J.D. Power, a global leader in data analytics and consumer intelligence based in Troy, today announced it has agreed to acquire an affiliate of TrueCar Inc. for $135 million.
ALG Inc. is an industry authority on automotive residual value projections in both the United States and Canada. The acquisition is expected to augment offerings from J.D. Power’s data and analytics division.
The transaction is expected to close by the end of 2020 and is subject to customary closing conditions as well as regulatory review and approval. Upon approval and close, all 40 ALG employees will join J.D. Power.
“We believe ALG will bring complementary strengths and value to J.D. Power and its clients,” says Dave Habiger, president and CEO of J.D. Power. “For more than 50 years, ALG has been a trusted data provider to the automotive industry delivering accurate and reliable residual value forecasts. Adding that component to our extensive data assets, valuation expertise, and analytic tools will enable us to provide even more value to our clients.”
Residual values are the foundation of auto leasing and are used across multiple segments of the automotive industry. Almost one-third of new vehicles sold each year are leased, typically for a three-year term. At any point in time, the value of vehicles in outstanding lease portfolios is estimated at $500 billion. Accurately predicting the value of vehicles at the end of the lease term is an essential activity for vehicle manufacturers and finance companies, according to J.D. Power.
Countless variables affect the actual residual value of a vehicle over a multi-year lease term. Examples include mileage, quality/reliability, options and feature sets, weather, and the macroeconomic environment. Since these factors need to be taken into account in order to accurately forecast residual values, the more granularity and greater the understanding of the impact of each variable, the better equipped manufacturers and lenders are able to maximize profitability.
“Today’s announcement is a tremendous outcome both in terms of the value delivered to our shareholders and the potential ALG will have with its new owner,” says Mike Darrow, president and CEO of TrueCar. “After careful consideration of a variety of options and potential partners, it became clear that a sale of ALG to J.D. Power, with its breadth of complementary services, strong automotive industry expertise, and trusted reputation, represents the best path forward for ALG’s clients.”