NADA Guide Analyst: Rising Cost of Fuel Will Impact Used-Vehicle Prices

MCLEAN, Va., March 16, 2011 /PRNewswire-USNewswire/ -- Rising gasoline prices will play a significant role in determining the price of used cars and trucks—including trade-in values—across all vehicle segments, said Jonathan Banks, executive automotive analyst for the NADA Used Car Guide.

"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.

Gasoline prices have climbed more than 35 cents during the first two weeks of March, driven by speculation that the country will experience a shortage in oil supply because of disruptions in oil production in the Middle East and new concerns after the devastating earthquake and tsunami in Japan last week.

"The impact to vehicle production from the earthquake in Japan will limit the supply of many fuel-efficient cars like the Toyota Prius," Banks added. "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.

"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," he said.

Auction prices in February 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, according to AuctionNet, a wholesale data supplier.

In February, auction prices for compact cars increased 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 is a departure from the expected seasonal price increase of about 2.5 percent.

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, 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 mid-size cars are increasing dramatically compared to the rest of the market," Banks said. "We expect prices of compact and mid-size cars to continue to increase because of the recent production disruptions in Japan. Lower production of popular-selling new cars will limit availability and drive more consumers into the used-vehicle market."

Hybrid prices, which increased dramatically in 2008 and then waned considerably through fall 2010, have begun to rise again as fuel prices have increased, he said. For example, AuctionNet prices for the Prius are up more than $1,700 since November 2010. 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."  

About NADA Used Car Guide

NADA Used Car Guide, over its 78-year history, has earned the reputation of a leader in providing market-reflective vehicle valuation products, services and information to businesses worldwide. NADA collects and analyzes more than 1 million combined wholesale and retail auto-related transaction prices each month. Its guidebooks, auction data, analysis and data solutions offer automotive, financial, insurance and government professionals the timely information and reliable solutions they need to make better business decisions. For more information, visit www.nada.com/b2b.

SOURCE National Automobile Dealers Association