TORRANCE, Calif. -
On Thursday, Toyota announced another voluntary recall on certain Toyota and Lexus models that covers many parts of the world, including the U.S. 
 
Will this mean a hit to the automaker’s U.S. residuals and used-vehicle values? Both Kelley Blue Book and Edmunds.com analysts say it’s unlikely. However, these experts say that the higher incentives and enticing deals Toyota has been offering this year to draw in consumers could be a different story.
 
Basically, Toyota Motor Sales USA is recalling about 740,000 Lexus and Toyota brand models in the U.S. for potential brake fluid leakage. The recall includes certain Toyota Avalon vehicles from model-years 2005 through 2006; Toyota Highlander (non-hybrid) and Lexus RX330 models from 2004 through 2006; and Lexus GS300, IS250 and IS350 models from 2006.
 
Meanwhile in Japan, Toyota Motor Corp. issued a recall for hundreds of thousands of vehicles throughout the world for the same issue (including other models besides those named in the U.S.)
 
According to Toyota Motor Sales USA spokesman Brian Lyons, the approximate recall count includes:
 
—Japan: 582,000
 
—Europe: 46,000
 
—China: 47,000
 
—Latin America/Caribbean: 6,000
 
—Middle East: 15,000
 
—Africa: 500
 
—Asia (outside of Japan and China): 20,000
 
—Oceana: 28,000
To fix the problem, Toyota said it is replacing the brake master cylinder seal to stop brake fluid leakage. This leakage causes the brake warning lamp to light up, the automaker noted.
“The Toyota genuine brake fluid used during vehicle assembly for vehicles sold in the United States contains polymers. The polymers act as lubricants for certain brake system components,” according to a statement released by Toyota Motor Sales USA.
“If during vehicle maintenance, brake fluid is used that does not contain such polymers or only small amounts, a part of the internal rubber seal (brake master cylinder cup) located at the end of the brake master cylinder piston may become dry and may curl during movement of the piston. If this occurs, a small amount of the brake fluid could slowly leak from the brake master cylinder into the brake booster, resulting in illumination of the brake warning lamp," according to the statement.
The automaker went on to note that if the vehicle is driven without  the master cylinder brake fluid replenished once the brake warning lamp has turned on, the brake pedal could start to become “spongy or soft.” There could be slow but sure deterioration in the car’s ability to brake, Toyota stressed.
The company said it will start mailing notifications early next month. Owners can have their brake master cylinder cup replaced at Toyota and Lexus dealerships for free.
There was also an additional recall in Japan, where 1,800 models of the Toyota Noah and Voxy models were recalled for an issue regarding speedometer lighting.
Residual, Used-Car Value Impact?
So will this impact residuals and used-vehicle values, according to Kelley Blue Book, the answer is no. The company indicated it doesn’t believe the latest recall will harm Toyota much on the residual front.
In fact, KBB director of residual consulting Eric Ibara suggests that residuals will probably be harmed more by the “aggressive marketing tactics” launched by Toyota.
“Kelley Blue Book does not see today’s latest Toyota recall news impacting the company’s residual values. When recalls occur, it is not unusual to see an immediate impact on used-car values, but within a relatively short period of time, that impact typically dissipates,” Ibara explained “So when Kelley Blue Book examines a 24-, 36- or 60-month residual value on a new car, unless it is a high-profile case like the massive Toyota recall crisis earlier this year, there is no lasting impact on residual values down the road.
“In fact, Toyota’s more aggressive marketing tactics employed this year (such as more attractive incentives) are more likely have a detrimental effect on residual values than the recalls,” Ibara said.
Looking at how the used-vehicle values have performed for Toyota so far this year, KBB’s lead analyst for vehicle valuation Alec Gutierrez said they have climbed 0.4 percent, not too far off from the 2.8-percent gain for the overall industry.
The short-term affect on used values from the sticky pedal and floor mat recalls was very marginal, and this latest recall isn’t likely to be detrimental, either, Gutierrez shared.
“The sticky pedal and floor mat recalls issued by Toyota earlier this year had a minimal short-term impact to Toyota’s values, (1-2 percent depreciation initially, depending on the model), and we would expect that the current recall concerning potential brake fluid leaks would have a negligible impact on the value of used Toyotas, if any at all,” Gutierrez shared.
“In fact, even considering the recalls Toyota has had to contend with throughout the past 12 months, three-year-old Toyota vehicles still currently retain 67 percent of their original MSRP, significantly better than the overall market average of 59 percent,” he added. “It appears as though there still is strong consumer demand for Toyota vehicles, and we would not expect that sentiment to change based on the current recall.”
Thought it doesn’t appear residuals and used values will decline too much, Toyota’s reputation likely took another hit, according to KBB.
“News that Toyota is suffering through yet another recall comes at a time when many in the industry thought that their darkest days were behind them,” commented James Bell, executive market analyst for Kbb.com. “With overall sales slowly coming back to life, the idea that ‘no news is good news’ could not have been more welcome at Toyota.” 
Furthermore, it looks like Toyota is still struggling to bounce back from the prior recalls.
Edmunds.com senior analyst Jessica Caldwell put it in perspective, noting: “Toyota has still not fully recovered from the damage done to its brand recently. On Edmunds.com, about 13.8 percent of site visitors research Toyotas now — down from 16.1 percent in the same period last year.”