Higher Fuel Prices Not Boosting Used-Vehicle Prices
McLEAN, Va. -- The recent 42-cent spike in the price of regular grade gasoline has had a minimal effect on used-vehicle prices in August, reports the National Automobile Dealers Association Used Car Guide. Instead, consumers are choosing to stay the course with their current vehicles.
“This time around, rising gas prices have done little to shift consumer demand for late-model used vehicles," said Jonathan Banks, senior analyst with the guide. "Buyers have become more accustomed to dramatic swings in gas prices. As long as fluctuations are similar to what’s been seen in the past, consumers will stick with vehicles that best fit their lifestyles, rather than make unnecessary sacrifices for improved fuel economy.”
In 2011, the prices of used cars increased substantially and those of light truck fell when gas prices grew from $3.07 per gallon in early January to a peak of $3.96 in May, says the Energy Information Administration.
Fast forward to spring 2012, when gas prices followed a similar path toward a peak of $3.94 per gallon in April, but used-vehicle prices took a different path with car price appreciation much less than the previous year. Light-truck prices also remained relatively stable and some increased moderately.
From April to July, the 3% average rate of depreciation for compact and mid-size cars has led all others segments by a wide margin, while prices for mainstream light-truck segments have averaged a decline of 1.6%, the guide says.
In dollar terms, the average price of a 3-year-old compact car fell by $1,350 over this period. Hybrid car prices have taken an even more pronounced hit since spring. For example, prices for 3-year-old compact hybrids such as the Toyota Prius fell by nearly 18% between April and July, or $2,718. By comparison, prices for large pickup trucks, such as the Ford F150, fell only $525.
So far in August, cars have continued to depreciate more than light trucks. Compact and mid-size car prices fell 2.2% and 2%, respectively, while prices for utility vehicles of all sizes and large pickup trucks barely slipped at an average of 0.5% compared to July. Prices for luxury cars and luxury utility vehicles fell 1.8% and 1.5%, respectively, in August compared to July.
“The most recent jump in gas prices is largely responsible for slowing down the rate of depreciation for cars compared to the prior three months, but by historical standards the improvement has been mild,” Banks said. “Even more notable is the continued price strength of light trucks in August. So far, higher gas prices have not had a noticeable impact on the demand for light-truck segments.”
As spikes in gas prices occur more frequently, Banks suggested that used-vehicle buyers are becoming increasingly desensitized to dramatic and rapid changes in the price of fuel at the pump. “We should see the volatility of used-vehicle prices diminish as gas prices rise and fall in the future,” he said.
Published by The Business Journal, Youngstown, Ohio.