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Vehicle depreciation is expected to accelerate in 2015 as increased used-car supply and larger off-lease volumes place pressure on retention rates, according to the latest joint vehicle depreciation report from Black Book® and Fitch Ratings, Inc. Click here to download the full report.
According to the report, 2014 new vehicle sales finished the year at 16.5 million units, and Black Book is forecasting new vehicle sales to finish north of 16.7 million units in 2015. The annual depreciation rate on used vehicles in 2014 was 12.1%, slightly lower than its initial forecast. Black Book believes annual depreciation levels on used vehicles will continue to trend toward pre-recession historical rates and climb to 14.5% in 2015.
“2014 depreciation was defined by pockets of volatility due to seasonality, harsh weather patterns and falling fuel prices impacting smaller cars and trucks of all sizes,” said Anil Goyal, Vice President of Analytics and Strategic Partnerships for Black Book. “Looking ahead, lower consumer demand and CAFÉ-driven model competition will place higher depreciation pressure on smaller car segments particularly, but trucks should have stable retention in 2015 due to balanced production levels and strong housing and service economies.”
Fitch believes higher vehicle depreciation in 2015 is not expected to have a significant impact on overall auto asset-backed securities (ABS) performance. Fitch expects U.S. auto loan ABS loss rates to rise in 2015 but not have a significant impact on overall performance.
Fitch’s outlook continues to be stable for prime asset performance and positive for ratings performance, consistent with 2014.
According to Fitch, residual value (RV) performance of U.S. auto lease ABS transactions moderated in 2014 with lower gains ending December 2014 at a 3.87% gain, down from 7.23% a year earlier as vehicle values crept lower during the year while used volume rose.
Looking ahead, used vehicle inventory levels and lease vehicle returns will continue to increase in 2015 by over 10%, along with higher vehicle trade-in volumes. These trends will drive RV losses higher throughout the year, but not impact ratings performance. The outlook for asset and ratings performance for auto lease ABS is stable for 2015, despite these negative trends.
The Black Book-Fitch vehicle depreciation report is a joint venture by the two companies utilizing Black Book’s used vehicle depreciation data, and Fitch’s U.S. auto ABS indices data.
Black Book tracks used vehicle market depreciation rates providing an understanding of how vehicle prices impact automobile lenders and lessors, auto ABS transactions, consumers and other auto market constituents.
“Leveraging accurate and timely collateral data trends from Black Book are critical to auto lenders especially given the changing landscape for risk potential in 2015,” said Hylton Heard, Senior director of Fitch Ratings.
The Black Book-Fitch Vehicle Depreciation Report is available for download by clicking here.
About Fitch Group
Fitch Group is a global leader in financial information services with operations in 34 countries. The Group includes: Fitch Ratings, Inc., a global leader in credit ratings and research; Fitch Solutions, a leading provider of credit market data, analytical tools and risk services; and Fitch 7city Learning, a global leader in financial training. Fitch Group is 50% owned by Paris-based Fimalac, S.A., and 50% owned by New York-based Hearst Corporation.
About Black Book
Black Book® is best known in the automotive industry for providing timely, independent and accurate vehicle pricing information, and is available to industry-qualified users through online subscription products, mobile applications and licensing agreements. A leading provider since 1955, Black Book has continuously evolved to ensure that it achieves its goal of delivering mission-critical information to its customers, along with the insight necessary to successfully buy, sell, and lend. Black Book data is published daily by National Auto Research, a division of Hearst Business media, and the company maintains offices in Georgia, Florida, and Maryland. For more information, please visit BlackBookAuto.com or call 800.554.1026.