LAWRENCEVILLE, Ga.—While smaller cars, such as sub-compacts, have faced much higher depreciation in the last two years compared with full-size pickups, Black Book warns lenders not to heavily target trucks over the economy cars to fill the portfolio.
Black Book explained that its residual forecast data shows that pickups will face a steeper depreciation curve than the small cars in the coming years. The company attributes that to demand dropping for pickups as inventory of new and used trucks builds. Black Book explained that trucks held their values very well in recent years due to revitalization of the housing market, and trucks being needed for construction.
Black Book said the supply of used trucks had been limited in recent years, but has been growing steadily as automakers increased production.
“Lately, the production levels of full-size pickups have risen sharply to the point where the incentive levels have to be really high to make the sale of these new trucks,” said Black Book. “Furthermore, the used supplies are stabilizing and forecasted to increase slowly in the coming years.”
The actual retention values of three-year full-size pickups cars have been 58%, 62% and 58% in 2011 (2008 model year), 2012 (2009 del year) and 2013 (2010 del year), respectively in the month of November. The three-year residual forecast for a 2016 model year in 2019 on full-size pickups is 52% based on Black Book’s November publish.
Black Book said the three-year retention rate on sub-compact cars has come down significantly from five years ago when this segment was in strong demand with high and volatile gas prices. As the production volumes increased post-recession, the sub-compact volume share increased until mid-2014 when it started to reverse after a drop in gas prices.
“The demand in this segment has taken a hit as more and more consumers look to a crossover instead,” said Black Book. “Furthermore, the supply of used sub-compact cars has continued to increase as a result of increased new sales a few years ago. This trend in the increase in used supply will continue for the next couple of years. The residual forecast for this segment is the lowest among all segments.”
The actual retention values of three-year old sub-compact cars have been 49%, 47% and 39% in 2011 (2008 model year), 2012 (2009 model year) and 2013 (2010 model year), respectively, in the month of November. The three-year residual forecast for a 2016 model year in 2019 on sub-compact cars is at 36% based on the most recent November publish from Black Book.