SANTA BARBARA, Calif. -

In addition to announcing an update to its forecasting model, ALG said Monday that  while it is projecting a modest decline in residual values,its latest forecast still bests “historical norms.”

The latest ALG Industry Report is calling for a 0.5-perecentage-point drop in 36-month residual values; however, this “compares favorably” to the 0.9-percentage-point decline projected from historical norms.

“Used supply overall is increasing by 800,000 units versus the prior effective period, which puts downward pressure on residual values,” said Eric Lyman, ALG vice president of editorial.

“However that negative impact is being offset by rises in consumer spending on durable goods which contributes to stronger residual values. Going forward, used supply increases are an indisputable fact, it is volatility of other factors that are driving risk to ALG's current market forecast.”

In other news from ALG, the firm has rolled out a new forecasting model that now takes real durable goods into consideration as a  new macro-economic driver.  ALG says this is to “better reflect current factors impacting vehicle values” and is effective with this latest edition.

“We are continually searching the market for data that drives used car values, and in the aftermath of the recession, we identified changes in the factors that drive auto sales and values,” said Lyman. “Our data has identified spending on durable goods to be a very good indicator of used vehicle pricing, since it reflects consumers’ willingness to buy big-ticket items.”

Continue the conversation with Auto Remarketing on both LinkedIn and Twitter.