CARMEL, IN – Wholesale used-vehicle prices showed continued softness in February. Average prices for vehicles sold by all the major seller groups (manufacturers, fleet and leasing companies, and dealers) were down on a year-over-year basis in February, according to a recent analysis by Tom Kontos, executive VP, Customer Strategies and Analytics, for ADESA, Inc.
And although they have declined from their peak in January, auction industry inventories remain high due to a combination of high supply (especially from repo and off-lease units) and weak retail demand.
“Any improvement in the retail used-vehicle market continues to be biased toward franchised dealers; independent used-car dealers are still having a tough go,” Kontos said. “Nevertheless, it should be pointed out that retail used-vehicle sales are up by over 40,000 units, or 1.7 percent, year-to-date, while new-vehicle sales are down by 125,000 units, or 5.3 percent.”
Moreover, Kontos adds, franchised dealers have offset about half their lost new-vehicle sales by selling 63,000 more used vehicles year to date.
“This shows the recession-resistance/lower volatility of used-vehicle sales during economic slowdowns compared with new vehicle sales,” he said. “This also shows the emphasis both dealers and consumers tend to place on used vehicles in tough economic times.”
The economic stimulus package may have some impact in generating tax refund spending money for would-be used-vehicle shoppers, Kontos pointed out, saying that this may lead to a later-than-usual, tax-time “Spring Market.” Increased consumer and business spending should also be supported by the Fed’s rate reductions, which, coupled with higher inflation figures (January’s Consumer Price Index was up 4.3 percent year-over-year), have put the “real” (inflation-adjusted) Federal Funds rate into negative territory. In the meantime, remarketers and dealers will have to keep their price expectations a bit lower when selling used vehicles.
Other results include: