Q&A: Used prices expected to soften this year
Beggs: "Retention values will still be very good, but not as strong as we've been dealing with."
ORLANDO — As managing editor of Black Book, Ricky Beggs oversees the company's daily monitoring and analysis of national used-vehicle prices, providing dealers, auctions and automakers with the data needed for pricing and residual planning. Beggs spoke with Staff Reporter Lindsay Chappell during the National Automobile Dealers Association convention here.
Where are used-vehicle prices going?
For 2013, I don't think they will be at the levels we saw this past year and in 2011. The reason is that we're moving away from the undersupply situation we've had because we're building up an ample supply of vehicles again.
Look at new-car sales levels. We jumped up from 12.7 million in 2011 to 14.5 million in 2012, and our projection for 2013 sales is 15.3 million. Those are all future used vehicles. We're getting close to 16 million.
Retention values will still be very good, but not as strong as we've been dealing with.
Dealers have complained for the past two years that prices were inflated. Is that complaint warranted?
I can't tell you the number of times I've stood on an auction lane with dealers who shook their heads in disbelief and said, "This is just too much money." And then they'd raise their hand and bid again. You've got to have inventory or you're not going to sell anything. So yes, the prices have been unbelievably high.
Right now, the price for the average used 2007 to 2011 model car is about $800 higher than the average used car from 2006 to 2010 was last February.
When will the trend stop?
In 2014. That's when we'll see total volume create enough used inventory to ease the demand and supply situation.
Will truck residual values soften?
Trucks are going to do well in residual values because demand is increasing. As the economy improves there will be more need in the service economy and in construction. Look at the period from last fall through the end of the year. The market was strong for all trucks. It doesn't matter if gas goes to $5 a gallon — when you need a truck, you need a truck.
Any uncertainties as you watch prices?
I'm a little concerned about the entry level and subcompact segments. More manufacturers have an offering in those segments than we've ever seen, and I'm just not convinced that American consumers are ready for that size of car on an everyday basis -- especially if gas is not $5 a gallon or higher.