NADA Used Car Guide: Trade-In Values of Trucks Likely to be Strong Next Month

NADA Used Car Guide: Trade-In Values of Trucks Likely to be Strong Next Month

December 17, 2009

McLEAN, Va. — During the first month of 2010, several used-truck segments are expected to show year-over-year value increases, according to NADA Used Car Guide, which also indicated that most car segments will still show double-digit decreased compared to January 2009. 

For instance, the NADA average trade-in values of large SUVs is expected to jump 16.61 percent from January 2009, large pickups are expected to increase 14.16 percent and midsize SUVs are projected to climb 6.74 percent. 

“This unprecedented increase is again a result of lower fuel prices, which brought consumers back to used trucks, driving up prices from the low points when demand for these segments was virtually non-existent,” explained Jonathan Banks, senior director of editorial and data services for NADA Used Car Guide.

“The decline in overall used supply has also been an important driver in the strength of used-vehicle values, especially for the truck segments,” he added. 

Banks said these have climbed due to increases in demand and shorter supply, which has been caused, in part, by the following: 

—The stabilization that occurred in January of previously volatile gas prices. “As gas prices fell, renewed consumer interest in the above segments increased demand, even while supply remained static or, in some cases, fell,” Banks noted. 

—Strong wholesale demand. “Traditionally, dealers relied on trade-ins for their used vehicle inventory,” he continued. “However, lower than average trade-in volume, driven by a lower supply of leased returns and sluggish new vehicle sales, has sent record numbers of dealers to auction to secure used vehicles. Increased demand for fewer units has created higher wholesale prices.”  

—Wholesale demand was also boosted by such market factors such as the credit crisis, limited automaker incentives, reduction in new-vehicle production and CARS.  

“Elevated prices on the wholesale side eventually translated into higher retail values,” Banks continued. “Fewer used vehicles in the supply chain caused used-car prices to rise as demand rebounded, especially in the light truck and SUV and CUV segments.”

Meanwhile, car values are expected to continue to be softer in January across all segments, according to NADA Used Car Guide data. For instance, entry compacts are projected to be down 28.96 percent year-over-year in January, and intermediate compacts are projected to be off 24.84 percent. 

Banks said there has been a slowdown in passenger cars’ Used Car Guide values this year due to a number of factors. 

“Used Car Guide values for the majority of passenger cars were down for CY 2009 on a year-over-year basis, reflecting the generally poor condition of the economy, overall market volatility, and of the remarkable shift in demand from cars to trucks/SUVs over the course of the year as fuel prices receded from their 2008 highs,” Banks observed. 

Moving on to look at initial December wholesale prices, AuctionNet data suggests that most segments have been relatively stable in the first week of the month compared to November. 

Van prices were down just less than 2 percent from November and CUV prices dipped more than 0.5 percent. Cars and pickup climbed less than 0.5 percent, while SUVs appeared to be relatively static from the previous month. 

As far as NADA’s Weekly Historical Volatility Measure, the prices of compact CUVs have been the most volatile in the first week of December with an HVM score of 17.1 percent. They were followed by large SUVs (16.6 percent), large pickups (15.8 percent), intermediate compacts (13.6 percent) and midsize vans (12.9 percent). 

The set average was 12.2 percent. 

Conversely, the segment with the least volatile prices was midsize CUVs, which had an HVM of 8.2 percent. Also below the average were luxury large SUVs (8.6 percent), luxury large (8.9 percent), intermediate midsize (10.3 percent), intermediate large (11 percent) and premium luxury large (11.3 percent). 

Moving on, Banks offered more insight into the market, adding: “October-to-November transactional sales averages declined gently which may indicate that the worst of the typical autumn/winter sales decline reached bottom in October.  

“When put into historical context, November sales averages were fairly strong, excluding the Thanksgiving holiday week,” he continued. 

Banks went on to note that initial returns of many 2009 models were “very low” as December began. 

“This low volume and relatively strong dealer and consumer demand has helped maintain price strength across the board,” he explained. “However, NADA believes that as a more steady used supply manifests itself, prices will moderate and return to the more traditional historical gap between wholesale and retail prices.” 

As far as January goes, NADA expects the used market will be somewhat static. Banks pointed out that on the new-car front Toyota has boosted production. More specifically, this was done to tackle inventory shortages. To meet the demand, the automaker has added shifts at its San Antonio, Texas, plant and started overtime at its other plants in North America. 

“This indicates that despite a down (but slightly improving) economy, there are still supply shortages, which should help keep used prices strong in the near-term,” Banks shared. 

“With this said, NADA does not anticipate the same degree of year-over-year strength on most trucks because similar increases in used-truck values would see them priced higher than comparable new vehicles,” he concluded.

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