Used Supply and Gas Prices Playing a Major Role in Residuals

As spring gets underway, used supply is expected to rise, pushing pre-owned prices down slightly over the course of this month and April.

That's according to the March-April Canada Industry Report from ALG Canada, which predicts used market supply to rise in aggregate, which will serve to push residuals down by 0.01 percent.

That said, the market impact of expanding used supply on specific vehicle segments will range from a decline of 0.4 percent to a slight rise of 0.1 percent, reported Geoff Helby, ALG Canada regional director.

In terms of the effect of supply rates, the premium compact segment will see the largest negative impact with a decline of 0.4 percent, while the premium executive, premium sport and subcompact segments show the largest positive impact of 0.1 percent, according to ALG Canada data.

Helby also pointed out low gas prices, which are still falling, had a negative impact on fuel-efficient segment residuals, while inefficient segments enjoyed a rise in price.

Taking all economic factors into account, residuals are expected to rise by 0.6 percent through March and April, which is slightly more positive than the 0.4 percent increase predicted during the same period of last year.

Helby pointed out this change is in line with seasonal trends.

"With the updated macro-economic outlook assumptions, segments with lower fuel economy are more positive," said Helby. "Wages, home prices and exchange rates lower residuals across all segments. Supply impact is mixed by segment, but slightly negative on average."

Breaking the numbers down, the midsize pickup segment is expected to see prices rise the most, with residuals predicted to bump up by 1 percent.

The microcar segment is expected to see residuals rise considerably over this two-month period, as well, with rates spiking by 0.8 percent, while minivans are also expected to see a larger-than-average increase, with residuals rising by 0.7 percent.

The premium midsize utility, premium compact utility and premium compact segments are all expected to see residuals rise by 0.2 percent, Helby reported.