CARMEL, IN – November wholesale used-vehicle prices registered an average overall modest increase, but it should be recalled this is from the most dramatic decline ever in October, according to a recent analysis by Tom Kontos, executive VP, Customer Strategies and Analytics, for ADESA, Inc.
Moreover, proportionately more trucks were sold in November than in previous months in 2008, as dealers capitalized on bargain-basement prices for these units, especially with gasoline prices dropping dramatically in recent weeks. In addition, it is important to note dealer consignment volumes were lacking at wholesale auctions in November. Dealers tend to sell older, lower-priced units at auction, so the absence of such units tends to result in higher average prices.
For these reasons, it is important to focus on price trends in the individual vehicle model class and seller-type segments to better assess market conditions, according to Kontos. The picture that emerges when analyzing these details is the market in November continued to be nearly as weak as October, although weekly trends (minus the holiday week) indicate the worst may have been over in late-October/early November, around the time of the election.
Retail sales of used vehicles improved somewhat from October, but it was still the worst November of the decade, noted Kontos. Credit conditions and lack of consumer confidence continue to stifle sales. The relatively brighter spots for older, rougher units, particularly those retailed by buy-here-pay-here dealers, along with the big trucks mentioned above, continued to hold up better than the rest of the market.
Conversion rates (units sold as a percent of units offered) at auction improved modestly, but inflows exceeded outflows at auction and inventories continued to grow. As these units are released into the market over the coming months, they will continue to put downward pressure on prices.
The actions of the government will be critical to an improvement in the economic and automotive industry outlook in 2009, said Kontos. Needed actions fall along the following broad fronts:
According to ADESA Analytical Services’ monthly analysis of Wholesale Used Vehicle Prices by Vehicle Model Class, November wholesale used-vehicle prices averaged $8,713 — a modest increase from October’s near-record low and record drops. Average prices were up 1 percent compared to last month and down 10 percent compared to last year. Full-size SUVs and pickups resumed month-over-month improvement in prices that began in July, but was interrupted in October, rising 8 percent and 1.5 percent respectively. Minivans, a popular fleet vehicle, also showed significant price increases (up 3.2 percent month-over-month). Compact cars ended their 21-month run of year-over-year price gains, registering a drop of 5.4 percent. In fact, all model classes registered year-over-year price declines, even those that showed monthly gains.
November prices for vehicles sold in manufacturer sales were down 10.7 percent year-over-year, fleet/lease sales prices were down 12.4 percent, and dealer consignment sales prices were down 20 percent.
Based on data from CNW Marketing/Research, November retail used vehicle unit sales were down 15.0 percent year-over-year for franchised dealers, 18.0 percent for independent dealers, and 16.4 percent overall.