LAWRENCEVILLE, Ga.—Concerns over the used car bubble bursting may grow this year, as a new report indicates vehicle depreciation is expected to accelerate in 2015.
A joint vehicle depreciation report from Black Book and Fitch Ratings, Inc. points to what many experts have warned will drive used values down further—more vehicles are coming off lease, to go along with the increasing number of trade-ins as car-buyers find money for new cars.
According to the report, 2014 new vehicle sales finished the year at 16.5 million units, and Black Book is forecasting new vehicle sales to finish north of 16.7 million units in 2015. The annual depreciation rate on used vehicles in 2014 was 12.1%. Black Book believes annual depreciation levels on used vehicles will continue to trend toward pre-recession historical rates and climb to 14.5% in 2015.
“2014 depreciation was defined by pockets of volatility due to seasonality, harsh weather patterns and falling fuel prices impacting smaller cars and trucks of all sizes,” said Anil Goyal, VP of analytics and strategic partnerships for Black Book. “Looking ahead, lower consumer demand and CAFÉ-driven model competition will place higher depreciation pressure on smaller car segments particularly, but trucks should have stable retention in 2015 due to balanced production levels and strong housing and service economies.”
Looking ahead, used vehicle inventory levels and lease vehicle returns will continue to increase in 2015 by over 10%, along with higher vehicle trade-in volumes, Black Book explained.
Fitch believes higher vehicle depreciation in 2015 is not expected to have a significant impact on overall auto asset-backed securities (ABS) performance. Fitch expects U.S. auto loan ABS loss rates to rise in 2015 but not have a significant impact on overall performance.