Consumer Reaction to Vehicle Recalls: GM vs. Toyota; recall impact on used vehicle pricing

MCLEAN, VA -- Aug. 20, 2014: NADA Used Car Guide announced the results of its automaker recall perception survey, an online survey conducted on NADAguides.com in response to the record-breaking number of motor vehicle recalls occurring over the first half of the year.

An overwhelming majority of consumers were found to be paying more attention to recalls today than in the past, with 88% of respondents making this claim.

71% of respondents also shared the opinion that recalls have grown substantially over the past few years, despite National Highway Traffic Safety Administration (NHTSA) data that shows both the number of distinct recalls and vehicles involved have remained fairly consistent since the mid-1990s.

Today, the public is receiving news of recalls in manners unlike ever before. Instead of people proactively accessing information, the media is "feeding" reports to people through their Facebook news feed and tweets on their Twitter accounts. As such, it is possible that drivers are now being notified of recalls as they occur as opposed to actively paying more attention to them on their own.

Also according to the survey, both the number of recalls issued and the seriousness of the safety defect influence future purchase decisions. A sizable 44% of respondents agreed that regardless of problem severity, the more an automaker issued recalls, the less likely they would be to purchase one of their new or used vehicles down the road, while 33% were neutral and or 23% disagreed.

Consumer purchase behavior tells a different story, however.

"So far there's been only mild evidence to suggest that used GM prices are being affected by the recalls. Chevrolet's used car prices have been steadily gaining ground on the competition over the past few years, but we have noticed a relatively small 1 – 2 percentage point drop in this improving trend since April" said Jonathan Banks, Executive Automotive Analyst at NADA Used Car Guide.

By comparison, Toyota's price advantage over the competition fell by 20-percentage points within months of the automaker issuing a series of recalls related to unintended acceleration in 2009 – 2010. However, the timing of the two recalls likely had an effect on these price changes. Toyota's recalls were the first to occur where social media accelerated the spread of news.

Consequently, this development in technology may actually be helping GM as the public has become increasingly desensitized from much of the "noise" generated by the media. Whereas the Toyota incident came first and was met with much astonishment, sequels rarely create as much buzz, with GM's recall being less shocking to the public in today's digital world.

Methodology NADA Used Car Guide's survey results are based on an online questionnaire of 1,409 visitors to Nadaguides.com. The survey was conducted from June 30 – July 15, 2014. 59% of respondents were over the age of 46, 35% were aged 26 – 36, and 7% were 25 or younger. The gender split was 74% Male to 26% Female. Responses were generally similar across age and gender lines.

About the 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.