If you have certified pre-owned units with alternative powertrains, the spring issue of Perspective from J.D. Power Valuation Services (formerly NADA Used Car Guide) offered some insight into why it might be difficult to turn that vehicle.
Before it became that CPO model, J.D. Power analysts explained that alternative segments generally have weaker demand and higher incentives than their gasoline-powered counterparts on the new side of the market.
“These two hindrances carry over directly to the used market, which means prices of used alternative powertrain models fall at much higher rates than for their gasoline counterparts,” analysts said in the report.
“The higher rate of depreciation means electric vehicles, plug-in hybrid and traditional hybrid retained value is frequently inferior to competitive gas models,” they continued.
Looking at the most recent 3-year-old retention figures by powertrain type (3-month average from March to May of this year), analysts noticed gasoline equipped models have retained at a rate of 52.1 percent, followed by hybrids at 46.4 percent.
Trailing much further behind, J.D. Power found that plugin hybrid and electric vehicle value retention reached 36.9 percent and 26.9 percent, respectively.
“Looking back, 2016 and 2015 retention results for the same period were similar. However, electric vehicle retention was more volatile because of new models being added,” analysts said in the report, which can be downloaded here.
Impact of fuel prices
J.D. Power also mentioned that what consumers are paying at the pump isn’t giving them much of an incentive to take that CPO unit off your store’s hands.
Analysis cited the forecast from the U.S. Energy Information Administration (EIA) that predicted fuel prices are expected to grow from roughly $2.30 per gallon in February to $2.51 per gallon in July before falling to $2.24 per gallon by December. Looking further out, the EIA expects prices to average $2.40 per gallon in 2018 and $2.44 per gallon in 2018.
“With average regular grade gas prices expected to remain around or under $2.50 per gallon in the U.S. over the short-term, there is little reason to believe that buyers who are sensitive to high gasoline expenses will be inclined to choose an alternative powertrain vehicle over a traditional gas-powered automobile due to the cost of fuel,” J.D. Power said in the report.
“However, it’s entirely possible that even with low gas prices expected in the coming years, some environmentally conscious consumers will continue to actively purchase electrics or plug-in hybrids,” analysts added.