Throughout 2014, the automotive industry has been recognized as the driver of much of the economic recovery. Whether the industry has been the main driver or merely a major supporter of the economy’s improvement, there is no question that the low level of depreciation in light-duty pickup trucks’ value is a result of the demand for these working tools.
Black Book’s findings reveal that pickup trucks within the fleet industry will stay in service longer and will have significantly more miles on the odometer than volume sedans. According to a recent Black Book “Commercial Value Report,” the highest volume sedan for the 2012 model-year had an average mileage per unit of 49,000 at an average price of $10,400. The mileage of the highest volume pickup, also a 2012 model, averaged 97,000 miles at the time of resale with an average price of $19,130. This is a prime example of the importance of the light-duty pickup market in the currently growing economy.
While the overall market depreciated by 12.1 percent over the past 12 months, the total truck market depreciated by 10 percent and the full-size pickup segment depreciated by an almost unbelievable 4.9 percent.
Why the minimal annual depreciation? The economy continues to improve, with the construction and service industries contributing to the growth. The current demand is barely being met with the limited supplies.
All of this demand is not just within the managed fleets but also with the small companies or independent businesses that are prospering. Local plumbers, electricians, and even carpet installers have been looking for replacement used trucks.
In addition, while there are greater volumes of several popular brands of pickups than there are of the highest volume sedan model within new-car sales, there are fewer unit choices within several truck segments compared to many of the car-related segments in the commercial fleet remarketing field. This further affects supply and demand while also contributing to the lower average truck depreciation.
Greater Depreciation in 2015
What does this mean going into 2015? It is unrealistic to expect this low level of depreciation to continue into 2015. Over the past two years, all full-size pickups from Detroit have been refreshed or completely overhauled, some with new structural materials. In the full-size pickup arena, attention is being paid to not only appearance, but also safety-related items, technologies, improvements in ride and comfort, and fuel efficiency.
Vehicles in this segment have shifted from the biggest and highest-horsepower V-8
engines to supercharged six-cylinder engines and even diesels in 1/2-ton applications. These vehicles also include technology-laden direct injection and cylinder deactivation, all while gasoline prices at the pump plummet.
Although demand for light-duty pickup trucks will continue, and the used market will be ready for new technology to become available, at a time when new pricing will be bumping against the acceptance ceiling, depreciation of trucks should be greater than the 2014 overall levels. Still, this market should be trending better than the car market.
Ricky Beggs is the editorial director and senior vice president of Black Book.