Black Book: Don't overreact to softer used values
Used-car values remain relatively close to recent, historic highs, and some product segments, such as light trucks, are likely to hold there fairly well, according to Black Book USA.
That means auto lenders can be aggressive in making loans in some used-vehicle segments without increasing risk, the company said last month.
"The question is 2013," Ricky Beggs, vice president of Black Book, said on the sidelines of the National Automobile Dealers Association convention in Orlando. He said the supply of trade-ins and off-lease vehicles is set to increase this year.
Beggs said that values for some used trucks could hold up in 2013 better than vehicle values in general. "I think trucks are going to be good," he said. "The manufacturers are better at building to demand. And if you look at the economy, the service industry is going to have needs."
Last year, 12 of the 24 product segments Black Book follows increased in value from Feb. 1 to May 1, Beggs said. That was down from 14 segments in the same period in 2011. Now Black Book is watching for the 2013 data, he said.
"In 2013, we won't see 12," Beggs said. "Will it be seven? Eight? Nine?"
The point is, he said, lenders and dealers shouldn't overreact to softer used values.
Meanwhile, last week, in the first of what are expected to be joint quarterly reports, Black Book and Fitch Ratings said that on average, used vehicles are expected to depreciate faster in 2013 than they did in 2012. But the increase won't be enough to hurt the market for asset-backed securities, which are a big source of funding for auto lenders.
Asset-backed securities are bundles of loans assembled by auto lenders for sale to investors. The investors collect the payments as the loans are repaid, and the lender gets money to make more loans. During the last recession, ABS transactions nearly disappeared and many subprime lenders were forced to retrench.
According to the report, faster depreciation could spell higher losses for investors in asset-backed securities but only compared with record-low losses today.
You can reach Jim Henry at email@example.com.