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SANTA BARBARA, Calif. — Under the belief that gasoline prices will soar above $4 per gallon by 2013, ALG made its 36-month residual value forecasts for two vehicle segments expected to be impacted most. Not surprisingly, those two segments included mid-compacts and premium full-size SUVs.

"Gasoline prices are a key driver of resale values at the segment level, and this new white paper focuses on the two segments — mid-compacts and premium full-size SUVs — that are most significantly impacted, positively and negatively," explained Matt Traylen, ALG's chief economist during an introduction to the company's spring segment trends and outlook report released on Wednesday.

"Despite the recent drop in oil and gas prices, we are maintaining our long-term gas price forecast of over $4 per gallon in 2013," Traylen continued.

Specifically, ALG thinks U.S. gas prices will average $4.13 per gallon three years from now. With that price point as a backdrop, the company went deep into its analysis about the segment expected to enjoy a positive impact from rising fuel prices.

ALG's outlook for mid-compacts is upbeat with gas prices expected to positively affect used auction values by 13 percent relative to the overall industry. Analysts explained it would contribute 9.3 percentage points to their current 36-month residual value forecast.

Incorporating other factors such as supply and demand, ALG expects the mid-compact's used auction values to improve 29 percent overall during the next three years.

"While used supply for the mid-compact segment will decline, it will decline less than the industry overall, which will create a higher mix of mid-compact vehicles available in the secondary market," ALG predicted.

"This in turn will create downward pressure on resale values for the segment," the company added.

Analysts reiterated that demand in the mid-compact segment, including hybrids, spiked considerably in 2008 when gas prices hit record highs. They conceded demand dipped briefly as gas prices receded, but they contend it has remained above the industry average.

"Notably, the Mid-Compact Real Demand Index shows several bumps in demand," ALG stated.

"The first occurred in late 2005/early 2006, after the introduction of a new vehicle by Chevrolet, the HHR (Heritage High Roof), a small crossover that initially had success among consumers but quickly flooded commercial and daily rental fleets as demand waned," the company continued.

"Another model change during that same period was the redesigned Honda Civic," ALG added. "Both vehicles helped boost demand.

"Likewise in late 2007/early 2008, a number of redesigned mid-compacts (Ford Focus, Mitsubishi Lancer, Scion xB and Subaru Impreza) created another demand spike," the company went on to note.

ALG pinpointed a number of new product introductions creating the most benefits recently for the mid-compact segment. Analysts noted the Kia Forte, Kia Soul and Honda Insight as well as a redesigned unit from Mazda that recently led to the automaker's first Residual Value Award, the Mazda3.

Analysts were ready to put the 2010 version of the Toyota Prius into this block of positive-impact models, noting how the unit was redesigned to help fend off competition from Honda's new Insight. However, they stopped a bit short since this model Prius was connected to automaker recalls earlier this year, eroding some consumer appeal.

Turning to the premium fullsize SUV segment, ALG projects rising fuel costs should hit this vehicle cluster hard again.

Based on the 2013 gas price forecast, analysts contend used auction values of premium fullsize SUVs will be negatively impacted by 20 percent relative to the industry. That calculation prompted them to reduce the 36-month residual value forecast for the segment by 7.4 percentage points.

"Overall, however, the segment's used auction values are expected to be essentially unchanged over the next three years, with significant declines in used-vehicle supply and increasing wages and housing prices offsetting the negative impact from gas prices," ALG explained.

"Demand has been declining for more than two years as gas price volatility, the recessionary environment and tightening of the credit market have more than offset the positive impact of new product launches," the company added.

Analysts indicated shifts in this segment are driven mainly by the Cadillac Escalade, Mercedes GL Class and Lincoln Navigator. They believe those three units together represent 75 percent of the total segment sales.

ALG emphasized that whatever boosts in demand there have been for premium fullsize SUVs since January 2005, introduction of new or redesigned segment models created only short-term benefits. Again, the company went back to the bedrock models for the segment to support the point.

"The 2006 Lincoln Navigator offered a new design, including ultimate trim levels," analysts recounted. "The Escalade was completely redesigned for 2007, moving it closer to a luxury car while still retaining key attributes of an SUV. And with the introduction of its all-new 2007 GL Class, Mercedes-Benz became the first European brand in history to sell a truly big, seven-passenger SUV."

ALG looked at a couple of other units, too, but ones that weren't introduced until the 2008 model year. Analysts noted the Lexus LX 570 was redesigned, adding more high-end features, such as power seats, airbags and cameras as well as more power and torque. They also pointed out Toyota redesigned its Land Cruiser for 2008, an eight-seat vehicle, giving it a more powerful engine among other features.

"These new or redesigned entries generated consumer interest and helped drive segment demand," analysts said. "However, higher gas prices in the summer of 2008 reversed the demand trend.

"Simply put, ALG believes a fundamental shift has occurred among consumers toward more fuel-efficient vehicles," the analysts went on to stress. "With expected increases in gas prices, this shift has already led to declines in SUV sales."