NADA Used Car Guide: Rising Gas Price Effect Spills into Wholesale Market
With so much recent analysis focused on how gas prices are swaying shopper behavior, NADA Used Car Guide took a look at the issue from the inventory manager perspective.
Maybe not to the degree of 2008, but executive automotive analyst Jonathan Banks surmises the 35-cent climb at the pump during the first two weeks of March still will play a significant role in determining the price of used cars and trucks — including trade-in values — across all vehicle segments
“The upward trend in gasoline prices will have an impact on consumer preferences for vehicles and will impact used-vehicle prices, but it will pale in comparison to the situation in 2008, when gasoline prices last spiked,” Banks said.
NADA Used Car Guide thinks climbing gasoline prices are being driven by speculation the country will experience a shortage in oil supply because of disruptions in production in the Middle East and new concerns after the devastating earthquake and tsunami in Japan.
“The impact to vehicle production from the earthquake in Japan will limit the supply of many fuel-efficient cars like the Toyota Prius,” Banks offered.
“These vehicles were already tight on inventory and over the next month demand should easily outstrip supply in the new market, driving more consumer demand towards used cars and trucks,” he continued.
“Historically, a sharp increase in fuel prices has been followed by a decline in large, used SUV prices and conversely, resulted in an increase in prices for used compact cars,” Banks went on to say.
Analysts pointed out AuctionNet figures that showed February auction prices were up between 1 to 3.7 percent on a month-over-month basis — with passenger cars recording the largest price gains and SUVs recording the smallest price gains.
In February, NADA Used Car Guide saw auction prices for compact cars increase about 3.1 percent or higher, depending on the model year. Auction prices for large pickup trucks and SUVs were flat compared to January, which the firm said is a departure from the expected seasonal price increase of about 2.5 percent.
Banks noted the latest data gathered by AuctionNet on March 15 shows that fuel-efficient vehicles like the Honda Civic and Chevrolet Cobalt have continued to increase. Average values on small cars are up between 4 to 6 percent with several Hyundai and Kia models posting increases more than 6 percent in March.
Meanwhile, Banks saw that truck prices have remained stable and have not showed signs of serious declines over the past month.
“Because of the recent spike in fuel prices, values for used compact and midsize cars are increasing dramatically compared to the rest of the market,” Banks asserted.
“We expect prices of compact and midsize cars to continue to increase because of the recent production disruptions in Japan,” he continued. “Lower production of popular-selling new cars will limit availability and drive more consumers into the used-vehicle market.”
NADA Used Car Guide recalled that hybrid prices increased dramatically in 2008 and then waned considerably through last fall. Now those models have begun to rise again as fuel prices have increased.
For example, Banks cited AuctionNet prices for the Prius are up more than $1,700 since November of last year. In March, Prius values have increased by about 6 percent with the strongest gains occurring this past week.
“Barring an extreme increase in gas prices driven by a potential domino effect in other Middle East and North African countries, it’s unlikely that used-vehicle prices will experience the extreme volatility seen in 2008,” Banks concluded.