Retired rentals likely to hurt some used-car prices
Tight used-vehicle supplies will buoy used-vehicle prices in general through 2012, but a rise in the number of retired rental vehicles entering the wholesale market will drag down some models' prices, an NADA Used Car Guide analyst predicts.
In the second half of the year, says Larry Dixon, prices of specific vehicle models that have been sold heavily into rental fleets, such as the Nissan Altima and Dodge Avenger, will fall faster than those of other vehicles in the same segment.
The NADA guide predicts the number of 2011 and 2012 retired rental Altimas entering the wholesale market in the second half of the year will increase 33 percent compared to the first half of the year. The number of 2011 and 2012 retired rental Avengers entering the market in the second half of the year is expected to grow 11 percent.
"The segment itself is going to feel a minimal impact, but the negative results will be more concentrated on those" models, Dixon says.
Data from NADA guide also show that higher volumes of some retired rental vehicles, along with falling gasoline prices, already have helped to depress compact-car prices.
The number of 2011 and 2012 retired rental cars such as the Ford Focus, Nissan Sentra and Toyota Corolla that entered the wholesale market in April-May increased 21 percent, or nearly 2,800 units, from February-March levels.
According to ADESA Analytical Services, the average wholesale price of a used compact car sold at auction in May was $7,280 or 3 percent below the average price in April. It was also 7 percent lower than the price in May 2011 when prices were bolstered by a new-car shortage resulting from the March 2011 earthquake in Japan.
Tom Kontos, an analyst with ADESA, says auto companies sold 112,498 more new units into rental fleets through May than they did in the same period last year. "We will get more of those back as time goes on," he adds.
Ricky Beggs, managing editor of Black Book, says his talks with rental-car remarketers showed a "slight increase" in the number of retired rental vehicles for sale at auctions the week ending June 15. Rental-car companies say business has been slower than expected, so they are selling excess vehicles, Beggs says.
He adds: "It's not a tremendous number, but more than they expected to remarket at this time of year."
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