MIAMI-Pick-up trucks are holding their value better these days than compact cars, an interesting trend in light of the high gas prices, pointed out Ricky Beggs.
The VP and managing editor of Black Book, Gainesville, Ga., attributed the fact that pickups, especially compact pickups, are maintaining their value best among all car segments indicates consumers are not as concerned about the price of a gallon of gas as they used to be.
"Pick-ups are doing very well with retention, compact and full-size, and utility trucks are adding to that. Car buyers are becoming desensitized to gas price hikes."
What is also causing the value-retention gap between pickups and compact cars-one of the worst car segments for retention according to the latest numbers-is that manufacturers have misinterpreted consumer demand for small cars and are producing more small cars than people want to buy now, according to Beggs.
"Compact cars have had more sales this year than in the past, but that's because there are more players making the cars," said Beggs during the 2012 CUNA Lending Council Conference. "We are not sure consumers really want all those small cars, but the manufactures make them, often to comply with CAFE… requirements. I am not upbeat and excited about the value retention of the compact cars."
The federal government's fuel-economy standards in 2011 got a big jolt. The Corporate Average Fuel Economy (CAFE) law was created in 1975, but last year automaker requirements were increased. The average fuel economy for cars must improve from the current 27.5 mpg, where it has been since 1990, to 37.8 mpg by 2016. The truck standard has to rise from 23.5 mpg to 28.8.
Beggs is a little more positive now about the ability of mid-size cars, which have taken a beating in retention value in recent years, to keep their resale prices up. He attributed that thinking to the fact there have been numerous mid-size redesigns recently and that the segment's gas mileage has improved.
"A formerly bland segment is no longer, and it has an acceptable MPG without loss of space, interior room, and ride comfort."
Other Beggs' observations:
o The older, much cheaper used car with not a lot of life left should see a sharp decline in value due to consumers buying more new cars and trading in the old car they had been hanging onto. "The typical buy-here-pay-here car that would get $4,500 in the past several years will now likely fall back to about $3,000."
o Enjoy the days of excellent repo resale. "It still will be a good market in 2013 for repo sales, but not the same retention of the last few years."
o Hybrids are not seeing the consumer activity due to their high sticker prices. "Consumers are not seeing the value in the extra cost for the return in extra gas mileage."
o The future of new cars sales looks good. "We project 14.3 million units this year, 15.2 million next year, and 16 million by 2016."