ALG: Decreasing Used Supply to Have Positive Effect on Canadian Residual Values

As used supply is expected to decrease minimally in the near future, ALG reports this tightening of used inventory may lead to a rise in residual values in Canada.

In its latest Industry Report, the company said it anticipates the decreasing Canadian used-vehicle supply will lead to a 0.2 percent increase on residuals, on average.

“The impact varies between zero to 0.3 percent for nearly all segments,” officials added.

The premium full-size segment displays the largest negative impact, falling 0.8 percent. On the other hand, the midsize utility segment showed a positive impact of 0.4 percent.

Highlighting the economic outlook on a larger scale, ALG officials noted the Canadian economy has “slowed,” though employment has held up well to date

“Third quarter GDP growth of 0.1 percent, as well as preliminary growth of 1.2 percent indicate a struggling economy which needs to boost exports and encourage increased business investment,” officials continued.

And experts are forecasting 2013 to be another slow year, with growth of 2.1 percent, according to ALG.

But the industry is coming off of a booming year, with new-vehicle sales for 2012 up 5.7 percent from 2011 to 1,675,675 units sold – “second best sales year ever in Canada,” ALG said.

So, how will these economic factors affect residuals?

“The total movement (including macro-economic and used-supply adjustments) for the edition (January-February) averages roughly -0.5 percent in the 48-month term, with variations among the segments,” ALG said.

The company also provided the following chart to illustrate its results: