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November 2014 Wholesale Used Car Values Trend Report

Wholesale prices: the rise continues

In October, we noted that after months of decline, wholesale vehicle prices finally turned the corner, albeit showing a barely perceptible rise. But in November, we can clearly say that the trend is continuing. According to research by Manheim, the Manheim’s used vehicle index is up 0.7% year-on-year.
April 2014 was when prices reached a high-point, before beginning a five month decline. But November prices are now within 1.3% of their April levels. According to Manheim, dealers have been busy snapping up vehicles with confidence at auctions. It is not apparently clear which factors have directly led to the October and November up-tick. But Manheim are confident that the approximate 16 million new vehicle SAAR (October & November) was not responsible for creating the level, age/model/condition mix of trade-ins and lease turn-ins that are supporting the currently buoyant used vehicle market.

Used vehicles: market outlook steady

According to data published by auto research firm CNW, total used vehicle sales in November, were up just under 1%, after declining in October. But year-to-date used vehicle sales are still down 1.1%. Although surprisingly, there are strong indications that dealers are generating record profits on the back of these sales. It would appear that increasing numbers of lease-ins as well as newer trade-ins have helped increase the average used vehicle selling price at franchised dealers. In a related development, CPO sales, continued to be strong in November, with monthly sales helping reach 2.14 million vehicles year-to-date, making it a 10.2% increase year-on-year.

Rental risk market: pricing fighting back

According to Manheim, average auction prices for the rental risk market (adjusted and unadjusted for mileage and mix) ticked up month-on-month in November – but are still down compared to 12 months ago. Looking back, it appears that a glut of below average condition vehicles, as well as greater oversupply generally, was responsible for the sharp fall in October’s prices. In contrast to year-on-year prices, November saw increased auction volumes of rental risk units year-on-year. However, on a seasonal basis, November is always the lowest volume month of the year. But average mileage surpassed the 45,000 mile threshold for the first time ever.

Luxury vehicles clawing back price

Unquestionably, recent months, has seen the decline in luxury car pricing. But the luxury sector is now fighting back, although admittedly due to the decline, they are rising from a low base with significant ground to make up. On a seasonal basis, the market will expect to see traditional increases in luxury lease-returns, and it will be interesting to see if the current come-back in luxury price residuals can be maintained. As in previous months, the compact car market shows competitive pricing (used and new).

Meanwhile, vehicles in the $8,000 to $10,000 price range which have taken a pounding in recent months, after ticking up in October, are now showing weak demand again. Vehicles in the $13,000 to $15,000 appear to show the strongest relative pricing on a segment basis.
At auction, Dealer consigned-units, although experiencing a 2% rise in average mileage, still showed a 1% increase in average selling price.

Posted by: Farra Majid on Tuesday, December 9th, 2014 at 7:10 pm in DEALERS, INDUSTRY