By Greg Basich
Although gas prices have been increasing lately, the resale values of vehicles in the fuel-efficient car segments have lost more value than those in the large truck segments, according to a new report from Black Book. Automotive Fleet (a sister publication to Business Fleet) wanted to know more about what was causing the shift and spoke with Ricky Beggs, managing editor for Black Book, to find out.
To start, the Compact Car, Compact CUV and Entry-Level Car segments, as recorded by Black Book, saw falling resale values of 3.1%, 2.6% and 2.5%, respectively, since mid-July. The Luxury SUV, Full-Size Pickup and Full-Size SUV segments on the other hand, have only fallen by 1.9%, 1.7% and 1.3% respectively during that same period.
“No. 1, I think it is still a slight increase in the supply that’s coming into the marketplace,” Beggs said. “I know there is a lot of talk about gas prices being a driver of this, but with gas prices going up you would think that more fuel-efficient cars would hold their values better than the trucks and SUVs. Well, it’s going the other direction as far as the trending goes. Percentage wise, the entry and compact cars are the ones that are actually taking the higher percentage decline. I think that’s driven just by an adjustment in the marketplace. I don’t think gas is at the level yet where people react to them.”
Beggs said he believes the functionality of utility vehicles and the necessity of pickup trucks to many businesses’ operations is keeping those segments higher. He also said the number of pickup trucks in the market is lower and more reflective of actual demand than in years past.
As for the effect of gas prices on different vehicle segment resale values, Beggs said there needs to be a larger, sustained shift in prices for this to occur. When asked about whether resale values either lag behind or match gas price changes, Beggs explained that if the increase in prices is large, and sustained enough, then they track fairly closely. If not, then gas prices don’t affect resale values much.
He said in the short term, prices need to stay above $4, and over the long run, he cites $5 as a price that could cause a larger shift. He also attributes the wide swings in fuel prices this year to resale values not being affected as much by recent gas price increases.
“One reason the consumer isn’t reacting to the movement in gas prices as much as they might is because they believe gas prices will come back down,” Beggs said.
Beggs did note there are some regional differences in terms of interest in vehicle types, for example states on the West Coast that are experiencing high gas prices due to recent supply concerns.
“If I look at some of the comments from the survey reports that I got back this week, there were a few that mentioned interested in ‘econo’ cars or ‘fuel-efficient’ cars,” Beggs said. “The areas where those comments came from were in states that had pretty high, above national average, gas prices. Those states are at the $4.10, $4.20 gas price level, including Washington state and California.”
Overall, Beggs said he believes the market will continue in the same direction that it’s been moving: a slow, steady decline through the end of the year, barring anything unforeseen happening in the automotive marketplace or with fuel prices.