Consumer interest in SUVs, trucks keep residuals at a healthy rate

According to the Edmunds Used Car Report, SUVs and trucks made up 47 percent of sales of 3-year-old vehicles in 2017. And in total, off-lease supply boosted the used market to reach 39.2 million sales last year — a record high.

And as increases in off-lease supply begin to put long expected pressure on residual values, this trend in large-vehicle sales is helping the used market absorb the high volume of off-lease and prior rentals in “an interesting manner,” Edmunds analysts shared.

The report points out that trends are defying the norm. In most cases, used prices and days-to-turn go hand-in-hand, because lower-priced vehicles normally sell quicker.

But healthy sales of pre-owned SUVs and trucks are resulting in a decrease in days-to-turn and an increase in price, Edmunds analysts explained.

Some of the car-based segments are showing more of what is expected: lower days to turn, driven by lower values.

“While this isn’t the ideal scenario for the passenger-car segments, at least they’re not experiencing an increase in days to turn as well as a decrease in values, which would signal a larger crisis for cars,” the Edmunds report states.

And trends in the SUV and truck market served to keep the recent influx of used supply from putting too much pressure on residual values.

Prices rose by just 1.4 percent last year, according to the report. That’s after spiking by an average of 3.6 percent every year from 2012-2016.

“Consumer demand for SUVs — which were limited in supply — is really what helped fuel the modest price growth that the used market eked out in 2017,” said Ivan Drury, senior manager of industry analysis at Edmunds.

Trends within the rental companies will serve to keep healthy residuals going a bit longer, as consumer preferences for SUVs and trucks are evident in this sector, as well.

“As rental companies begin to purchase these vehicle types to appeal to consumers and replace vehicles that are out of commission due to accident or repair, they’re also helping to mitigate losses on the residual end,” the Edmunds report pointed out.

On top of racking up more SUVs and trucks for interested consumers, Edmunds reported rental agencies are also buying vehicles that go for an average of $3,200 over the starting MSRP.

“This is a winning strategy for both OEMs and consumers: Rental customers get to enjoy more creature comforts in their vehicles, and automakers are able to better protect residual values and give customers a more favorable impression of their brands,” Edmunds concluded.