Vehicles’ resale value and reputation are in reverse

February 9, 2010 at 12:00a.m.

CHICAGO (AP) — The Toyota in your garage is losing value by the week.

Kelley Blue Book dropped the resale values of recalled Toyotas for the second time in four days Monday, leaving them as much as 4 percent or $300 to $750 lower than a week ago, depending on the model.

Recalls and a slow response to safety questions have put a dent in the market value of cars long seen as money in the bank for their owners.

As values drop and safety issues keep surfacing, the world’s No. 1 carmaker faces increasing risks that even long-steadfast customers will defect.

After all, a key factor in Toyota’s rise to the top was its reputation for quality vehicles with high resale values. If its used cars no longer live up to their formerly lofty reputation, then getting buyers in the showroom may be harder, and its long-time market strength could be in jeopardy.

“Toyota has fantastic loyalty, but this is definitely going to have a real erosion in that,” says Juan Flores, director of vehicle valuation for Kelley, which just two months ago named Toyota the best brand for resale value.

The auto research Web site Edmunds.com estimates resale or trade-in values could fall up to 10 percent in the short term. How far they drop over the longer haul will depend on how long the confusion lingers.

Already, some dealers are refusing to accept Toyotas for trade, and others are paying considerably less than they did just two weeks ago.

The latest reduction by Kelley reflects both Toyota’s apparent lack of confidence in its vehicles and a dramatic drop in customer interest in Toyotas, according to Flores. It does not take into account a possible recall involving its prized Prius gas-electric hybrid over a brake problem.

Toyota Motor Corp. has so far recalled more than 7 million cars in the U.S., Europe and China over a sticky accelerator and floor mats that can get caught in the gas pedal.

“If the recall is expanded, we could see some further softening,” Flores says.

Since the first recall for sticky accelerator pedals Jan. 21, Edmunds’ estimate for the trade-in value of a 2009 Toyota Camry has fallen by 4 percent to 6 percent to $13,967, and the 2009 Toyota Corolla has declined 6 percent to $11,233.

“My advice to a consumer would be, ‘If you don’t have to trade one in, wait,’” says Michelle Krebs, senior analyst for Edmunds. “Values will stay down for a bit. But Toyota’s got really strong brand equity.”

The news has unnerved more than a few consumers who had viewed Toyota as a bulletproof brand for quality.

Laura Benin, 34, of New York City chose a 2009 Corolla for her first car purchase a year ago because of Toyota’s stellar reputation. Now she’s reluctant to drive her car even after the potential acceleration problem is fixed, but knows this is a bad time to try to sell it.

Chuck Eddy, a Chrysler dealer in Austintown, said he’s heard of other dealers refusing to take recalled Toyotas in trade, but said he’ll still take them at reduced values.

Two auction houses, where dealers sell trade-ins if they decide not to keep them, have told his dealership that they won’t take recalled Toyotas due to legal liability fears. Eddy says customers are nervous about buying Toyotas and the auction houses have further limited his resale options.