The large number of new and redesigned EVs entering the market coupled with evolving customer attitudes to transportation and EV ownership mean the auto industry must be prepared because their financial lives depend on it,” says Thomas King, president of data and analytics and chief product officer at J.D. Power.

Many variables affect the actual residual value of a vehicle over a multi-year lease term including new vehicle sales tactics (incentives), used supply, quality and reliability, options and packages, and the macroeconomic environment. Accurate forecasting has become particularly important in the current marketplace, where vehicle valuations have been affected by a combination of macroeconomic volatility and the frequent introduction of new models, including electric vehicles, which have unique depreciation schedules and continue to influence traditional vehicle sales.

Since these factors need to be taken into account in order to accurately forecast residual values, the more granularity and greater the understanding of the effect of each variable, the better equipped manufacturers and lenders are able to maximize profitability.

“Pairing ALG’s proven residual value forecasting algorithms and expertise with our existing automotive data, analytics, and vehicle valuation capabilities will enable us to deliver a truly end-to-end solution for understanding vehicle price performance and optimizing pricing decisions in all facets of the vehicle sales process,” says Jonathan Banks, vice president and general manager, vehicle valuations at J.D. Power.

The ALG acquisition follows J.D. Power’s recent merger with Autodata Solutions to offer new and pre-owned automobile transactional data, valuation tools, vehicle feature information, and consumer analytics to the automotive industry.

J.D. Power offers consumer insights, advisory services, and data and analytics. It uses big data, artificial intelligence, and algorithmic modeling capabilities to understand consumer behavior.