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Questions about the Used Car Market in 2013

Expert Says New Car Introductions Have Strong Impact

By

Questions about the Used Car Market in 2013

Ricky Beggs, managing editor of Black Book USA, tapes his weekly videoblog at the 2013 NADA conference in Orlando, Fla.

Photo (c) Black Book USA

When it comes to the used car market, few folks know more than Ricky Beggs, managing editor and analyst at Black Book. He and his team closely monitor every used car automobile auction taking place across the country and have a daily pulse on different segments of the market.

Obviously, the new car market has an impact on where the used car market is heading in 2013. Beggs took a few moments from his hectic schedule to answer questions about the used car market in the wake of recent new car introductions.

In business since 1955, Black Book is a provider of accurate pricing insight, mobile solutions and online vehicle trade-in valuation for the automotive industry. The company offers the industry's most accurate vehicle valuation insight to dealers, lenders, remarketers and government agencies.

Black Book also provides automotive shoppers with instant and accurate credit-score estimates and trade-in appraisals, which in turn provides quality sales leads for dealers. If you like what Beggs has to say in this Q&A, you can check out his weekly video series offering the latest insight in the auto market.

Q. As you point out, trucks grabbed plenty of attention, with the Chevy Silverado's launch, the Ford Atlas concept stealing some thunder and the Dodge Ram 1500 capturing Truck of the Year. Black Book believes full-size pickups will see price strengthening in the used markets in 2013 because of a growing economy and interest in the segment. Why are new trucks causing price increases in the used truck market?

A. Everybody can't afford a new one. Just the fact that it's creating a buzz in the segment, good interest in the segment, and not an overabundance supply of used inventory. Low supply naturally creates a little more demand. Values will go up.

Q. You also say that manufacturers are targeting younger buyers, which has always been the case. Yet Baby Boomers probably still buy the majority of new cars. Is that true in the certified pre-owned market though? Are younger buyers flocking there until they can earn enough to buy the hot new cars?

A. If the younger buyer can't afford a new car, or a certain kind of new car, then they're willing to step into that CPO car - or at least the manufactured-backed CPO model. [Editor's note: About.com recommends only using manufacturer-backed certified pre-owned programs and not those run by warranty companies.]

Q. You also raise a good point about fuel-efficient cars. Since the 2008 fuel spike, OEMs have been going full bore to reach the Corporate Average Fuel Economy (CAFE) standards. You're predicting, in effect, a glut in the used compact car market. What does that do to residual values?

A. Unless there is a significant increase in gas prices to the $5 range and stay there for a while, Black Book doesn't feel the demand will be in the segment in relation to the volume and the number of players in the segment. If the demand is not there leading to oversupply, then that's going to pull residuals or retention down.

Q. OK, the Corvette C7 was introduced the North American International Auto Show. What does the impact of a splashy new model do to the value of existing and older Corvettes? Does it diminish their value or increase it because of more intense focus on the new product?

A. No because it is such a niche-focused type product.

Q. Time for you to pull out the crystal ball. What are your thoughts on how 2013 shapes out for the used car market? What's going to be strongest segment this year? What's going to be the weakest segment?

A. Overall a solid used market but not at the retention values of 2012 and 2011 in relation to value. Pickup trucks - both small and mid size - will be a strong segment. Compact crossovers could be strong as well, especially when you see how the functionality and size has grown in that segment over the past few years. Weakest segment, dollar wise, prestige luxury because the price is so high in relation to everything else. But percentage-wise they're in line with the overall car segment average. Midsize cars, luxury and near luxury and prestige luxury cars will see weak retention from the percentage standpoint.

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