CARMEL, IN – Average wholesale used-vehicle prices registered a small (0.4-percent) uptick in August after four months of declines, according to Tom Kontos, chief economist, ADESA.

On a year-over-year basis, the increase is up to 5.5 percent, but is misleading because it is based on weak year-ago comparables, which were impacted by Hurricane Katrina and extensive employee discount programs, according to Kontos. However, retail used-vehicle sales fell by more than 20-percent year-over-year in August.

Retail sales last August were at record highs, which exaggerated the year-over-year drop. Nevertheless, the weak used-vehicle retail sales environment appears to be the result of several factors including:

  • Maturation and slower growth of the macroeconomic expansion, which is in its fifth year.

  • High gasoline prices, a depressed housing market, higher interest rates, and other economic concerns that have put pressure on disposable income and consumer confidence.

  • Higher retail used-vehicle prices relative to discounted new-vehicle prices.

  • Prevalence of negative equity in new and used vehicles purchased under long-term loan arrangements over the past several years.

    All of the above factors have caused consumers to be more cautious toward big-ticket purchases, including used vehicles, reported Kontos.

    ADESA Analytical Services analysis shows retail used-vehicle prices have fallen significantly in recent months from 63 to 58 percent of the average new-vehicle price. Gasoline prices also fell. These developments bode well for an improvement in retail sales that will generate demand for the commercial and rental fleet units returning for remarketing now and in the coming months. Sellers should remain cautious, however, in their price expectations for the remainder of the year, said Kontos.