CARMEL, IN and ATLANTA – Average auction prices in October, according to ADESA Analytical Services´ monthly analysis of Wholesale Used Vehicle Prices by Vehicle Model Class, were down 0.8 percent from year-ago levels, constituting the first decline since February. Average prices were down 1.8 percent compared to September. The month-over-month decline would best be characterized as seasonal, while the modest year-over-year decline indicates steadiness. Overall, these movements indicate continued firmness in the wholesale used-vehicle pricing environment.
At Manheim, wholesale used-vehicle prices (on a mix, mileage, and seasonally adjusted basis) inched upward in October for the second consecutive month. Naturally, before the seasonal adjustment, wholesale prices fell (-1.8 percent), as the largest seasonal downward pressure on wholesale used vehicle prices inevitably occurs in October, the start of the new model year. On a year-over-year basis, wholesale prices were down 0.6 percent. For the past four months, used-vehicle prices have been in a holding pattern as the negative pull of weak retail demand for late-model used vehicles has offset the potential price benefit arising from fewer off-lease units.
Solid retail sales, especially for independent used-car dealers, continue to support the firm pricing situation. Some publicly traded retailers have reported soft sales, but some of this is weather related and nevertheless appears to be most concentrated in late-model used vehicles, which are most vulnerable to the high new vehicle incentives. According to data from CNW Marketing/Research, retail used vehicle sales in October were up 5.1 percent y-o-y. This marks the 15th time in 17 months that retail sales have increased on a year-over-year basis and reverses the decline seen in September, in part due to the post-hurricane bounce. Sales by independent used car dealers grew by 9.4 percent, and franchised dealers sold 1.4 percent more used vehicles than this time last year. Used-vehicle sales by independent dealers on a year-to-date basis remain at their best levels since the current decade began, ADESA reported.
For the fourth month in a row, compact cars had the strongest year-over-year price gains, and full-size SUVs had the sharpest y-o-y price declines. Average prices in both these categories had double-digit, year-over-year movements, though in opposite directions. High gas prices are clearly a major contributor to this trend, although factors such as the extremely high new vehicle incentives on large SUVs have also played a significant role.
The ADESA Auction Inventory Index fell from its fall peak at the end of September and early October. By October month-end, the index stood at 119.8 – down from 136.8 at the end of September and down 1.9 percent from its year-ago level of 122.1. ADESA Analytical Services estimates this represents approximately 31 days of auction sales, which is still sufficient supply to maintain downward pressure on wholesale prices as we approach the holiday season.
The ADESA Auction Dealer Optimism Index registered a modest gain in October, a gain which exactly matched the loss in September. The index measures dealer “optimism” as the year-over-year change in dealer consignment “conversion rates” at ADESA auctions. The October index shows that dealers purchased a slightly higher percentage (0.7 percent) of vehicles offered for sale by other dealers at ADESA auctions than they did during the same period in the prior year. The modest swings in this index indicate that dealer consignment conversion rates have returned to their normal seasonal levels after registering significant gains in the highly robust first quarter of this year.