IRVINE, CA – During the month of May, the used-vehicle market was relatively stable, depreciating 0.4 percent overall. Only five of Kelley Blue Book’s 20 segments continued to appreciate, although the gains were relatively conservative (0.1 to 2 percent). This is in sharp contrast to last month, where 11 segments appreciated in value.
Of the segments showing strength, KBB expects these vehicles are approaching a peak and values will flatten or begin to depreciate in coming months. Hybrid vehicles, subcompacts, and compact crossovers continue to incur the most depreciation, even as gas prices inch up.
Car values depreciated 0.8 percent overall for the month of May, with much of the declines coming from the smaller car segment. In addition to drops in the hybrid and subcompact segments (2.6 and 2.8 percent respectively), compact cars continue to show weakness (1.7 percent drop), with the smart fortwo falling the hardest (3.4 percent). However, if gas prices continue to increase toward the $3.50-$4.00 tipping point, these segments are expected to make a strong comeback.
The performance of the Mid-size and Full-size car segments are somewhat of a mixed bag. Although many models in the mid-size segment declined last month, the strong performance of Ford products including the Fusion (4.2 percent appreciation) and Five-Hundred (5.5 percent appreciation) kept the segment in positive territory with a 0.1 percent gain.
Ford products also performed well within the full-size segment. However, the steep decline of models like the Chrysler 300 (4.5 percent) and Pontiac G8 (4.0 percent) led to an overall segment depreciation of 1.0 percent. The strength of Ford values suggests the beginning of a marketplace premium for the company’s products, especially in light of the recent GM and Chrysler bankruptcy filings.
The appreciation in trucks that took place the first half of the year has finally subsided. The significant drops in value experienced in 2008 have been largely offset over the past several months, although values have settled at a lower level than historical depreciation would have predicted, according to KBB. Now that truck values have reached equilibrium, a return to traditional seasonal depreciation is taking shape. For the month of May, truck segments continued to demonstrate stability, with pickup trucks remaining flat, crossovers dropping 0.8 percent, SUVs increasing 0.6 percent, and vans increasing 0.9 percent.
The mid-size and full-size SUV segments are some of the few remaining truck segments continuing to show month-over-month gains, although the pace has slowed. The strength in these segments is not unexpected, especially considering the aggressive drops in 2008. The full-size segment was up 1.7 percent in May, while the mid-size segment was up 0.4 percent.
Values in the crossover segment have hit a plateau for the first time this year, returning to normal seasonal depreciation. Crossover values dropped 0.8 percent in May. The monthly depreciation in crossovers was mainly driven by declines in compact, luxury, and hybrid crossovers. The trend for crossover values has closely mimicked that of SUVs, although the volatility has not been quite as pronounced. Since the volatility in truck values is highly correlated to the price of gasoline, crossovers, with their better fuel economy, have provided more stability than trucks and SUVs.
Appreciation in the minivan segment is noteworthy, according to KBB, especially considering minivans improved more than any other segment for the month (2.0 percent). The relative affordability and utility offered by minivans are the main drivers providing lift in this segment. While consumers are ever more watchful of every dollar they spend, it is difficult to beat the value offered by minivans, especially when cross shopping against more expensive crossovers and SUVs. Some of the best performing minivans for the month were the Dodge Caravan, Chevrolet Uplander, and Nissan Quest (4.6, 4.8, and 4.1 percent appreciation, respectively).
