After November’s Hurricane Sandy, dealer demand for used cars is up; so why are pre-owned values declining?

Kelly Blue Book’s Alec Gutierrez addressed this very issue in this month’s Blue Book Market Report.

Granted, used values bumped up during the weeks following the storm, said KBB's  senior market analyst of automotive insights.

But after the initial rise, “values have moderated, and today, values are generally following a normal seasonal depreciation pattern.”

That said, KBB says the industry is not seeing value declines as drastic as levels seen in 2011.

Breaking down the numbers, in November, values declined 0.8 percent, a modest decline compared to the 1.7-percent decrease in November 2011.

“Although dealer demand from the Northeast has helped to keep depreciation to a minimum, anticipate modest
declines to continue through year-end,” Gutierrez said.

And though used values overall saw a 0.8-percent decline last month, the segments price levels were “mixed,” Gutierrez said.

First, the luxury and subcompact cars saw the highest declines for November, falling 2.6 percent and 1.7 percent, respectively.

But this didn’t come as a surprise to KBB.

“Soft values for luxury vehicles are typical at this time of year, as luxury automakers focus on the new model-year changeover by offering generous incentives on their previous model-year inventory. This drives down values of used luxury cars, due to the strong demand from luxury buyers for the latest and greatest product,” Gutierrez explained.

As for subcompacts, it seems the decline in fuel prices is making them less of a hot item for consumers.

“The decline in fuel prices has played a primary role in driving down values of small fuel-efficient vehicles. Fuel prices are down more than $0.50 per gallon since early September, and even more in other parts of the country,” Gutierrez said. “With gas prices down, expect values of small cars to remain steady. In 2011, subcompacts dropped 2.2 percent, while compacts fell nearly 3 percent.”

Perhaps in line with seasonal sales as the winter season approaches, full-size trucks and SUVs, meanwhile, outperformed the market in November, showing no change as the rest of the market declined, KBB reported.

“Demand for four-wheel-drive vehicles tends to pick up late in the fourth quarter, as demand from buyers in colder parts of the country increases,” Gutierrez added.

Lastly, the company shared that increased demand from dealers in the Northeast after Hurricane Sandy hit has kept  depreciation to a minimum, allowing values to “creep up” year-over-year.

“Values are now up 4 percent year-over-year, after having remained below the record highs of 2011 through most of 2012. Values likely will remain comparatively strong year-over-year in December before returning to a more typical seasonal depreciation pattern in the early part of 2013,” Gutierrez concluded.