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Revving Up: Actual Car Quality versus Perceived Quality

Perception is reality, and American brands pay the price.

July 2009, by - Also by this author

Perception is reality. This statement is none truer than when it comes to attitudes about cars. Try to tell a Volkswagen owner that Buicks traditionally score higher in respected quality surveys. You'll get some blank-faced stares.

The case is made in a study that measures the mere "perception" of quality: Automotive Lease Guide's Perceived Quality Study.

In the Perceived Quality Study (PQS), consumers were polled on their beliefs regarding several quality indicators for the mainstream car brands. (Luxury marques were not ranked.) The latest study, released in June, puts Toyota on top, followed by Honda, Nissan, Subaru, Volkswagen and Mazda. All other brands, 21 of them, fell somewhere below what ALG benchmarks as "industry average."

Toyota and Honda deserve their ranking; they have the actual quality scores and high residual values to back that up. But the picture gets cloudy for many other brands, and in a few cases, perception is the opposite of reality in the quality department.

Enter Volkswagen. It ranks fourth in perceived quality yet is under the industry average in the just-released J.D. Power and Associates Initial Quality Study (IQS). In J.D. Power's 2009 Vehicle Dependability Study (VDS), which measures problems experienced by original owners of three-year-old vehicles, VW places next to last out of 37 nameplates.

Mazda scores a top five in perceived quality yet scores 25 out of 37 in Initial Quality and 33 out of 37 in Vehicle Dependability.

Nissan, third in Perceived Quality, is in the middle of the pack in actual quality scores. Fourth-ranked Subaru places above the average for VDS but ranks 27 in IQS.

Where is the Love?

Conversely, a few notable American nameplates have excellent quality scores yet lag in perceived quality. Buick is a perennial rock star in the dependability study and ranks the highest this year, tied with Jaguar. Yet it suffers in perceived quality. Mercury suffers an even more egregious slight.

Ford is getting some love in the perceived quality department; its trucks rank the highest of the American brands. And overall, Ford came in second to Hyundai in year-over-year change in perceived value. The American brand is faring well in both IQS and VDS.

Perceived Value and Residuals

Here is where perception gets real, dollars-and-cents real: Take the Perceived Quality scores and compare them with ALG residual values.

ALG numbers show that the top six in perceived value all rank in the top six in residual value. Yet the same can't be said, necessarily, for actual quality and residual value.

The MINI came in dead last in the latest Initial Quality study, yet Mini Cooper is always at the top of the class in retained value. Buick, Chevrolet, Ford and Mercury rank high in actual quality but are under industry average in residual value rankings.

ALG talks about how important "emotional appeal" is to perceived quality. Nothing beats the MINI for emotional appeal.

As ALG points out, many other factors are in play when it comes to value retention: smart lifecycle management (i.e. consistent redesigns), aligning supply and demand, managing incentive spending and restricting sales to rental fleets are also vital motivators of brand strength.

And then there are "spillover historical beliefs" of American cars having poor quality. Those beliefs have been spilling over for far too long.

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