CARMEL, IN - Wholesale used-vehicle prices softened modestly in August versus prior month and from their record highs in April, according to Tom Kontos, EVP, customer strategies/analytics of ADESA. This is more of a seasonal softening, with tight supplies continuing to exert upward pressure on used-vehicle values and keeping them at historically high levels.
Nevertheless, consumers and dealers may be “pushing back” on what they view as high used-vehicle prices, respectively, at retail and wholesale, noted ADESA. “As we’ve identified in previous reports, new-vehicle sales may be benefiting from high used-vehicle prices, both from substitution as new vehicle prices become more attractive relative to higher used-vehicle prices, and from higher trade-in values for new-vehicle shoppers,” said Kontos. “The lower used-vehicle retail sales in August (see “Details” below) may in part be a result of the substitution of new vehicle purchases by shoppers who might have otherwise bought a used vehicle. Lower used-vehicle sales may, in turn, have allowed dealers to be more selective in the lanes and online.”
To the extent high used vehicle prices are supporting improved new vehicle sales, this is a welcome trend for the auto industry as a whole, noted Kontos. For remarketers, however, substitution of new vehicles for used vehicles by consumers at retail and the ability of dealers to be more selective at wholesale are demand-side reminders that prices may continue to soften even as tight supplies provide some underlying support to wholesale prices.
According to ADESA Analytical Services’ monthly analysis of Wholesale Used Vehicle Prices by Vehicle Model Class1, wholesale used vehicle prices in August averaged $9,993 – down 0.7 percent from July and up 0.4 percent versus prior year. Other than for some of the lower-volume model class segments whose prices tend to be more volatile, average prices for each of the segments tracked at or near the market average on a month-over-month basis. An exception would be mid-size cars -- a popular vehicle at auction, especially among commercial fleet consignors -- which managed a modest price increase for the month.
Manufacturers registered a 2.2 percent month-over-month price increase and a 7.4 percent year-over-year rise, indicating still-strong demand for off-rental program units. Fleet/lease consignors experienced a 0.7 percent sequential price increase and a 1.8 percent annual increase, in part from strong dealer demand for rental risk and commercial fleet units. Dealer consignors saw a 1.3 percent average price decrease versus July and a 9.4 percent uptick versus August 2009.
ADESA Analytical Services estimates that auction industry inventory levels stood at 28 days at month-end compared to 33 days last August – continuing to indicate tight supply and high auction throughput.
Based on data from CNW Marketing/Research, retail used vehicle sales in August were down 3.8 percent year-over-year for franchised dealers, but up 12.4 percent for independent dealers, leaving total retail volume up 3.8 percent. On a month-over-month basis, however, retail sales of used vehicles were down for both franchised (down 4.3 percent) and independent (down 5.2 percent) dealers (and down 4.7 percent combined). Certified used vehicle sales in August were down 7.3 percent versus July but up 3.0 percent compared to August 2009, according to Autodata. The consumer price index for used vehicles rose by 17.0 percent year-over-year in July (latest available) based on data from the Bureau of Labor Statistics.