Rise In Gas Prices Make That Used Smaller Car More Valuable
DETROIT (WWJ) - As gas prices rise, so does the value of that used car sitting in your driveway. That truck or gas guzzler in your driveway will be decreasing in value at that point.
According to Jonathan Banks, executive automotive analyst for the NADA Used Car Guide the price of all used car and trucks, including trade-in values, across all vehicle segments will rise or fall according to gas prices.
"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, according to PRNewswire-USNewswire, 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.
"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.
