Hybrids – Supply & Demand

Hybrids hold their value.The shortage of hybrids on the used car market is raising demand… and prices.

In Stu Ralph’s experience, a regular gas-powered six-year-old Toyota Highlander with close to 300,000 kilometres would normally retail for about $5,000 – but the hybrid version commands much more. “In a nutshell, these vehicles not only hold their value, but bring better than average money than gas-powered units,” he says.

Ralph offers recent examples to prove his point. “A 2000 Honda Insight with over 100,000 kilometres sold for $3,600,” he states. “A comparable 2000 Honda Civic with the same mileage would have sold for $1,500 less.”

A 2002 Prius with 150,000 kilometres sold for $3,600 – a Toyota Echo in average condition would be worth $2,400. Ralph says he uses Canadian Black Book as a guideline, together with their own auction sales results, which are more current since they are done on a weekly and daily basis.

Few and far between

According to Pat Dwyer, Fleet Manager at Yorkdale Toyota, hybrids hold their price because they make up a small percentage of the marketplace. Out of 50 cars on his used car lot, only three were hybrids.

“There’s a very small number compared to other models – it’s all about supply and demand, like everything else in the car business,” he says. “If you’ve only got a couple of these cars, you can ask for more money and people will pay it.”

Scott Whittal, Director of Operations for Automotive Resources International (ARI), agrees. “It’s a challenging time because there’s a shortage of these vehicles, and dealers are battling it out over any good quality used vehicle,” he says. However, Whittal estimates only one percent of his used car market is hybrids.

At North Toronto Auction, if a used hybrid is on the website – no matter what the year or model – it gets a lot of hits in comparison to a gas model. “A lot of it could be curiosity,” Ralph admits. However, when a hybrid comes in to auction, he says people will follow it like a bandleader, and many will bid on them. He concurs that the issue is supply and says, “If we had more, we could sell more, without question.”

Cost vs. technology

Josh Ba i l ey, Vi c e Pre sident of Research and Editorial for Canadian Black Book, feels that people who want hybrids want the latest technology. “The technology has grown leaps and bounds from 2007 to 2013,” he says. However, if they can’t afford a new hybrid, they may be tempted by a used hybrid, especially with certif ied pre-owned programs.

“With some education by the dealer to the consumer, there may be some oppor tunit y to move some of them from new to used,” he says.

But from Dwyer’s experience, if someone wants a brand-new car, they won’t be budged. “With hybrids, people know the price of the vehicle, they’re not going to move from wanting a new car to a used car,” he says. “There’s no sticker shock – they know the car’s going to cost $30,000 to $40,000.”

He also notes that incentives for buying green cars do not apply to used hybrids.

Condition, condition, condition

Ralph notes that the used hybrids he gets at North Toronto Auction are generally in good condition, and are usually purchased by independent used car dealers. The majority of the vehicles he gets are government f leet vehicles.

At Yorkdale Toyota, Dwyer has two technicians who specialize in repairing hybrids. “I would think that an independent car dealer would have difficulty working on a hybrid since it requires special tools, specialized knowledge – you really need to know what you’re doing,” he says. “You’ve got to be very careful because of the high electrical charge.”

But if the car will cost too much to recondition, he will wholesale it to someone else. “We like to keep them in the family, but if it’s too much, we don’t keep it,” he says.

At ARI, Whittal says there are some challenges in calculating the cost of used hybrids, and relies on a combination of Canadian Black Book and his own resale numbers. “We don’t have to do a lot of reconditioning on our resale units, because they’ve been on our ARI maintenance program and usual ly their condition is quite good,” he says.

Evaluating the market and the resale values is an ongoing effort at ARI, constantly looking for market changes, changes in models, and regional differences. “British Columbia is a region that’s very hybrid focused,” Whittal notes.

“But what happens now and what happens six months from now could be completely different. If you look at the recession, six months before everything turned upside down, it was a different market.”

What the market will bear

One of the chal lenges in the appraisal process of a used hybrid is the fact that there simply aren’t many out there. “It’s more difficult than a Honda Civic, where there may be thousands that have gone into the market for the past few years,” says Bailey. “It takes more work on our part to assess what the value is, rather than just a regular vehicle.”

Bailey says that Canadian Black Book doesn’t take any extra factors into account when calculating the value of a used hybrid. “We’re looking for what the mar­ket is paying for that vehicle,” he explains. “When we’re looking more to the future with our residual forecast, what a 2013 hybrid would be worth in 2017, that’s a dif ferent story. We do look at it with a different set of eyes.”

He feels that the sales of hybrids so far have been largely predicated on the cost of fuel. “Two years into the future, we see fuel prices going slightly upwards but not dramatically,” he says. “Manufacturers are looking to offer more hybrid products, the luxury brands are coming into that arena, so there will be more products and that will move it up to a larger percentage of the overall market. There will be accumulating numbers on the road, and buyers will be willing to look at something different because of the price of fuel.”

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