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ALG Residual Values: SUVs Up, Compacts Down

May 06, 2010

Sales and residual values of premium vehicles and SUVs have suffered heavily because of last year's prolonged recession and the $4 per gallon gas prices during the summer of 2008. But now gas prices have dropped to less inflationary levels and these vehicle segments have become more attractive to consumers, according to ALG's May-June Residual Value Report.

The full-size SUV segment showed the largest year-over-year 36-month residual movement of +8.4 percent of MSRP, ahead of the next-best performers premium mid-size SUV (+2.5 percent), premium luxury (+.07 percent) and premium full-size SUV (+0.1 percent).

The once popular entry compact segment experienced one of the larger declines in year-to-date sales and residual values. Consumers are less concerned about gas prices, have more money in their pockets and, as a result, have turned away from the fuel-economy segments. Entry compact experienced a 1 percent loss in sales between 2009 year-to-date and 2010 year-to-date. This loss of popularity is reflected in residuals, which have declined 2.6 percent.

With the slow increase in gas prices, high unemployment and only slow improvement in housing, utility trucks (e.g., full-size pickups) have not fared well either. The segment saw a 9.4 percent decline in sales between 2009 year-to-date and 2010 year-to-date. Their residual value reflects a similar loss, showing a 2.4 percent decline.

Of all the segments, compact pickups fared the worse in a year-over-year comparison with 4 percent decline in residual value.

ALG believes that full-size pickups and SUVs have stabilized their demand. The caveat is that ALG forecasts fuel prices will be, on average, $4 or more per gallon in three years time. Fuel prices at that level will have a direct and negative impact on both full-size pickups and SUVs.

ALG says there's a possibility that last year's auction trends may reoccur. If this happens, ALG believes the lower supply of full-size pickups and SUVs will help mitigate any decline in demand.

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