Kelley Blue Book Expects Green Car Prices to Decrease by Year's End
If you're considering a green vehicle, you may want to wait a few months. According to KBB.com, fuel-efficient vehicle values are likely to fall 15 percent by year-end, due to stabilizing gas prices and a return to normal production levels for Japanese manufacturers.
So far in 2011, Kelley Blue Book reported significant strength among values of fuel-efficient subcompact, compact and hybrid cars. From January through May of this year, fuel-efficient vehicle values increased 20 to 25 percent, surpassing the used-car market average increase of 5 percent during the same time period. KBB attributes this steep increase to a few things:
- Average gas prices increased from \Average gas prices increased from \•.00 on January 1 to \•.97 per gallon on May 15..00 on January 1 to \Average gas prices increased from \•.00 on January 1 to \•.97 per gallon on May 15..97 per gallon on May 15.
- The earthquake and tsunami that struck Japan severely constrained Japanese vehicle production.
- Continued supply constraints of good-condition vehicles due to reduced leasing and trade-ins.
Japanese manufacturers plan to have their production facilities back to 100 percent capacity by September. With gas prices on the decline and Japanese vehicle and part production recovering, demand for fuel-efficient vehicles is waning. As a result, dealers are becoming more reluctant to pay premium prices for these vehicles at auction.
"While depreciation has been relatively mild so far, based on changes in gas prices and issues with supply, Kelley Blue Book believes a significant 15 percent correction is likely by the end of the year," said Alec Gutierrez, Manager of Vehicle Valuation for Kelley Blue Book. "If we take a look back at the auction market in 2008 when gas prices hit $4.00 per gallon, we can foresee drops during the next few months."
With values inflated 20 percent since the beginning of the year, KBB predicts that we will surpass the drops during the peak of the recession. But, the key factor in determining the July to December drop in fuel-efficient vehicle values is fuel prices.