Autosignal | Wednesday, December 23, 2009
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Forecast: Small-Car Flood to Swamp Residuals If you want a vehicle that will hold its value, buy a big SUV rather than a small car, the experts at Kelley Blue Book say. Automakers, under pressure to meet tighter fuel economy rules, are about to flood the market with so many small, fuel-efficient vehicles that the residuals of those vehicles will fall, predicts Eric Ibara, director of residual consulting for Kelley Blue Book. Gasoline prices are expected to stabilize below $3.50 a gallon for the next three to five years, also lessening demand for fuel-efficient vehicles, Ibara says. Kelley projects lower 2010 residual values for brands such as Honda, Toyota and Volkswagen than it did in 2009 because their lines include many small, fuel-efficient vehicles. Residual value is the projected value of a vehicle at the end of a specific time period. "Our outlook for the next five years is that this segment is going to get very competitive, and therefore, we've lowered our forecast for these vehicles," Ibara says. In contrast, domestic truck brands with heavy concentrations of pickups and SUVs, such as Jeep and GMC, had higher projected residual values this year. That trend will continue, Ibara says. Honda was Kelley Blue Book's No. 1 brand in its 2009 residual-value analysis with a projected residual of 44.5 percent after five years. But in Kelley's projections for 2010, Honda's projected residuals shed 6.5 percentage points, and the brand dipped to No. 3. Kelley bases predictions on current vehicle data, market conditions for each vehicle, segment competition and an economic forecast. (Source: Automotive News, 12/14/09) Click here to add your comment about the article. Click here to email to client
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