Actual Car Quality versus Perceived Quality

At a kid's birthday party, I once tried to tell a bunch of moms that there is no correlation between kid's hyperactivity and sugar. "Look it up," I said. It's a myth.

I got some stone-faced stares and the conversation turned to dangerous toys in Happy Meals.

Similarly, try to tell a Volkswagen owner that Buicks traditionally score higher in respected quality surveys. You'll get the same stares.

Perception is reality. This statement is none truer than when it comes to attitudes about cars. To back this up, check out Automotive Lease Guide's Perceived Quality Study.

Wait, there's a survey that measures the mere perception of quality? How cynical, you say. How cynical, and yet how influential and real. The perception of quality helps to drive billions of dollars in car sales, and it helps to keep people making and selling those cars employed.

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, just ahead of Suzuki.

Mazda scores a top five in PQS yet scores 25 out of 37 in IQS and 33 out of 37 in VDS.

Nissan, third in PQS, is in the middle of the pack for IQS and VDS. Fourth ranked Subaru does rank above the average for VDS but ranks 27 in IQS.

Conversely, a few notable American nameplates have excellent quality scores yet lag in perceived quality. Buick is a perennial rock star in VDS 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.

Granted, there are a few notable instances of a lack of correlation between short- and long-term quality scores. Jaguar, first in VDS, is 29 in IQS. How do Jags go from problem child to problem free?

It points out the issues with qualifying a whole brand. One major problem on a single model can put a dent in initial quality, especially for smaller brands. Such is the case with the Jaguar XF.

If a mom tells you her daughter is hyper because of the sugar in the cake, that statement is suspect. But if a VW owner says he has not had any problems with his Passat, then should anyone care about the brand's overall score? I can tell you I've had no mechanical issues with my Mazda3 in four years of ownership.

But here is where perception gets real, dollars-and-sense real. Take the perceived quality scores and compare them with ALG residual values.

ALG analyzed its own numbers and PQS scores to show the strong correlation with perceived quality and retained value.  

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 IQS 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 under industry average in residual value rankings. In one anomaly, Suzuki ranks 8 in residual value but near last in PQS.

ALG talks about how important "emotional appeal" is to perceived quality. VW did well by marketing that white daisy in the cup holder. Makes you feel all cuddly. And 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.

Originally posted on Business Fleet