CARY, N.C. -

The weather forecast may be favorable, but new historical forecast data from Black Book shows the outlook for small cars — particularly subcompacts — is not so sunny.

Vehicles in that segment, including such models as the Toyota Yaris and Prius, Nissan Versa, Kia Soul, Honda Fit, Ford Fiesta and Chevrolet Spark, have depreciated 26.1 percent over the last 12 months — the largest 12-month drop of any segment over the last 10 years (2008 notwithstanding).

That’s compared to 16.6-percent depreciation across all segments over the last 12 months.

Month-over-month, subcompacts saw 2.4 depreciation in May — the largest for any segment during that period.

 “The subcompact car segment has experienced a roller-coaster ride of price valuations over the last 10 years, feeling the effects of supply and fuel price fluctuations,” Anil Goyal, Black Book’s senior vice president of automotive valuation and analytics, said in a news release. “Dealers should use this data to make the right inventory decisions, and lenders should evaluate their term pricing and advanced policies when analyzing this segment for their portfolios.”

Auto Remarketing wanted to know more about why subcompacts are having such a tough ride, so we caught up with Goyal for a more in-depth conversation.

Auto Remarketing: How does supply play into this subcompact slump?

Goyal: "You’ve got more supply coming back as small cars. Subcompact cars have been going up in supply as more and more leases come in and they adapted more toward the leading model in a 2011-forward timeframe. As the production increased on small cars during that time, since we were going through high gas prices just a couple of years ago, we have a scenario where supply is higher as those cars come back to the market, but you’ve got low gas prices. Consumer sentiment has changed to wanting to be more in an SUV-like, crossover-like vehicle, and that’s really causing this particular segment to take the brunt of the decline.

"We predicted the decline basically in the market as we’ve seen the last years a consistent improvement in demand and supply not catching up with the demand. We’ve come to a point where that pent-up demand has been met and more toward a time where you’ve got to tailor the segment more toward where the demand is, and unfortunately the subcompact doesn’t make that cut. Last year, we started to see the decline in the subcompact segment. The full-year annual depreciation that we saw across all vehicles was 13.2 percent; for subcompacts it was 21.7 percent."

AR: How much of this is really about gas prices? And if prices are rising now, will demand for smaller cars rebound?

Goyal: "Gas prices are up, although slowly, but that’s being driven by events that have happened; it’s not sustainable in the long term. We had the fire in the Canadian oil sands area. We had Brexit causing the dollar to go up, which has a direct correlation to gas prices. From what we have heard, there is a consistent reduction in demand globally for oil, and the production levels continue to be maintained.

"Another thing that we hear is there are a lot of oil wells in the Midwest that are shut down, but they could be brought back up easily if gas prices were to go up. So gas prices are not going to see a high increase because they can be tempered down by production levels going up. OPEC used to have a lot of control on the price of gas but doesn’t have as much control."

AR:  What else is at play?

Goyal: "Another factor that compounded things this year is we didn’t see that seasonality bump that we typically see in springtime. Subcompact cars tend to be more of a favorite after tax refund season, with the refund check going toward a down payment on that (subcompact) car, which tends to be in the sweet spot of that buyer. This year, given that supply was high, that didn’t make that much of a difference for that tax refund buyer. We saw as much as a 2 percentage point increase in seasonality last year during spring, so it had helped in terms of decreasing, cushioning the blow. This year we didn’t see that. There was a lack of spring market lift."

AR: Why the shift toward bigger cars?

Goyal: "They have the feel, the sportiness, convenience of sitting up high, the feeling of being safer. It’s something different that the new generation wants. They don’t want to drive the minivans that their parents drove."

AR: Family sizes tend to be smaller; granted, people tend to have more stuff. Given the choice, bigger is always better?

Goyal: "It’s more a perception that bigger is better. Think of subcompact crossovers; there is more interest in that kind of a car. That’s the perception, that it’s bigger. Although it does have more functionality than the typical subcompact sedan."

AR: Today’s subcompact is not the bland subcompact of yesterday. They are more stylish, better equipped. Still, they’re not as popular and not retaining their value.

Goyal: "It was a simple-looking sedan with no defined personality. The manufacturers have been trying to make them more sporty looking. I think there’s still an aspect of bringing the hatchback back to the market, where you have a blend of some of the design elements from the crossover segment but trying to create it in the way that it really is a subcompact car from a visual appeal perspective. Visually it better fits the new generation."