Truck and SUV used price performance has been impressive. Trucks and SUV prices have reached record levels and have followed an upward trend since the last gas spike in 2008, which drove truck and SUV prices to record lows. The upward trend in gas prices which essentially began in January 2009 and accelerated late in 2010, surprisingly has not had a significant on prices.  There is no doubt that the recent increases in gas prices have slowed down the appreciation on values for trucks and SUV’s, but we haven’t seen a consistent decline in truck prices until recently…since mid-March trucks and SUV prices have slid down slowly. When looking at prices in isolation it doesn’t appear to be a big deal.  However, when considering the overall market performance it is clear that truck prices are underperforming the market by over 5%.

There is no need to panic today for many reasons; some significant ones include:

1. Used Supply is much lower on trucks and SUV’s compared to prior years.  In fact the number of vehicles that went through auctions in 2011 from January – April is down about 40% on trucks and 15% on large SUVs.  Granted these numbers may be exaggerated because more vehicles are kept by dealers but clearly there are less trucks to buy.

2. Consumers are more resilient to gas price increases.  According to a survey by MSNBC, $4.00 gas is not as frightening as it was in the past.  NADA has seen evidence of this in that trade in activity has not shown trends like 2008 where consumers turned in SUV’s and trucks in droves.

3. The economy is getting better – Consumers are a lot more confident than they were in 2008. 

So what am I worried about? 

I am worried that the robust profits on trucks and SUV’s will make some manufacturers bullish on the actual demand for these vehicles when gas prices remain between $3 and $4 per gallon.  New vehicle inventories are already reaching triple digits on many trucks and SUVs yet GM has indicated that it is reluctant to pare down production, or mulling it over...  The signs are there yet there is reluctance which will ultimately result in an increase incentives on top of the big increases already witnessed during March.  This will only get worse as production continues to outpace demand.

With truck and SUV prices at historical highs we need to have prudence on the expectations of the new market.  Even if barrel prices remain near $100 per barrel consumers are still faced with $3.00 gas.  All the indicators are showing a pull back in demand that manufacturers need to recognize.  As we move into the summer season a huge pull-back in gas prices is not expected which means demand for trucks and SUVs will continue to be slow.

Hopefully our industry has learned from past mistakes and manufacturers will respond quickly to short term shifts in demand based on consumer preferences.  Used prices are a sensitive metric and they all point to the obvious pull back in demand for large trucks and SUVs.