Strong Pickup Values Key to Strategic Growth, Black Book Says

A new report from Black Book further indicates that the pickup-truck segment should remain red hot for at least the next two years — and also gives lenders data that might help them be more aggressive with their LTVs, pricing, and terms. 

“Between this and a number of other tools that we have, the residual values, the portfolio analysis, [and] the depreciation curves, what we’re trying to do is not just show [lenders] where they have potential risk, but also show them where there’s potential opportunity,” said Jeff Bunch, vice president of Black Book Lender Solutions.

The report, which analyzed historical vehicle segment data and projected retention levels for the next 12 to 24 months, showed that compact, mid- and full-sized pickups enjoyed solid retention for the past 12 months, a trend expected to continue well into 2015. Full-size crossover utility vehicles should also outperform average retention, while entry-level cars are projected to underperform the next two years.

Such historical and residual value data can help lenders evaluate potential risk for lending in particular segments. It also provides opportunities, “namely, when you point out pickup and crossover SUVs, where maybe a bank could look at that and say, ‘Maybe we could be a little more aggressive in our LTVs, and our term, and our pricing in a lot of different ways, because this is a segment that’s going to hold pretty strong on the retention side,” Bunch said, 

With banks becoming more aggressive as competition continues to grow and rates remain low, “this kind of data helps them be aggressive in the right segment,” he added.  “That’s really what we’re trying to push.”

Bunch doesn’t think that the strong retention in the pickup segment will create an eventual bubble — at least not anytime soon, as the construction industry continues its rebound. Plus, the fact that the average age of cars and trucks on the road today is 11 years old — meaning that many trucks may need to be replaced soon — pent-up demand in the truck segment will be around for a while.

Barring any surprises related to the economy or unemployment levels, “there’s going to be a good two to three years of positivity on the pickup side,” Bunch said. “You’ve got a few manufacturers throwing out some pretty neat models over the next two years, so I think there’s going to be a lot of excitement with new technology and new options that haven’t been available before.”