Wednesday, 18 May 2022 11:38

Wholesale Vehicles: Residual Values, Volume, Sales Trends to 2024

Written by Chad Simon, Auto Rental News


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Supply chain issues, production shortages and shrinking dealer inventory have the car rental industry on edge.

Most vehicle segments have been actually appreciating, and many units are selling for above sticker price, leaving rental companies scrambling to stock up on whatever they can get their hands on.


Dr. Alex Yurchenko, head of data science for Black Book, and his team are responsible for predicting vehicle wholesale values, and it starts with consumer demand in the retail space.


Supply vs. Demand


Although consumer confidence rebounded by about 10% in April, it’s still at its lowest level in a decade, according to Yurchenko, who shared this and other trends in a seminar at the 2022 International Car Rental Show in Las Vegas on April 25.


Yurchenko said initially, rising gas prices didn’t change consumer behavior. They still purchased what was available---big SUVs and trucks, but not many cars. Over the last several months, however, that behavior has changed. Because of high gas prices, there’s now a higher demand for smaller, more fuel-efficient vehicles, such as compact SUVs and cars, he said.


According to Yurchenko, repossessions have traditionally been a good source of used inventory for car rental companies, yet over the last two years, that channel has nearly dried up because of a moratorium on repossessions. Help from both the government and lending institutions led to those vehicles not returning to the market.


“We’re talking about 1 million vehicles per year,” Yurchenko said. “Recent trends point to an increase in repossession volume. Numbers are still low, but the volume of repossessions is increasing.”


Supply-chain issues---including the ongoing chip shortage---are still the biggest factor right now driving this whole scenario. Yurchenko believes the most optimistic forecast is that the industry will reach some sort of normalcy in terms of production levels by 2023, but dealer lots are not going to return to normal levels anytime soon.


Inventory limitations and new sales incentives keep hitting record low levels every month. Pre-pandemic, the average incentive was about 11% of MSRP, according to Yurchenko. The average incentive in March 2022 was close to 3.5%.


“The majority of consumers are paying above sticker price, which was unheard of a few years ago,” Yurchenko said. He added that dealers are fighting to...

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