Car & Truck Blog

Residual Value Spotlight: 2020 Ford Explorer

Ford’s Explorer helped launch the ascension of SUVs back in the early 1990s and has been the industry’s best-selling Midsize SUV for nearly a decade. Will the newly redesigned MY20 Explorer catapult residuals higher?

  • The Ford Explorer receives a full redesign for MY20, the first since MY11 (9 years).
  • The outgoing 5th generation Explorer was very well received and enjoyed both strong new vehicle sales and high residual values. But the model’s residual strength waned somewhat as its design aged and as the midsize SUV segment become more competitive.
  • The redesigned MY20 Explorer looks to build upon the model’s enduring success and push the residual value needle higher.

The competitiveness of the Explorer’s outgoing design provides important clues as to how the 6th generation will perform in the new and used vehicle markets.

The 5th generation Explorer, which ran from model years 2011-19, represented the model’s most extensive redesign to-date and was very well received by consumers. The new design was a dramatic departure from previous iterations, sporting a more muscular and progressive look that helped set Explorer apart from its midsize SUV contemporaries. In addition, the change shifted the Explorer from body-on-frame to unibody construction, which helped improve ride comfort and driving dynamics.

These improvements, along with accelerating demand for SUVs in general, dramatically changed the Explorer’s used price fortunes versus the outgoing model (especially early on). For example, retained value for three-year-old models jumped from an average of 48% for the 2010 model year, to an incredible 62% for the 5th gen redesign. Not only did this mark an incredible 14-percentage point improvement, it also lifted Explorer retention well above the midsize SUV average (Figure 1). Undoubtedly, the attractiveness of the redesign played a massive role in altering the model’s new sales and used price performance.

Figure 1
Figure 1

In terms of used vehicle prices, we can estimate the impact of design by applying statistical adjustments to historical wholesale auction sales to control for the impact of volume, age and mileage, among other factors. Remaining value can then be attributed to the new design itself. The MY11 Explorer experienced a whopping $7K premium (or lift) over the outgoing design as a three-year-old model, placing it in exceedingly rare territory (Figure 2). In fact, only 7% historical SUV redesigns garnered a premium above $4K.

Figure 2
Figure 2

The impact of the last generation’s redesign was also evident in J.D. Power’s consumer-facing Auto Avoider and APEAL surveys1. For example, over 80% of Avoider Study respondents stated that exterior design was a primary purchase factor early in the 5th gen’s lifecycle, a substantial 15% above the segment average. Similarly, APEAL survey results show a significant increase in owner sentiment toward both exterior and interior design, allowing Explorer to outpace a booming segment by a wide margin in these areas (Figure 3).

Figure 3
Figure 3


While the last generation Explorer was well above average in retained value and design-related consumer sentiment following its launch, its position of superiority versus the midsize SUV segment declined over time. For example, the Explorer’s APEAL scores for 2018 were roughly on par with the segment average. So how can recent consumer perceptions of the outgoing Explorer be used to estimate the residual value impact of the MY20 redesign?
Unlike design, the impact of certain value-defining characteristics such as fuel economy and horsepower can be statistically measured in a relatively direct manner. But given its subjective nature, a strong understanding of consumer tastes, likes and dislikes is required to estimate the impact of a new design to residual values and used vehicle prices. As alluded to earlier, J.D. Power’s design assessment methodology is supported by the consumer opinions captured in our Voice of the Customer surveys such as APEAL.

Our analysis has revealed a clear relationship between APEAL score and used vehicle premiums, with higher APEAL scores generally associated with higher premiums for redesigns (for the stats folks out there, the correlation coefficient is .42) (Figure 4). We can use this observed relationship to estimate the change in APEAL score associated with a given redesign, and then estimate how this change will impact future used vehicle demand and residual value. This is done by identifying similar improvements from the past and analyzing how they performed in the used vehicle market.

Figure 4
Figure 4

It should be noted that J.D. Power’s overall APEAL index is comprised of various sub-indices. While all are important drivers of ownership satisfaction, some carry more weight than others. For example, exterior design is among the most heavily weighted APEAL sub-indices for mainstream vehicles (along with engine / transmission), and as such, has a large influence on a model’s overall APEAL score.


In general, media reception of the Explorer’s new exterior design has been warmly received by industry press, but some have noted the relatively muted exterior upgrade. This isn’t necessarily a bad thing, though, as the old design remains very well regarded. At first glance, the front end is a bit more chiseled and muscular, while the rear end is more like the outgoing design. The biggest changes to the side profile involved extending the distance between front and rear wheels, thereby reducing overhang and giving the new Explorer a more well-proportioned and modern stance (the wheelbase was extended by 6.3” even though overall length and width remained roughly the same).


The increase in wheelbase was made possible by a move to an all-new rear wheel drive platform and it’s arguably this change that is responsible for the most significant improvements over the outgoing design.

The new RWD architecture allowed Ford to extend interior volume behind the first row of seats from 81.7 cu.ft. in 2019 to 87.8 cu.ft. for 2020. While cargo capacity behind the third row fell by roughly 3 cu.ft., passengers will be more comfortable than in the outgoing model. The platform update also greatly increased towing capacity, as max loaded trailer weight grew from 3,000 lbs. on AWD 2019 Explorers outfitted with the 2.3L turbo engine, to 5,300 lbs. on similarly configured 2020 versions.

The new platform and the increase in wheelbase greatly improved overall driving dynamics as well. The new Explorer feels firmly planted to the road and takes corners with confidence and without excessive body roll. It should be noted that improvements in driving dynamics and storage / space address two shortcomings consistently shared by consumers in J.D. Power’s APEAL survey.

In addition to the increase volume, the Explorer’s new interior is more upscale and modern. The layout of audio and HVAC controls is cleaner and less cluttered and both the standard 8.0” and upgraded 10.1” touchscreens bring the Explorer’s infotainment interface up to par with newer midsize SUV entrants (e.g., Kia Telluride). While no one would argue that the new Explorer’s interior represents a much-needed improvement over the outgoing design, materials do fall short of providing an unquestioned “premium” feel at times.

From a content standpoint, the new Explorer comes with a long list of standard or available safety and driver assist features as part of Ford’s Co-Pilot360 suite of technologies, including blind spot with cross-traffic alert and automatic emergency braking.

Ford also made noteworthy changes to the Explorer’s powertrain, replacing the base 3.5L V6 engine from the outgoing model with a 2.3L turbocharged 4-cylinder mated to a 10-speed transmission making 300 horsepower and 310 pound-feet of torque. Power and fuel economy improved over 2019’s version of the 2.3L engine, with horsepower and combined MPG rising by 20-hp and 2-mpg, respectively. Improvements in torque (+30 lb. ft.) and fuel economy (+2 mpg combined) were also made on the larger displacement 3.0L V6 turbo found on the upscale Platinum (but horsepower remained the same).


Overall, the 6th generation provides a more contemporary and refined Explorer. While aesthetic changes were a bit muted, the Explorer’s design remains among best in class and rectifying certain perceived shortcomings (e.g., driving dynamics, storage and space) should lift the Explorer above the midsize SUV average in overall APEAL when next year’s survey is conducted.

We estimate the resulting improvement will translate into an above average used vehicle redesign premium of ~$2.5k for the MY20 Explorer at 36 months of age. While the MY20 redesign premium is well below MY11’s uncommon figure, it reflects a redesign that is considered strong, nonetheless. Similarly observed redesigns premiums from the past include the 2016 Honda Pilot, 2014 Toyota Highlander and 2015 Ford Edge.


Applying the estimated improvement from the MY20 redesign, along with other product- and market-related changes, puts 2020 Explorer residuals at an average of 51% of MSRP after three years. This places MY20 Explorer residuals roughly 5-ppts above MY19 Explorer residuals and ~3-ppts above the MY19 midsize SUV segment average (Figure 5). (Note that MY19 segment figures were used as not all MY20 midsize SUVs had been valued for the July / August ’19 edition.)

Figure 5
Figure 5

Since the predominant lease term of importance is 36 months, our residual values are largely rooted in current prices of comparable three-year-old vehicles. At a high level, adjustments are made between the two comparative model years (i.e., three-year-old and new) to account for changes that have occurred in design, performance, equipment, etc. Adjustments are then made to account for changes expected to occur in used supply, incentives, and macro- economic factors over the forecast term.

This can be illustrated using the MY20 Ford Explorer Platinum 4WD, with the MY17 Platinum as the starting point since we’re estimating a 36M residual for a MY20 returning in CY22 (just like a MY17 selling in the used market in 2019).

Moving from left to right, MY17 Explorer Platinum wholesale prices are currently averaging just over $29k (after adjusting mileage to 45k to reflect 15k miles per year). Inflation aside, equipment, performance and the new design add a total of ~$2.6k to currently prices, bringing our estimated MY20 Platinum value before forecast adjustments to just over $32k (Figure 6).

Figure 6
Figure 6

Once changes to future market conditions are factored in – in particular, a large 3% reduction in value due to a double-digit rise in used supply – brings the estimated 36M residual for the MY20 Platinum to ~$30,950. The Platinum’s dollar residual equals 51% when expressed as a percent of equipped MSRP (or $60.3k).


Aside from the XLT, where Ford swapped out some content and essentially held the line on pricing, prices for other MY20 Explorer trims were raised by ~10%. Typically-equipped MSRPs on the up-level Limited trim grew to $51,225 while prices on the range-topping Platinum exceed $60k – a level reached by relatively few non-luxury midsize SUV competitors (the Jeep Grand Cherokee being one example).

While Ford added or upgraded numerous driver-assist, safety and infotainment features, the value that can be directly assigned to these items is somewhat unbalanced on higher level trims relative to the increase in price (as illustrated by the MY17 to MY20 Platinum walk).

The more significant drivers behind the increase in price include improvements in driving dynamics and towing capacity associated with moving from an FWD to an RWD platform, added roominess, and the appeal associated with the unique design cues and cache associated with up-level trims (especially the Platinum and the 400-HP high performance ST).

The jump in prices can be viewed as reasonable given that consumers are increasingly gravitating to higher priced trims and given that the Platinum exhibits a bit more used value strength than other Explorer trims. However, residual value risk will grow should Explorer prices increase in an outsized manner moving forward without appreciable justification.


Overall, the new Explorer is a handsome, well-executed redesign. Bigger inside and more refined and capable, it remains an excellent choice for midsize SUV consumers. But while residuals for the new model are solid, challenges remain. For one, segment competition is increasingly fierce. The redesigned Explorer competes in a crowded field comprised of 25 models for MY20, up from 22 for MY11. In addition, there are 5 redesigned models (e.g., Toyota Highlander) or all-new models (e.g., Hyundai Palisade) for MY20, the highest number of segment debuts in nearly twenty years.

In addition, aggressive pricing among upper trims is a risk, but at least at this stage new sales volume expectations seem reasonable, a point that should help mitigate unnecessary incentive pressure on residuals. Given the Explorer’s evolutionary design change, conveying other improvements and the model’s overall value proposition to consumers will be extremely important to maximizing potential for the new model.