While 50 cents might not fetch much nowadays, that decline in gas prices since April created a ripple effect throughout the industry, especially when it comes to wholesale prices.
That’s the word from Kelly Blue Book, which calculated that used values dropped more than 2 percent in June, the second consecutive monthly decline since values leveled off in early April.
Through the second quarter, Alec Gutierrez, KBB’s senior market analyst of automotive insight, indicated values slid more than 4 percent, the most pronounced quarterly decline since 2008.
“The market was especially soft this year due to an earlier-than-anticipated jump in fuel prices, which sent values of fuel-efficient compact and hybrid cars tumbling,” Gutierrez said. “Fuel prices topped out in early April, well before the typical seasonal decline that begins after Memorial Day weekend.
Since vehicle values peaked early as well, KBB determined that now they have slipped below average prices seen in 2011.
The firm believes the average one- to three-year-old vehicle now averages $18,000 at auction, approximately 4 percent below the amount dealers were paying one year ago when used values hit an all-time high.
“Although values are now down from the height of last year, they remain 20 percent higher than the low point in 2009 and more than 10 percent above the average price paid from 2000 to 2008,” Gutierrez pointed out.
“With values still high from a historical perspective, Kelley Blue Book believes there is room for further softening through the second half of 2012,” he added.
Compact Cars Especially Affected by Gas Price Change
While new-car sales moved up 22 percent year-over-year, Gutierrez said sales for new compact models pushed up by just 1.4 percent last month.
“Fuel prices are expected to drop as low as $3 per gallon by year-end according to some estimates — a mark that will send compact cars sales tumbling further,” Gutierrez projected.
To slip to that figure, gas prices would have to continue on a track spotted by NADA Used Car Guide.
Analysts compiled data from the U.S. Energy Information Administration that showed the turnaround gas prices made year-over-year. This past June, prices at the pump were 20 cents lower than a year earlier. When considering the state of things in June of last year, gas prices stood almost a $1 higher than the level consumers saw 12 months earlier.
The roller-coaster of activity on the fuel-price front might have left compact-car developments in limbo, Gutierrez indicated that midsize cars are benefitting from the situation. He indicated midsize cars accounted for 18.6 percent market share in June, a 44-percent increase year-over-year.
“The surge in midsize car sales can largely be attributed to the strength of the redesigned Toyota Camry, which posted more than 32,000 sales alone in June,” Gutierrez explained. “The Chevrolet Malibu, Honda Accord, Nissan Altima and Ford Fusion also performed well, each selling more than 20,000 units due to strong incentives in anticipation of redesigns that are expected to arrive for each model later this year.
“The Altima, Malibu and Fusion currently are available with nearly $3,000 each in cash rebates and close to 0 percent financing for up to 60 months,” he continued. “In many cases, these deals are swaying consumers who otherwise would have considered purchasing a compact.”
Used Fuel Sippers Slide on Cheaper Gas
Gutierrez continued his fuel discussion by mentioning that cheaper prices at the pump continued the trend of weaker demand for fuel-efficient vehicles, which saw a drop of 2.5 percent in auction values since the start of June, more than the overall average of 1.9 percent depreciation for the market.
“As dealers remain wary of purchasing these vehicles at auction, Kelley Blue Book expects values to continue falling in line with fuel prices,” Gutierrez estimated. “The most significant declines will come from hybrid cars, which remain up 10 percent on a year-to-date basis. The 2010 Toyota Prius, which we noted was due for a price correction last month, continued its swift decline of more than $1,000 in June.”
Although Kelley Blue Book expects continued weakening, Gutierrez said used-car managers should note that fuel-efficient vehicles remain among the top performers when it comes to value retention from original MSRP.
KBB calculated that the average 2010 model-year used compact car is worth 66 percent of its original MSRP, slightly better than the aforementioned 65 percent average for the industry. Subcompact and hybrid cars remain especially strong, currently holding 70 and 72 percent of original MSRP, respectively.
“Consumers that own a fuel-efficient vehicle should not be concerned with excessive depreciation,” Gutierrez emphasized. “Today we merely are seeing a correction from the run-up in values that occurred while fuel prices increased early in the year. These vehicles are highly sensitive to fluctuations in fuel prices and as a result, there is a strong increase in values while fuel prices rise, only to be followed by a correction once fuel prices retreat.”
Read more: Autoremarketing | KBB: Quarterly Wholesale Decline Strongest Dip Since 2008