A new concern is emerging in the used-vehicle market about the possibility of a future softening of resale values for full-size pickups. Currently, and throughout the 1990s, resale values for full-size pickups have been extremely strong. The concern is that the supply-and-demand imbalance we are seeing today with SUVs in the wholesale market may be repeated in upcoming years in the full-size pickup market.

Although the lease guide books have lowered their forecasts for pickup truck residuals, along with all other vehicle segments, the question by some is whether pickup residuals were lowered enough. Will we see in the future a softening in the used-pickup truck market? Might pickups be headed down the same path as full-size sport/utility vehicles? There are arguments to support this contention if you look at the dynamics of today’s pickup truck market and how it parallels the SUV market.

According to Raj Sundaram, president of Automotive Lease Guide (ALG), pickups continue to be in strong de-mand in the wholesale market. But there is a concern that future residual values for pickups may parallel what has happened to the resale values of full-size SUVs. As the full-size SUV category proliferated with new models, they saturated the wholesale market causing supply to exceed dealer and consumer demand. These types of imbalances in the wholesale market have a way of correcting themselves with downward price adjustments. As a result, resale values plummeted for full-size SUVs.

“While it is not an exact comparison, our concern is that there are some parallels between full-size SUVs and what’s happening today with full-size pickups. For example, in 2004, Ford wants to increase the sales volume for its new F-Series, Nissan wants to sell 100,000 units of its all-new Titan full-size pickup, while Toyota wants to sell an additional 30,000 units of its extra cab Tundra pickup. Between just these three manufacturers, they want to sell an additional 200,000 units in the full-size pickup market, which is more than nine percent of the entire segment’s current volume,” said Sundaram. “The interesting question is where will this volume come from? Everyone is forecasting sales volume in the U.S. market to be slightly lower this year at 16.4 million; next year it may be a little higher. However, no industry analyst is forecasting a huge increase in sales volume in 2004. It could be argued that the full-size pickup segment will grow at the expense of the compact pickup segment. Although that may occur, based on the past experience with SUVs, ALG has taken proactive actions and lowered future residuals for full-size pickups. Our concern is that it might be tough for the market to swallow a 200,000-unit increase,” said Sundaram.