The monthly Market Report reviews the state of the automotive industry by examining Kelley Blue Book Wholesale Lending Values.
Findings to date show that fuel-efficient segments have recently risen in price much more aggressively than during the past two years. Values are up nearly 20% ($1,500-$2,500) since January of this year, a significant departure from the steady depreciation of 2009 and 2010.
For example, the Toyota Prius hybrid has increased in value nearly $3,800 since January 1, and the Ford Fusion midsize sedan is up a hefty $1,800. With escalating fuel prices, KBB predicts that values for many of these vehicles will continue to rise. KBB also warns that dealers should be cautious of increasing auction values. "Ultimately, what a dealer has to pay at auction for a vehicle directly translates to what a consumer can expect for their trade in," Alec Gutierrez, Manager of Vehicle Valuation for Kelley Blue Book, told Auto Trader.
And while fuel-efficient segments have performed better than others since the beginning of the year, the report shows that all used-vehicle values have been increasing through April. To illustrate how prices have risen over the past several years, KBB compiled the chart below, which illustrates the average change in value for a three-year-old vehicle in April 2007 versus today.
|Year-to-Year Comparison - KBB Trade-in Value|
|*Chart compares three-year-old vehicles (MY05 & MY08) for each period|
"It's simple supply and demand," said Gutierrez. "Over the last several years we have seen values for used vehicles increase due to the fact that there has been a substantial lack of supply."
With gas prices approaching $4 per gallon, many consumers have gravitated to subcompact, compact and hybrid cars to reduce the impact of gas prices on the family budget.
"Dealers have been fighting tooth and nail at auction to replenish their inventory with the fuel-efficient vehicles consumers want today," noted Gutierrez. He predicted that, in mid-to-late summer when gas prices are expected to go down, the values of many fuel-efficient models would also drop.
"Basically, what we're saying is that if your vehicle is still running and you don't have to sell it, this is not a good time to get into the used vehicle market place. However, if you have an extra used vehicle, you'll get the best bang for your buck," added Gutierrez.
Jack R. Nerad, Executive Editorial Director and Executive Market Analyst at Kelley Blue Book and kbb.com, remarked, "The quick run-up in gasoline prices has created a stampede away from large cars and trucks toward smaller, more fuel-efficient vehicles. Because of that, prices for new and used smaller vehicles have firmed up, while prices for larger vehicles have softened. We at Kelley Blue Book expect fuel prices to decline by fall."
"The bottom line?" we asked Nerad. He responded, "If you are looking for a small car, you might want to wait. If, on the other hand, you've been considering a larger car or truck, this might be a good opportunity to move while others are hesitating."