ATLANTA - Wholesale used-vehicle prices (on a mix, mileage, and seasonally-adjusted basis) dropped lower in January, according to Manheim.

Before the seasonal adjustment, average wholesale used-vehicle prices rose between December and January, but the increase was less than historical patterns would indicate; therefore, the Manheim Index declined by 0.2 percent to a 113.3 reading for the month.

Wholesale prices were off 2.6 percent on a year-over-year basis, as the comparison was being made against the cyclical peak in pricing that occurred in January 2006.

A stable labor market and favorable credit conditions pushed non-seasonally adjusted prices higher in January. However, there is no guarantee that the spring market will accelerate as quickly as it has in recent years, according to Manheim.

Factors impacting used-vehicle sales include:

• Tax refunds might already be committed to past purchases.
  

  Tax refunds are a major driver of the used-vehicle spring market. Forecasting the level of tax refunds and, more important, the distribution between specific demographic and regional segments of the population is a difficult proposition. Early estimates suggest, however, that tax refunds in early 2007 will grow less rapidly than in recent years. And, with the recent rise in credit card debit it is reasonable to assume that a smaller slice of the refunds will end up directly supporting used-vehicle purchases, according to Manheim.

  
  

  
  

• Revisions to employment growth show a strong base to the economy.
  

  January's job growth came in slightly below expectations, but the benchmark revisions added more than 400,000 people to the 2006 total and pushed aggregate payroll growth last year to more than 2.2 million. Wage and salary growth is estimated to have risen by more than 6.5 percent last year.

  
  

  
  

• Drag from housing will dampen the economy for an extended period.
  

  A recent Census Bureau report shows that vacant homes for sale hit their highest level in the measurement's 40-year history. Many analysts believe that vacant home inventory is a better market indicator than the total inventory of homes for sale (which declined in recent months) since owner-occupied houses are often taken off the market when pricing is weak.

  
  

  
  

• Benefit from falling gas prices likely over.
  

  In the fourth quarter of 2006, the boost in discretionary income provided by falling gasoline prices offset much of the drag in housing. Since crude prices seem to have found their bottom, and the normal seasonal upturn in pump prices is only months away, consumers are unlikely to experience additional relief.

  
  

  
  

• New-vehicle inventory levels continue to fall.
  Despite modest new-vehicle sales in January, current and past production cuts continued to reduce dealer inventory levels. Preliminary numbers put the reduction in domestic new vehicle inventories during January at approximately 250,000 units.

  All vehicle market classes experienced year-over-year price declines in January, as the comparison was against last year's cyclical peak in wholesale pricing. January saw a further improvement in the pricing for many SUVs and full-size pickups, helped in part, by lower gasoline prices. Indeed, for some SUV models the wholesale market was quite active showing both an increase in the number of vehicles offered and a higher sale-through percentage. Luxury model SUVs, however, suffered a further easing in wholesale pricing in January, according to Manheim.

  In a trend that, according to Manheim, will continue for some time, the volume of risk vehicles sold at auction moved higher in January. The pricing for the units remained unchanged from their strong year-ago performance. Likewise, commercial fleet volumes continued to rise, as did pricing for these units, in spite of the already strong gains achieved over the past two years.