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Depreciation rates on used vehicles are nearing levels not seen since the recession, though the trend will soon reverse and likely lead to marginally higher losses for U.S. auto ABS, according to the latest joint vehicle depreciation report from Black Book® and Fitch Ratings. Click here to download the full report.
According to Black Book, both new and used vehicle markets are seeing positive growth after hitting a low of 10.3 million new vehicle sales in 2009. As a result, depreciation has increased every year since 2011. Black Book projects new vehicles sales to finish north of 16 million units this year and at least 16.5 million in 2015. “As a result, annual depreciation levels on used vehicles will begin climbing to roughly 13% in 2014 and 15% in 2015,” said Black Book Senior Vice President and Editorial Director, Ricky Beggs.
Among the highlights from the latest joint report, auto depreciation is expected to rise above 13% in 2014. This level is still below the average pre-recession depreciation rate of between 15-18% annually. Fitch points out that rising interest rates, not likely to occur until 2015, can result in higher vehicle depreciation if this were to dent consumer demand for new and used vehicles.
In the auto lease ABS sector, rising supply from off-lease volumes in 2014 will contribute to higher depreciation in 2014, and pressure residual value (RV) losses. This is not expected to pose any material threat to overall asset performance nor outstanding ratings. In the rental car ABS sector, rental car company fleet depreciation rates will creep up, but stay within the historical range of 1.0%-2.0% per month, depending on each rental car company’s fleet mix.
Housing and service industries will continue to be a net positive for larger vehicle sales and retention levels, although trucks and later-model vehicles are exhibiting higher-than-normal valuation volatility.
The Black Book-Fitch vehicle depreciation report is a joint venture by the two companies utilizing Black Book’s used vehicle depreciation data.
“Auto lenders are continuously searching for ways to leverage collateral data and valuation insights in order to identify the right portfolio expansion opportunities,” said Tom Cross, President of Black Book.
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.
“Leading collateral data and vehicle valuation trends from Black Book are valuable to the auto lender community as they look to effectively manage risk potential,” 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.