Friday, 31 January 2014

Fuel Competition: Higher Fuel Prices = Lower Car Sales

Fuel Competition: Higher Fuel <b>Prices</b> = Lower <b>Car</b> Sales

Fuel Competition: Higher Fuel <b>Prices</b> = Lower <b>Car</b> Sales

Posted: 28 Jan 2014 01:54 PM PST

"Other than the airline industry, no industry suffers from high oil prices more than the auto industry," Anne Korin and Gal Luft say in their book, Petropoly. "When oil prices rise the economy slows down and Americans have less disposable income with which to purchase new vehicles. The cars they do buy tend to be smaller and cheaper. Since Detroit makes most of its profits on light trucks and SUVs, its profits take a hit when oil prices soar.

"In the long run sustained high gasoline prices have a lasting effect on the automakers' bottom lines. When fuel prices are high, people drive fewer miles and that means less wear and tear, less replacement parts and fewer road accidents. All of these mean slower vehicle replacement and hence less profit for Detroit.

"Expensive fuel is therefore a drag on the autos' financial well-being. By any yardstick the industry would be better off when fuel prices are low."

Used <b>Car Prices</b> Softening, But it&#39;s Still a Healthy Market, NADA Say

Posted: 25 Jan 2014 12:00 AM PST

Banks_Jonathan

Automotive News - January 25, 2014

Used cars should get cheaper in 2014 after five years of con­sis­tently ris­ing prices, but it's not an indi­ca­tion of a burst­ing bub­ble, NADA Used Car Guide's Jonathan Banks said at the National Auto­mo­bile Deal­ers Asso­ci­a­tion annual con­fer­ence. Used car prices are about 10% higher than the aver­age price dur­ing the past two decades.

NADA Used Car Guide: Used-<b>Vehicle Prices</b> to Slip in 2014 - News <b>...</b>

Posted: 28 Jan 2014 12:00 AM PST

NEW ORLEANS — A sharp rise in the supply of late-model used cars and light trucks is expected to end a five-year run of price growth, the NADA Used Car Guide reported this past weekend.

Late-model used vehicle supply will be more plentiful due largely to an 18% surge in off-lease volume. The supply of units six to eight years in age, however, will continue to fall as a byproduct of the new-vehicle sales decline from 2006 to 2009.

"These diverging trends will result in late-model used-vehicle prices dropping more substantially than their older counterparts," said Jonathan Banks, executive automotive analyst for the NADA Used Car Guide, at the 2014 NADA Convention & Expo in New Orleans.

The NADA predicts prices of used vehicles up to four years in age will decline by an average of 2.5% on an annual basis in 2014. By comparison, prices of units from five to eight years in age will essentially remain flat.

Collectively, the NADA anticipates the average price of used vehicles up to eight model years in age will fall by 0.5% to 1% this year. In 2013, prices grew by a slight 0.4% and have increased 18% since 2007.

"Although availability of off-lease units will be better this year, it's important to place volume levels into historical context," Banks said. "Despite the increase, lease volume will still be 11% below 2009 levels."

Volume growth will be highest for the segments with higher new sales over the past few years: compact utilities, subcompact cars, luxury cars and utilities. Conversely, tight supply for certain truck segments — mid-size vans, large SUVs and compact/large pickups — will see prices increase once again in 2014.

Supply aside, the outlook for other market fundamentals remains positive. The economy is expected to grow at its highest level since 2012, unemployment will continue to fall, home prices remain on the rise and credit conditions will continue to be advantageous.

"Economic factors, in addition to the increased dealer focus on used car operations and greater awareness of manufacturer certified pre-owned programs, will keep used vehicle prices at historically high levels despite the anticipated decline," Banks said.
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