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Land Rover, Toyota Earn Top Honors in ALG’s Residual Value Awards

SANTA BARBARA, Calif. — ALG, TrueCar’s analytics division, named Land Rover and Toyota as the top premium and mainstream brands during its 15th annual Residual Value Awards.

The awards program looks at 26 vehicle segments and forecasts which will retain the highest percentage of MSRP value after a three-year period. The awards will be presented at the Los Angeles Auto Show.

“Residual value is important for automakers and consumers because it’s a complete indicator of the vehicles future value, accounting for quality durability and brand desirability among other factors,” said Larry Dominique, president of ALG.

Land Rover’s win as the top premium brand is the company’s first. The brand was credited with having a consistent “stream of hot, new vehicles” with high customer demand, says ALG.

“Some Land Rover models are in such high demand that they’re selling above MSRP — a remarkable achievement that’s only possible with manufacturer restraint and a tightly controlled supply chain,” said Dominique.

Toyota was the top mainstream brand, capturing five segment awards, including top honors in the alternative-fuel, truck and premium categories.

Eight new vehicles made the winners list for the first time, including the Dodge Charger for full-size car, the Subaru WRX for sports car and the Ford Transit Connect for midsize commercial van.

“It is great to see such a diverse mix of brands winning this year,” said Dominique. “It shows the industry as a whole continues to improve residual values benefitting consumers and automakers alike.”

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Honda, Acura Rank Highest in ALG’s Residual Value Awards

LOS ANGELES — ALG, a market intelligence firm, announced the results of its 14th annual Residual Value Awards, with Honda and Acura earning awards for top Mainstream and Premium brands, respectively.

Acura returns to the top ranking among Premium brands after a two-year gap, while Honda ranks highest after a three-year gap. While Acura and Honda claim the top spots, it was the Toyota family of brands that walked away with the most hardware — nine total (six awards for Toyota, two for Lexus and one for Scion).

ALG’s Residual Value Awards honor the vehicles in each segment that are forecast to retain the highest percentage of MSRP after a three-year period. Award recipients were chosen after a careful evaluation of vehicle criteria, including segment competition, historical vehicle performance and industry trends, according to the firm. This year’s awards are based on 2013 model year vehicles.

“Residual value is a complete indicator of vehicle value, taking into account quality, durability and brand desirability,” said Larry Dominique, president of ALG. “The Residual Value Awards measure the most important brand performance metric — the statement consumers make with their wallets when they purchase a vehicle.”

In two of the most hotly contested segments, Midsize and Compact Car, the Honda Accord and Hyundai Elantra ranked highest, respectively. In the Midsize Car segment, the Subaru Legacy was second, and the redesigned Nissan Altima third. In the Compact Car segment, the Scion TC and Mazda3 rounded out the top three.

Among Mainstream brands, Hyundai ranked second overall behind Honda. Scion, which took part in the Residual Value Award rankings for the first time, ranked third. Infiniti and Audi ranked second and third, respectively, among Premium brands. Lexus, last year’s highest ranked brand, is now fourth.

“Hyundai’s ascent as a brand is nothing short of impressive,” said Dominique. “Since 2007, when the brand ranked in the bottom quartile for residual value, Hyundai has delivered well-executed product, and has kept incentives and fleet — two elements that can quickly damage residual value — in check. And, as demonstrated by the redesigned Santa Fe Sport, they continue to deliver.”

Among Premium brands, Lexus took home segment awards for the redesigned GS and LS models (Premium Fullsize Car, Premium Executive Car respectively), while MINI received awards for the Cooper (Premium Compact Car) and Cooper Countryman (Sub Compact Utility Vehicle). In the Alternative Fuel segments, the Toyota Prius c and Mercedes-Benz ML350 BlueTEC received awards.

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Toyota, Lexus Perceived Quality Scores Improve, ALG Reports

SANTA BARBARA — A study by ALG, an independent subsidiary of TrueCar Inc., indicated that Toyota’s perceived quality score rose more than two percent over the last six months, closing the gap with leading mainstream brand Honda. Additionally, Lexus once again came out on top among luxury brands, according to the company’s Fall 2011 Perceived Quality Study (PQS).

“The continued rally of Toyota is evidence of the brand’s widespread reputation for quality and ownership loyalty. This is the third straight survey where Toyota has shown relatively strong growth,” said Eric Lyman, vice president of residual value solutions for ALG. “If this trend continues, the brand might soon regain the top spot from Honda in the mainstream category.”

Twice a year, ALG surveys approximately 3,000-4,000 U.S. consumers to gauge perceptions of a number of mainstream and luxury automotive brands for its PQS, reported F&I and Showroom magazine. Of the 23 brands included in the Fall 2008 survey that remain in the survey today, Ford brands, Kia and Hyundai have racked up the biggest long-term gains, according to ALG. Hyundai led the group by moving from 18th place to 9th place, Ford Cars and Ford Trucks moved from 15th to 7th and 8th to 3rd place, respectively, and Kia jumped from 23rd place in 2008 to 18th place.

“These three automakers have made impressive efforts to improve brand perception and we can see that it has truly paid off in the mainstream rankings,” Lyman added. “The perception of where luxury brands stand in relation to each other seems to be solidly cemented in the minds of consumers, owing to the consistency of the luxury rankings.”

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DealerTrack to Sell ALG to TrueCar

LAKE SUCCESS – DealerTrack Holdings, Inc., today announced that it has signed an agreement to sell its wholly owned subsidiary, ALG, Inc., to TrueCar, Inc. In connection with the sale, DealerTrack has entered into additional commercial arrangements with TrueCar, including a perpetual, royalty-free license for DealerTrack to use certain ALG intellectual property and data in its products and services.

The transaction is structured as a tax-free reorganization, and in consideration for the sale of ALG, DealerTrack will receive a 15.0 percent equity interest in TrueCar and warrants to increase its ownership interest to up to 19.9 percent. As part of the transaction, DealerTrack will have the limited right to appoint a director to TrueCar’s Board. The sale is expected to close in the fourth quarter, subject to customary closing conditions and regulatory approval.

DealerTrack expects to recognize a pre-tax gain for GAAP purposes of at least $40 million on the sale, but does not expect this transaction to have an impact on 2011 non-GAAP guidance. DealerTrack will provide additional details on the financial impact of this transaction during its third quarter earnings call.

Mark F. O’Neil, chairman and chief executive officer of DealerTrack, commented, “This transaction exemplifies our strategy of effectively allocating capital to maximize value for DealerTrack stockholders. We are not only selling a business which we have grown significantly since we acquired it back in 2005, we are making an investment in a high-growth, progressive company that is positively impacting the way cars are retailed in the U.S. market.”

Scott Painter, chief executive officer of TrueCar, commented, “We believe that, in combination with ALG’s core competency of providing industry-leading residual values for the automotive market, TrueCar’s business will be enhanced and continue to generate exceptional growth as more of the car buying process moves online. In addition, we believe that our acquisition of ALG will significantly improve our relationship with OEM’s.”

Painter continued, “Lastly, we are pleased to be entering a strategic partnership with DealerTrack which includes a two year commitment to help us effect a smooth transition of the ALG business.”

Based in Santa Monica, California, TrueCar simplifies and clarifies the car buying process for consumers by providing accurate market information which helps buyers make better, more informed decisions. TrueCar saves consumers time and money by providing price clarity and transparency, while delivering the benefits of higher close rates and vehicle sales to dealers. TrueCar reaches consumers via two channels.

The direct channel is a website that provides vehicle pricing transparency to consumers and dealers and the indirect channel is a private-label affinity buying program for major brands. The TrueCar management team were founders of CarsDirect, and have a very deep background in retail automotive technology.

Evercore Partners acted as financial advisor and O’Melveny & Myers provided legal advice to DealerTrack in connection with this transaction.

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Spring 2011 ALG Perceived Quality Study Highlights Continued Rebound Of Toyota And Lexus Brands

SANTA BARBARA – Toyota’s Perceived Quality Score rose four percent over the last six months and Lexus once again captured the luxury category’s highest Perceived Quality rating in 2011, according to the Spring 2011 Perceived Quality Study from ALG, a subsidiary of DealerTrack Holdings, Inc. and the industry benchmark for residual values and depreciation data.

The study also shows that Land Rover (up 2.5 percent) and Kia (up 5.6 percent) experienced the biggest gains in perception among luxury and mainstream brands respectively.

“The continued rebound of Toyota is a testament to the brand’s solid reputation for quality and ownership loyalty. Toyota isn’t out of the woods yet, however, as the company faces the repercussions of another large recall earlier this year,” states Eric Lyman, director, Residual Value Solutions, ALG.

“We also see the success of Land Rover being fueled by the growing popularity of its driver-oriented Range Rover Sport and the Evoque, helping the brand slowly notch perception improvements. For Kia, the consumer quality recognition is the payoff for a recent revolution in product quality and design supported by aggressive marketing campaigns.”

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ALG: Mercury’s Residual Values to Be Impacted Less than Other Terminated Brands

SANTA BARBARA, Calif. – ALG, a subsidiary of DealerTrack Holdings, Inc. expects some negative impact on residual values of Mercury vehicles due to the brand’s recent termination by Ford Motor Co. The impact is anticipated to be relatively modest at 2.5 to 3 percentage points of MSRP over the next three years.

ALG has studied the residual value impact of terminations of previous brands, such as Eagle, Plymouth, Oldsmobile and Isuzu, as well as the recently terminated Pontiac and Saturn. It has found that residual values for three-year-old vehicles of these brands consistently underperform those of their parent OEMs and the industry overall for a period of one to three years after the termination announcements. The impact depends to some extent on the mix of used models on the market, and the sales strategy prior to termination. Historically, the impact on residual values averages about 5 percentage points, but is sometimes as high as 10 percentage points.

However, Mercury has some positive factors driving residuals in its favor. Mercury’s low sales volume – accounting for less than 1% of the U.S. auto market – means that the supply should be absorbed quickly in the used vehicle market. ALG’s Brand Value and Perceived Quality metrics for Mercury have been trending steadily upwards over the past few years, indicating stronger demand. In 2010, days’ supply and incentives have been relatively low, also supporting the conclusion of strong demand prior to the termination announcement.

“Historically, the impact of brand termination on residual values averages about 5 percentage points, but due to Mercury’s low volume and stronger demand indications prior to the announcement, we expect its residual values to be impacted by only 2.5 to 3 percentage points over the next 36 months, with the majority of the decline in the first 12 months,” said Matt Traylen, ALG’s chief economist.

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