Used-vehicle values to drop further in 2020, analyst says

After five straight months of declines, Black Book’s Used Vehicle Retention Index is expected to continue to fall throughout 2020, Anil Goyal, executive vice president of operations, told Auto Finance News.

“The index has held up pretty high for a long period of time. It was expected that at some point it’d fall – it just took a bigger dive in the fourth-quarter of last year,” Goyal said, noting that the primary causes for the drops are related to the retail market, citing slower new-vehicle sales and increased OEM incentives.

“It depends on how the manufacturers produce and sell their vehicles,” he explained. “As production volumes lower, will they be low enough so they don’t have to incentivize sales?”

Goyal said he anticipates the industry will see the trend of declining used-vehicle values continue through the first quarter – and throughout the year, but at a decelerated pace from 2019 – adding production volume will likely surpass retail sales.

Used-vehicle values bottomed out in December, hitting the lowest point in all of 2019, according to the Used Vehicle Retention Index released today.

The December index clocked in at 113.3, slipping 2.6% year over year. Goyal noted demand for affordable vehicles remains strong, as the index for full-size vans and luxury sedans experienced the steepest drops, while the index for mainstream, mid-size sedans improved.

The Used Vehicle Retention Index is calculated by using Black Book’s wholesale average value on two- to six-year-old vehicles. The index dates back to January 2005 and peaked at 128.1 in May 2014.

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