ALG Industry Report Shows a Slight Fall in Vehicle Residual Values

ALG is forecasting a slight decrease in 36-month residual values of -0.5 percentage points (ppt), which compares favorably to historical norms that expected a -0.9 ppt drop, according to the latest ALG Industry Report. The ALG Industry Report, which summarizes the forecasted residual values for automobiles by providing a look at factors impacting vehicle valuations over the next 36 months, is now available to the automotive and financial services industry.

"Used supply overall is increasing by 800,000 units versus the prior effective period, which puts downward pressure on residual values," said Eric Lyman, ALG vice president of editorial. "However that negative impact is being offset by rises in consumer spending on durable goods, which contributes to stronger residual values. Going forward, used supply increases are an indisputable fact; it is volatility of other factors that are driving risk to ALG's current market forecast."

ALG, the benchmark for forecasting vehicle residual values since 1964, has also launched an updated forecasting model, adding real durable goods as one of the new macro-economic drivers to better reflect current factors impacting vehicle values.  This change is in effect beginning with this edition of The Industry Report.

“We are continually searching the market for data that drives used car values, and in the aftermath of the recession, we identified changes in the factors that drive auto sales and values,” said Lyman. “Our data has identified spending on durable goods to be a very good indicator of used vehicle pricing, since it reflects consumers’ willingness to buy big-ticket items.”

The Industry Report includes a macro look at the U.S. economy and factors that can impact vehicle pricing – including gasoline prices, durable goods and interest rates. Other measures of the nation’s economic health are considered, including job reports, consumer confidence and unique factors such as the recent “sequester,” the impact of which may affect used vehicle values moving forward.

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