INDIANAPOLIS, IN—Supply shortages of late-model, off-rental units have forced dealers seeking inventory for their spring sales to bid more aggressively for needed vehicles. As a result, sales prices rose by 1.9 percent on a year-over-year basis in May, though the increase over April was a modest 0.6 percent. Still, relatively weak retail demand continues to plague the used vehicle market and as off-rental and off-lease volumes recover, wholesale prices will likely soften again, according to Tom Kontos, executive vice president of customer strategies and analytics for ADESA.

Wholesale used-vehicle prices in May averaged $10,195 compared to $10,138 in April (up $57) and $10,008 in May 2006 (up $187), according to ADESA Analytical Services’ monthly analysis of Wholesale Used Vehicle Prices by Vehicle Model Class.

Truck prices on average were down 0.9 percent compared to April while car prices were up by 2.3 percent. These trends are partly due to higher gas prices in May.

According to data from CNW Marketing/Research, March retail used-vehicle sales were down only 0.6 percent year-over-year for franchised dealers, and 1.2 percent for independent dealers, and 0.9 percent overall. This is encouraging news considering the double-digit year-over-year drops in previous months. ADESA Analytical Services believes the key factor in this improvement in demand has been dealer discounting of used vehicles. This is seen by two measures that are generally continually monitored: the consumer price indexes for new and used vehicles and used-vehicle prices as a percent of used-vehicle prices as calculated using Federal Reserve data. The used vehicle CPI fell 4.6 percent year-over-year in May versus 1.0 percent for the new-vehicle CPI. Used-vehicle prices as a percent of new vehicle prices were at 57.5 percent in March (most recent data available), down from 61.8 percent in May 2006.

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