Used Car Market Outlook
Low auction inventories have kept used vehicle prices afloat. But does that mean you can finally sell your used pickup or SUV? And how has bankruptcy affected used car values?
Making smart fleet remarketing decisions these days isn't easy in the topsy-turvy used car market. Some eight to 10 months ago, bringing a used pickup or SUV to auction was like bringing cattle to the slaughterhouse. It wasn't pretty.
Compact and economy cars, on the other hand, enjoyed irrationally high values brought on by the highest fuel prices ever. By the end of June 2009 the market had come down to earth. Truck prices continue to rebound and small cars have deflated to near "normal" values.
However, there are new market forces at work, including a looming used car supply shortage driven by the recession and the credit crunch. What will that do to prices for used fleet vehicles, especially for models of the companies emerging from bankruptcy?
A Positive Trend
The used vehicle market continues its generally positive upward price trend started in the spring.
Adesa Analytical Services reported that average wholesale prices in June ($10,167) were above $10,000 for the first time since April of 2008.
Manheim's Used Vehicle Value Index stood at 114.1 for June, up 5.8 percent from June 2008 and 16.4 percent from the beginning of 2009. June marked the sixth consecutive monthly increase in Manheim wholesale used vehicle prices.
These increases can be attributed to a lack of supply coupled with a healthy demand for used vehicles. Over time, supplies of trade-ins should resume as new vehicle sales pick up, which will lessen upward pressure on used vehicle prices, says Tom Kontos of Adesa in his July commentary.
Small Cars Continue Decline
KBB data shows that in June all seven car segments declined for the first time in 2009, though this falls in line with normal seasonal depreciation trends.
Once again, the smaller, more fuel-efficient car segments, including subcompacts, hybrids and compacts contributed heavily to the trend, depreciating 2.5, 2.4 and 2.3 percent respectively. KBB contends that the depreciation in compacts and hybrids could continue for some time.
Adesa auction data shows all car segments (compact, mid-size, full- size, luxury and sporty) actually appreciated an average of 1.5 percent from May to June 2009.
Trucks Stay Strong
Truck segments continued to rise in value as demand remained surprisingly strong going into summer, led by full-size trucks (1.3 percent), full-size SUVs (2.2 percent) and minivans (3.9 percent).
The return to normal depreciation for the truck segments predicted last month has been delayed, given a surprising upsurge in truck values over the last 30 days. This is most likely attributable to reduced supply at auction and steady demand, which will continue, according to KBB.
The Ford Expedition EL and Toyota Tundra are two examples of vehicles benefitting from low supply at auction, increasing 6.1 percent and 5.1 percent respectively.
In the minivan segment, the Chevy Astro, Nissan Quest and Honda Odyssey all showed significant gains, increasing 12.9 percent, 12.4 percent, and 6.5 percent respectively. KBB says the recent strength in minivans can be attributed to a lack of supply at auction and their affordability.
Vehicles in the crossover segment were mostly flat in June (-0.3 percent) but should remain stable for the foreseeable future, according to KBB.