According to the Blue Book Market Report – JULY 2012, Used-car values dropped more than 2 percent in June, the second consecutive monthly decline since values leveled off in early April.
This month’s report includes:
USED-CAR MARKET ANALYSIS
Drop in Gas Prices Drives Weakest Q2 Performance of Wholesale Values Since 2008
Used-car values dropped more than 2 percent in June, the second consecutive monthly decline since values leveled off in early April. Through Q2, values slid more than 4 percent, the most pronounced quarterly decline since 2008. The market was especially soft this year due to an earlier-than-anticipated jump in fuel prices, which sent values of fuel-efficient compact and hybrid cars tumbling…
Declines to Continue in Q3
Looking ahead, Kelley Blue Book expects used-car values to continue to decline moderately, especially as supply improves at auction. As it stands today, supply has improved slightly but still remains tight. Trade-in volume has increased alongside new-vehicle sales, which is alleviating inventory shortages plaguing dealers. In most cases though, dealers are opting to retain trade-ins, keeping trade volume low in the auction lanes…
Crossovers Underperform, Yet Values Retention Remains above Average
Despite the fact that crossovers (CUVs) had the greatest percentage decreases in the second quarter, they continue to outperform the average vehicle in terms of retained value. Using model-year 2010 as an example, the average auction value for all vehicles is approximately 65 percent of the original MSRP, compared to 73 percent for the luxury crossover segment, and 66 percent for mid-size and compact crossovers. Declines in CUV values during the last three months are more of a return to normalcy than they are identifiers of poorly performing segments…
Used Fuel Sippers Slide on Cheaper Gas
Cheaper prices at the pump continued the trend of weaker demand for fuel-efficient vehicles, which saw a drop of 2.5 percent in auction values since the start of June, more than the overall average of 1.9 percent depreciation for the market. As dealers remain wary of purchasing these vehicles at auction, Kelley Blue Book expects values to continue falling in line with fuel prices. The most significant declines will come from hybrid cars…
NEW-CAR MARKET ANALYSIS
Analysts Determine Improved Economic Indicator Levels Needed to Bolster Vehicle Sales Back to 15M
New-vehicle sales hit 14.1 million seasonally adjusted annual rate (SAAR) in June 2012, a 22 percent increase year-over-year. Through the first six months of the year, more than 7.2 million light vehicles were sold, keeping sales on pace to hit Kelley Blue Book’s projected forecast of 14.2 million units for the year. This would mark the first time sales surpassed 14 million units since 2007, and the third consecutive year of 10 percent or greater annual gains since sales hit a near 30-year low of 10.5 million units in 2009…
With Gas Prices Sliding, Mid-Size Sedan Sales Surge at the Expense of Compacts
Gas prices have dropped more than $0.50 per gallon nationally since April, and sales of compact cars have slowed significantly as a result. Compared to last year, sales were relatively flat, increasing a scant 1.4 percent, which is well below the 22 percent average increase for the industry. Fuel prices are expected to drop as low as $3.00 per gallon by year-end…
Alternative Energy Vehicle Sales Surge 164 Percent in June
With gas prices declining, sales of hybrid and electric vehicles have remained surprisingly resilient. In fact, sales of dedicated hybrid and alternative-energy vehicles surged more than 164 percent in June. With gas prices expected to continue their descent, we could see hybrid and electric vehicle sales slow; however, today it appears as though the sales decline may be relatively mild…
RESIDUAL ANALYSIS
Reconsidering Fuel Prices
A further consequence of this market imbalance could be a hit to manufacturers’ bottom lines if they are forced to incentivize fuel-efficient models and are restricted in selling more high-profit, fuel-inefficient models. Over a long period of time, this could impact manufacturer’s research and design budgets. From a residual value perspective, if these trends materialize, they will likely present a few challenges to manufacturers. As the demand for a model wanes, manufacturers need to resist the temptation to direct excess volume to daily rental service. Balancing production with demand will be critical, along with a miserly application of incentives only when needed…
LATEST HOT USED-CAR REPORT
Large Utility Models Make Up Top Five for June
Summer is officially here, gas prices continue to fall and it appears KBB.com shoppers are looking to perform some heavy-duty activities. Commercial or utility-oriented vehicles make up the top five segments with the greatest change in traffic share on KBB.com…
Click here to read the full Blue Book Market Report – JULY 2012