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In a year like no other, 2020 introduced a range of new factors that have driven long-term projections for determining future value retention in the luxury segment of the used-vehicle market.

Supply chain issues driven by the COVID-19 pandemic disrupted production, which reduced supply as demand also plummeted over the course of the year.

In the final analysis, this combination of trends served to largely stabilize prices. Looking ahead, the outlook for both supply and demand are rising in a synchronized manner as economic prospects improve with the deployment of vaccines and treatments that appear to mark the beginning of the end of the current economic crisis.

It is precisely in this context that residual values play a critical role in the health and stability of the luxury automotive industry. 

Vehicles that retain strong residual values offer an unmistakable benefit to automakers and consumers alike. Such models allow for a competitive cost of ownership and leasing advantage. Indeed, in 2020, demand for leases loomed large in establishing residual value retention for luxury vehicles. In 2020, leasing accounted for 53% of luxury sales, compared with the mass market category in which 27% of vehicles ended up in the lease market.

When it comes to the overall luxury segment of the market, SUVs continue to grow in popularity. Consumers in both the luxury and mass market categories are drawn to SUVs because of their practicality and increasing levels of fuel efficiency. On the vehicle development side of the equation, many manufacturers have forgone traditional passenger cars in favor of SUVs. This a trend that we’ve seen for years as passenger car sales dwindle, in favor of SUVs and trucks.

Typically, increased levels of supply returning to the used market suppresses used vehicle values. That, however, is not occurring this year as the outlook for SUVs remains healthy because of increasing levels of demand — for both new and used units.

What does this all mean?

From a financial viewpoint, the best models to lease are those with a high residual value compared with their original MSRP. Typically, high residual values result in lower lease payments, as well. Consumers who purchase their vehicles benefit as well. High residual values allow owners to accrue positive equity more quickly.

Here are the vehicles with the strongest residual values in the J.D. Power 2020 Luxury Residual Value All-Stars.

2020 Lexus LX

Large Premium SUV Segment — 57% J.D. Power Residual Value Projection

Large premium SUVs remain popular choices for their ruggedness and people-hauling capabilities. The 2020 Lexus LX embodies these qualities and has been a top performer in the segment for years. While it’s no secret that the LX is based on the fan-favorite Toyota Land Cruiser, Lexus has taken advantage of the Land Cruiser’s rock solid off-road platform, refined it and packed it full of enough premium content to transform it into the top contender in the luxury segment.

Largely unchanged over the past several years, the flagship SUV of Lexus does not have multiple trim levels. However, it does come well equipped with a significant list of standard features. The main choices available to customers revolve around: seating arrangements, color, and a few extra-luxurious add-ons. While the formula is simple, Lexus has made it work, earn the LX a  57% residual value projection.

Flashback: MY19 Large Premium SUV All-Star – Lexus LX 52%

2020 Lexus RX L

Midsize Premium SUV Segment — 54% J.D. Power Residual Value Projection

The killer feature for consumers evaluating their Midsize SUV options, is the availability of third-row seating.  Up until 2018, the only Lexus SUVs models that offered third-row seating were the GX and LX models. This all changed with the introduction of the RX L, which is a slightly stretched version of the brand's popular RX model. By adding 4.4 inches of length — and a third row of seats — the RX L can carry up to seven people making the model more versatile than ever before.

For 2020, Lexus made some subtle changes inside and outside of the RX L, improving the vehicle’s ride quality. New infotainment and safety systems were also added. These, and other improvements have elevated the RX L to the top of its segment. As a result, the 2020 Lexus RX L's 36-month residual value is expected to be 54%, beating the overall segment residual of 49%.

Flashback: MY19 Mid-Size Premium SUV All-Star – Land Rover Discovery 54%

2020 Porsche Macan

Compact Premium SUV Segment — 53% J.D. Power Residual Value Projection

Compact Premium SUVs also continued to attract demand in the luxury segment. With each passing year, market share of this segment has risen, along with the number of vehicles available. Overall, the compact premium SUV segment is expected to carry an average 36-month residual value of 49%.

The Porsche Macan is projected to be one of the top vehicles in this category with a projected 36-month residual value of 53% — a figure that is four percentage points better than the overall segment average.

Starting in the $50,000 range, the Macan is the lowest priced vehicle offered by Porsche. For the 2019 model year, the Macan received a refresh which included a new front fascia with oversized vents to give the SUV a broader stance, along with a new rear fascia, which featured the brands new full-width taillight design that has now become a staple across all Porsche models.

Flashback: MY19 Compact Premium SUV All-Star – Lexus NX 51%

Luxury car segment retention solid, as well

While car segments are not expected to perform as well, overall,  as their SUV counterparts, residual value expectations are still strong in this category.

2020 Porsche 911

Midsize Premium Sporty Car – 63% Power Residual Value Projection

The Porsche 911 is one of the most iconic sports cars ever produced, with its unmistakable styling and performance to back it up. The latest generation capitalized on these characteristics and took them to the next level. All-new for 2020, the 992 generation 911 is currently offered as a coupe and convertible, powered by a slew of twin-turbo six-cylinder Boxster engines, and the choice of either an automatic or manual transmission.

The 911 remains surprisingly practical for everyday use; however, while the front seats are comfortable, the rear seats can be a bit cramped. Make no mistake, the 911 is expensive but, with an estimated 63% residual value projection, owners will be in a good place down the road.

Flashback: MY19 Midsize Premium Sporty Car All-Star – Porsche 911 60%

2020 Volvo V90

Midsize Premium Car – 54% J.D. Power Residual Value Projection

While wagons are niche vehicles; they have a following that is extremely passionate. This has kept OEMs producing these very practical models. In 2020 Volvo integrated practicality with luxury to outperform other brands in the Midsize Premium Car segment with its V90 model. It received the sector’s highest residual score (54%) — a massive nine percentage points better than the segment average of 43%. It is an impressive accomplishment when you consider that, outside of a few cosmetic and safety system updates, the 2020 V90 remains unchanged.

A taller, more rugged V90 Cross Country is also offered by the brand; however, its residual value isn’t quite as strong at 48%.

Flashback: MY19 Midsize Premium Car All-Star – Lexus GS 50%

2020 Porsche Panamera

Large Premium Car – 51% Power Residual Value Projection

The Porsche Panamera was the brand’s first foray into sedan territory when it debuted in 2009. Now in its second generation, the current model was introduced for the 2017 model year with a slight update to the redesign.

With a residual of 51%, the 2020 Panamera sits at the top of the class and is six-percentage points better than the overall segment average of 43%. The Panamera is truly a family friendly version of the 911 and true to the brand’s DNA. With everyday usability and a full serving of Porsche performance, the Panamera is sure to maintain a favorable value proposition for years to come.

Flashback: MY19 Large Premium Car All-Star – Lexus LS 44%

Conclusion

As vehicles continue to become more expensive each year, and uncertainty in the market continues, the importance of residual values will also grow in importance — for dealers, consumers and vehicle manufacturers alike.

Purchasers looking to make strategic decisions can use J.D. Power residual values as a guide for smart shopping and retaining bargaining power when buying or leasing a new vehicle in these trying times.

Likewise, automakers, finance companies and dealerships can also use these residual values to forecast their portfolios and make better business decisions. Closely studying value retention performance — including trends in key features and specific makes and models such as the vehicles included in this list — will help decision-makers remain in-step with consumer demand, secure the right inventory and pricing, while ultimately decreasing time-on-lot and increasing vehicle transactions.

David Paris is senior manager of market insights, at J.D. Power Valuation Services.

The J.D. Power 2020 Mass Market Residual Value All-Stars can be found in this story.