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Black Book: Vehicle Depreciation to Rise in 2015

February 3, 2015

LAWRENCEVILLE, Ga. — Vehicle depreciation is expected to increase in 2015 as a larger used-car supply and off-lease volumes place pressure on retention rates, according to a report from Black Book and Fitch Ratings.

The annual depreciation rate in 2014 was 12.1%, and Black Book believes depreciation levels will continue to trend upward to as high as 14.5% in 2015.

“2014 depreciation was defined by pockets of volatility due to seasonality, harsh weather patterns and falling fuel prices,” said Anil Goyal, vice president of analytics and strategic partnerships at Black Book. “Lower consumer demand and CAFE-driven model competition will place higher depreciation pressure on smaller car segments.”

The truck market should maintain a stable retention rate in 2015 due to balanced production levels and strong housing and service economies, Goyal added.

Higher depreciation in 2015 will not have a significant impact on overall auto asset-backed securities performance, according to Fitch Ratings. The ratings agency said it believes U.S. auto loan ABS loss rates will rise in 2015, but they should not have a significant impact on overall performance. The firm maintains a positive outlook for 2015, with stable prime asset performance and positive ratings performance consistent with 2014.

Used-vehicle inventory levels and leased vehicle returns will continue to increase in 2015 by more than 10% along with higher trade-in volumes, Fitch said. These trends will drive residual value losses higher throughout the year, but not impact performance. Auto lease ABS should remain positive for 2015 despite the negative trends.

The Black Book-Fitch vehicle depreciation report is a joint venture between the two companies, combining Black Book’s used-vehicle depreciation data with Fitch’s U.S. auto ABS indices data. The full report is available for download, here.

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