GAINESVILLE, Ga.-Pickup trucks of all sizes are expected to hold their value better than all other vehicle segments during the next two years, according to Black Book.
"Pickups are expected to remain strong for auto lenders since the service industry is picking up from an economy that wants to improve," said Jeff Bunch, VP of Black Book lender solutions. "Home construction is rebounding and a lot of those employed in that industry work out of their trucks."
Bunch added that manufacturers have also cut back on pickup production during the economic downturn. "To begin with, there are not as many trucks out there-a matter of supply and demand."
Most vehicle segments show about an 18% annual depreciation, with pickup trucks' used values falling at only 5%, reported Bunch.
Premium sporty cars will outperform the average vehicle retention rates over the next 12 to 24 months, as well, because of less supply currently in the market, added Bunch.
Crossovers will do well, at the price of minivans, whose residual values are declining faster due to the heavy competition in this segment and because many minivan owners are moving over to crossovers.
Where To Kick The Tires
Lenders should be wary of entry-level cars, such as the Chevrolet Aveo, Honda Fit, Toyota Yaris and Hyundai Accent, warned Bunch, who said the luster of better mileage is wearing off these models.
"Mid-size cars' gas mileage has improved a lot. People who used to go to the entry levels for mileage are now looking at mid-size, because there is not that much difference in fuel economy and they get more room."
Bunch said Black Book continues to see the air being let out of the used car bubble, as the strong residual values during the recession are a thing of the past (Credit Union Journal, May 27).
"As we look out 12 to 24 months we do see that depreciation accelerating," said Bunch. "Look at the supply of used cars that is growing-the U.S. went from selling 10 million new cars a year to 16 million. That's a lot of trade-ins."
