MCLEAN, Va. — Through September, retention rates for most model-year 2013 vehicles are down across the board compared to last year, according to NADA Used Car Guide. Larry Dixon, the firm's director of market intelligence, said increased supply and incentives are the reasons.
“We estimate that the supply of used vehicles up to five years old will jump by 12% this year. This is the biggest increase in more than a decade," Dixon said. "As for incentives, with new-vehicle sales growth leveling off, manufacturers are dialing up incentives to preserve market share. Per J.D. Power, incentives were up 9% through August to an average of $3,436 per unit.”
Only mid-size vans, luxury large utility, sports cars and mid-size pickups retained their average value better this year compared to 2015, according to the report. And, out of those four segments, mid-size pickups held their value the most — holding an average of 67.2% of their value after three years.
“Their versatility can’t be matched, and the road manners and fuel efficiency of today’s utility and pickup truck are significantly better than in the past. Availability — or the relative lack thereof — is also helping,” Dixon said in a statement issued to F&I and Showroom.
He added that although the supply of large pickups at auction is up about 28% compared to the year prior, it is still well below the pre-recession highs. Additionally, the relatively low price of gas, and the forecast of cheap gas to come is adding to the appeal of pickups.
However, while low gas prices are acting as a boon for pickups and utilities, it’s acting as a bane for subcompacts. The NADA Used Car Guide found that the subcompact segment retained its value the least out of all segments — 37.5% of its value after three years — and also realized the worst retention rate decline out of all segments — vehicles in the category dropping 7.2% in value compared to the year before.
Dixon said that the main reason for the decline in subcompact car retention is similar to the reason the industry as a whole is seeing declines in value retention: increased supply.
“It’s estimated that subcompact volume of vehicles up to five years old will grow by 20% [or more] this year, more than the vast majority of other segments,” Dixon said. “We’ve seen auction volume for the segment grow at a similar rate so far this year, 22%.”
While the average retention rates for the other car segments — compact, mid-size, large, luxury subcompact, luxury compact, luxury mid-size, and luxury large — were all below the larger utilities and pickups, their rates were noticeably better than subcompacts. At the low end were three-year-old luxury mid-size cars with a retention rate of 41.2%. At the high end were compact cars with a retention rate of 46.5% after three years.
Dixon also noted that while the subcompact segment is struggling, the luxury subcompact is holding its value much better than its non-luxury counterpart. In fact, the luxury subcompact segment is holding its value better than every other luxury car segment — the one exception being luxury sports.
The reason being is that luxury subcompacts are a less mature segment with less competition, Dixon noted. The segment, he added, also facilitates entry into the luxury sector because of the segment’s relative affordability vs. larger luxury vehicles.