CARMEL, IN - The used-vehicle market lost some momentum in November, reported Tom Kontos, ADESA chief economist.

Although independent used-car dealer retail volumes were up, a drop in sales by franchised dealers caused a reduction in overall retail used-vehicle demand (all on a year-over-year basis). This was reflected in the wholesale market, where average auction prices in November were down 0.4-percent year-over-year. This was the first year-over-year price decline since July of 2005, when prices dropped only 0.1 percent.

Prices are expected to remain relatively soft in December and into 2007 due to growing volumes of fleet, rental, and eventually, off-lease vehicles, along with steady flows of repo and dealer consignment units, according to Kontos.

ADESA Analytical Services estimates that same-store auction industry sales volumes rose 1.4-percent year-over-year in November.

Dealers appear to continue discounting used vehicles to try and generate more retail sales, said Kontos. This is seen by a fall in the ratio of used-vehicle prices to new-vehicle prices (57.7 percent, based on the latest Fed data versus more than 60 percent earlier this year), and a 1.5-percent year-over-year drop in the November used-vehicle consumer price index (compared to a 0.9-percent reduction for new vehicles). Broader economic strength and ample tax refunds will be needed to further stimulate used-vehicle sales as we head into the new year, reported Kontos.