LAWRENCEVILLE, Ga. — Black Book’s residual forecast for May illustrates the downward pressure on prices that increased supply will continue to have over the next few years.
Black Book forecast data shows that residuals on an average three-year-old vehicle will dip from the current three-year retention of 52% in 2016 to 47.8% by 2019. Retention values on a three-year-old vehicle peaked in 2013, when vehicles were retaining approximately 54.5% of their original typically-equipped retail.
Favorable credit availability, continued growth in demand, and consistently low gas prices have provided support in keeping retention rates high in the last five years, the firm noted. However, increased used supply in the marketplace, driven by the significantly large volume of sales on new cars and trucks, has played a driving role in slipping retention rates this year.
Here are the historical three-year retention rates and the projected residual forecast on an average three-year-old vehicle, according to Black Book:
2017: 50.1% (forecast)
2018: 48.6% (forecast)
2019: 47.8% (forecast)
The historical data represents published Black Book wholesale average values as a percent of new typically-equipped retail. The forecast also represents published Black Book Residual Values averaged across all three-year-old models.
“Despite the industry’s continued efforts to maintain a strong pace of sales on new cars and trucks, the increased level of supply in the used market has begun to weaken prices on both cars and trucks,” said Anil Goyal, senior vice president of automotive valuation and analytics for Black Book. “We saw the first sign of this in 2015, when cars saw above-average depreciation on the year, and this year we will see rising depreciation for truck segments as well.”
Originally posted on F&I and Showroom