LAWRENCEVILLE, Ga. — Black Book’s Used Vehicle Retention Index for fell 0.8% from February to 113 heading into April. The index is calculated using Black Book’s published wholesale average value on two- to six-year-old vehicles as a percent of original typically equipped MSRP.
The vehicle valuation firm noted that rising interest rates and auto loan delinquencies have led to a slight tightening of credit availability. Incentives also continue to rise, while certified pre-owned growth has continued to slow. Combined, these factors are creating downward pressure on retention values, resulting in the downward trend in the monthly index, which is weighted based on vehicle registration volume and adjusted seasonality, vehicle age, mileage, condition and inflation.
The two segments showing the most significant drops based on their index calculations were subcompact cars, which fell 2.2% and Compact Crossovers, which fell 1.6%.
“We are continuing to see that the market is steadily declining, and a typical four-year-old vehicle is not retaining the same value over time,” said Anil Goyal, senior vice president of automotive valuation and analytics for Black Book. “Given the direction of supply, demand, incentives and interest rates, we feel this easing downward trend for the Index will continue throughout the balance of 2017.”
The Index dates back to January 2005, when Black Book published a benchmark index value of 100 for the market. In 2008, the index dropped by 14.1%. It dropped by 6.4% in 2016. During 2011, the index rose strongly from 113.3 to 123 by the end of the year, as the economy picked up steam and used-vehicle values rose higher. It continued to remain relatively stable, peaking at 128.1 in May 2014.
Since registering a score of 125.9 in May 2015, however, the index has fallen steadily. This recent trend illustrates a continued, yet slow, weakening of the used-vehicle market as a result of cresting demand and increased supply in the used market, according to the firm.
Originally posted on F&I and Showroom