Cheaper Gas Helps Full Size SUV’s
As summers go, it has been a relatively mild one for the used vehicle market. That is not to say that there hasn’t been softening throughout the segments, but that the declines have been less steep than we are used to seeing and that certain segments have benefited significantly from cheap fuel prices and have not seen anything like the erosion we normally expect the summer to bring.
Chief among those vehicles that have benefited most from cheap oil have been full size domestic SUVs. Tahoes, Escalades, Navigators, and their ilk have stood up extremely well under the pressure of the summer market. Imports in that segment have also benefited if not to the same extent as their domestic brethren. Cheap fuel has also softened the fall of full size sedans, pick-ups, vans, and the higher end luxury imports that often fall steadily throughout the year.
Sport coupes and convertibles, on the other hand, have experienced more typical declines. There has been very little demand in those segments and they have been particularly difficult merchandise this summer. Likewise, cheap fuel has definitely diminished demand for fuel efficient vehicles. Compacts and sub-compacts sedans have been tough to sell. Electric vehicles even more so. For whatever reason, smaller crossovers and SUVs have fared relatively well throughout the summer despite the low cost of fuel.
Softer Summer Declines Leading to a Harsh Fall?
The question is, what will the future bring? If you believe as we do, that 70–80% of most vehicles’ yearly depreciation occurs in the six month period from June through November and that the summer declines have been less than usual, does that mean that we can expect the fall market to be harsher than usual? We have to wait for that answer. We will say that if the first couple of weeks of September is an indication, that might very well be the case. The European and Asian luxury segment has seen significant declines of late. Very late model vehicles of all sorts are also experiencing greater than usual drops as manufacturers increase sales incentives while chasing yearend market share. Increasing lease terminations are coming home to roost. The stock market declines will surely impact consumer confidence.
No one knows what the future will bring. In all probability, nothing we haven’t seen before. And handled before.