SANTA MONICA, Calif. -

In its latest Quarterly Market Report, ALG showed a year-over-year comparison of March/April 36-month residual value forecasts.

Of the 25 segments included in the report, only five had positive residual value changes from a year ago.

And they were all mainstream utility segments (which, according to ALG, includes minivans).

Asked why utilities have held onto their values so well, ALG chief industry analyst Eric Lyman said it is mostly due to increasing consumer demand over the past few years on that side of the market and the fact that gas prices are expected to be flat for the next three years. 

And these fuel costs haven’t even increased as much as expected to this point, anyway.

While down 1.4 percentage points from a year ago, midsize pickups lead all segments with 36-month residuals of 64.8 percent.

And the top six segments for 36-month retention are either pickups or utilities, and all six have residuals above 51 percent.

Smaller car struggles 

The premium subcompact had the most significant drop in residual value — going from 55.2 percent to 46.9 percent — and smaller car segments, in general, trended toward the bottom half of the residual value rankings.

This goes back to demand shift towards trucks, and even more so, the “fundamentals of the economy,” Lyman said. With strong economic fundamentals and relatively low gas prices, demand for smaller cars goes down, particularly the pure point-A-to-point-B type of vehicles.

“These are also low-margin segments for the automaker. So when consumer demand shifts away from these types of segments that aren’t as profitable for the automakers, the automakers are more than willing to refocus their attention both from a production and product development side towards the vehicles that are more profitable,” Lyman said in a phone interview.

“I think you can look at sort of the proliferation of the luxury pickup trucks — the really high-line (models) whether it’s a Ford Raptor or a Ford Limited Platinum type of vehicle — they’re going to pivot towards the vehicles that are in high demand and have bigger margins than vehicles that are really a challenge to squeeze out a profit in like the subcompact segment,” he said.

Overall, the 36-month benchmark residual forecast was 49 percent industry-wide, down from 49.8 percent a year ago.

ALG said this decline is “consistent with ALG’s expectations of gradual declines in used market values.”

Specialist brands lead auction retention

Also in ALG’s quarterly report was an analysis of 3-year-old auction retention changes by brand, with “specialist brands” leading the pack.

In the first quarter, Land Rover had the highest auction value retention at 64.5 percent, followed by Subaru at 59.7 percent, Jeep at 56.6 percent and GMC at 54.7 percent.

Overall auction retention for 3-year-old vehicles was 48.5 percent, down from 50.5 percent in the first quarter of 2016.

“Growth in used supply and expiration of pent-up demand from the Great Recession are leading causes of the downturn,” ALG said in the report.