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Volkswagen to Offer New Models at Lower Prices, Residuals May Suffer

September 1, 2016

HERNDON, Va. — Volkswagen will begin offering its new models for lower prices and provide dealers with a broader product range in a move that could lower residual values if incentives remain high, according to an industry expert.

The automaker is lowering prices to broaden its appeal in the wake of its diesel scandal and plunging sales, reports Bloomberg. Through July, the automaker's sales are 14% lower.

The move comes as VW said it would pay its 652 dealers about $1.2 billion. The automaker will make cash payments and provide additional benefits to dealers to resolve their claims.

Lowering prices for its vehicles could also lower resale value if incentives remain high. Resale values could remain unaffected if VW doesn't increase incentives or reduce content in the vehicles, said Patrick Min, senior project manager with ALG, a TrueCar company.

"The lowering of prices in itself won't necessarily impact resale values," Min said. "Resale values could be impacted if VW is pulling content out of the vehicles to lower the prices. If they're simply lowering prices and able to reduce the high incentives by the same amount, there would be minimal impact to resale value."

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