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June 2015 Wholesale Used Car Values Trend Report

Wholesale prices: 4 month decline halted…

Four months consecutive decline have come to a stop according to Manheim consulting’s used vehicle index (adjusted for mix, mileage and season). But the rise is barely perceptible, and Manheim notes that wholesale prices are in fact 0.1% down year-on-year.

2011 was the high point for wholesale prices. Although they have never hit those highs, they have not deviated significantly from the peak – and that is despite increasing wholesale inventory flooding the market. Rather, it appears that strong retail demand, operator efficiencies and enhanced dealer remarketing have bolstered prices. Currently, prices are in line with historic trends after several years of outperformance. Although Manheim cautions that further wholesale supplies will exert downward pressures on pricing.

Used vehicles: all units up!

Total used vehicles sales climbed upwards both in April and May, reversing the first quarter slump, reports NADA. But CPO units continue to rewrite the record books – sales are up 17.6% in May, and 12.5% for the first six months of the year. CarMax added to the growth story by reporting same-store used unit volumes climbing 4.9% for its fiscal quarter ended 31 May. Analysts bullishly expect new car dealerships to report impressive strong used vehicle numbers when the slew of second-quarter results check in later this month.

Rental risk units – Older units continue the downward price spiral

In contrast to total used vehicle sales, rental risk prices show no sign of bucking a plunging price trend. As in previous months, older, rougher rental risk units are leading the rout. Manheim found that auction prices (simple average) of May auction prices were 14.2% off from March to June. Adjusting for market class and mileage, prices still declined by 6% over the quarter. Manheim suggests that the decline can broadly be explained by older, more beat-up, less valuable units comprising the greater part of volumes sold. E.g. in Q2, 2014, 62% of the units sold at auction were from 2013, and 23% from 2012. But in Q2, 2015, only 31% of sales were from 2014, but 55% were from 2013. And in Q2, 2014, 45% of the risk units coming under the auction hammer had a condition grade of 4.0 or better. Cue Q2, 2015, and that number drops to 30%.

Auction volumes were up significantly in June, as well as for the first half of the year. Unquestionably, auction oversupply also contributed to the rental risk horror show:  Also contributing to the price decline was the oversupply: auction volumes are reportedly up in May. However, dealers are keeping new units away from the rental market: numbers sold in to rental declined 6% in June (in large part explained by GM curtailing deliveries), but are still up 6.5% year to date.

Interestingly, the average rental risk auction price has fallen $2,000 since May. Dealers may feel the price drop will enable them to entice a wider customer base in to a late-model used vehicle.

Market segment trends 

June brought more of the same as far as pricing in market segments was concerned: pick-up trucks were competitive, although they were joined by vans – with full-size commercial passenger units and cargo vans leading the way in the sub-segment.

Price categories refuse to budge: there is continued sluggishness in the $9,000 – $11,000 category, whilst pricing in the $15,000 plus category continued to show signs of strength. Again, contributing to the weakness in the former is the increase in supply year-on-year.

But prices for dealer-consigned units and commercially consigned units were up year-on-year (straight average auction pricing). But average mileage for dealer consigned units has stayed close to its level of 12 months ago. Meanwhile, by contrast, average mileage on commercially consigned units has taken a dive.

 

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    By Farra Majid, June 10, 2015

 

 

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Posted by: Farra Majid on Thursday, July 9th, 2015 at 9:56 am in INDUSTRY