Wednesday, June 2, 2010

ALG Forecasts Residual-Value Impact of $4 Gas by 2013

Lincoln Navigator

The 2010 Lincoln Navigator has an MSRP of $55,000 and is rated at 14 MPG in the city. Rising gas prices in the coming years will erode the vehicle's residual value.

Automotive Lease Guide, a leading provider of residual value information, sees three things in 2013: $4 a gallon gas, high residual values for hybrids and compacts, and low values for full-size SUVs. "Gasoline prices are a key driver of resale values at the segment level,⬝ explained Matt Traylen, ALG's chief economist, in a report from Auto Remarketing, a trade publication. "Despite the recent drop in oil and gas prices, we are maintaining our long-term gas price forecast of over $4 per gallon in 2013."

ALG believes that average U.S. gas prices will be $4.13 in 2013. At those prices, mid-compacts will get a relative bump of 13 percent in value compared with the overall industry. After taking supply and demand into consideration, that means auction values for compacts will improve by 29 percent during the next three years.

ALG analysts continue to look back at 2008 when gas prices spiked, and smaller cars and hybrids saw a corresponding jump in demand. Demand for hybrids dropped with gas prices, but have remained above the industry average, according to ALG.

The bump in three-year residual value was not fully extended to the 2010 Toyota Prius, even though it�"s the most fuel-efficient car currently in showrooms�and will therefore help consumers endure high gas prices. The Prius was connected to Toyota recalls earlier this year, eroding some consumer appeal.

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