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May 2015 Wholesale Used Car Values Trend Report

Wholesale prices: prices decline four months on the trot…

We had four months of consecutive wholesale price increases up to and including January, and we have now had four months of consecutive decline, according to Manheim Consulting’s Used Vehicle Index (adjusted for mix, mileage and season). And Manheim notes that wholesale prices are in fact 0.7% down year-on-year. Long-term, the wholesale price remains broadly on trend, but for how long?

Manheim suggests we are due a correction. Even taking in to account the recent declines in wholesale pricing, Manheim’s index is only 3.1% off the May 2011 peak – itself, inflated by the supply side shock of restricted production following the earthquake in Japan. However, with wholesale output set to increase, Manheim expects to go below trend. The amount of underperformance will depend on economics: to what extent can income and credit support retail used unit volumes and profits?

Used vehicles: dealers report record profits

Certified Preowned (CPO) units are breaking records – sales are up12.2% in May, and 11.6% year to date. Dealers have emerged leaner and meaner, and are reaping the profits of increased sales. Overall, Manheim reports that total used vehicle retail sales climbed 5% in April, recovering from a first quarter slump.

Rental risk units – prices take a pounding

Manheim found that May auction prices (simple average) were 10% off year-on-year. Adjusting for market class and mileage, prices still declined by 6% from 12 months ago. Most of the decline can be explained by older, more beat-up, less valuable units comprising the greater part of volume shift at auction. For example, in May 2014, 65% of the units sold at auction were from 2013, but in May 2015, only 29% of sales were from 2014. And in May 2015, 45% of rental risk units sold at auction came in at condition grade 4.0 or higher; fast forward to May 2015, and that number dropped to 30%.

Also contributing to the price decline was the oversupply: auction volumes are reportedly up in May, continuing the underperformance since the turn of the year. At the same time, numbers of new units being sold in to rental was up 9.4% to date.

Market segment trends 

Plus ça change. May brought more of the same as far as pricing in market segments was concerned: Pick-up trucks were competitive, whilst compacts continued to struggle. Luxury cars also continued to underperform the entire market, with basic level luxury cars feeling the most heat.

Price categories remained on trend: the $9,000 – $11,000 showed price weakness, whilst pricing in the $15,000 plus category continued to show signs of strength. Contributing to the weakness in the former is the increase in supply year-on-year. But dealer-consigned units were higher in May 2015 than May 2014, and average mileage showed a slight dip, reversing years of increases.

 

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    By Farra Majid, June 10, 2015

 

 

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Posted by: Farra Majid on Wednesday, June 10th, 2015 at 4:07 pm in INDUSTRY