Wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) moved modestly higher in July. This brought the Manheim Used Vehicle Value Index to a reading of 124.1 in July. Given that seasonally adjusted prices were declining at this point last year, the Index’s year-over-year change moved from -0.1% in June to +1.1% in July.
The continued strength in wholesale pricing reflects a retail used vehicle market where dealers are enjoying higher throughput, achieving ever-greater efficiencies, and still growing F&I income. Although new vehicle transaction prices continue to rise, incentive activity (both transparent and opaque) is on the rise. This likely left the new vehicle market net neutral with respect to its impact on wholesale pricing in July. This benign environment may be negatively impacted by past and expected exchange rate movements and shifting global demand.
New vehicle sales surprise to the upside. In July, new cars and light-duty trucks sold at a seasonally adjusted annual rate (SAAR) of 17.5 million. This was better than expected, and it brought the SAAR on a three-month moving average basis to 17.35 million, which is higher than the current consensus forecast for full-year sales. For the first seven months of 2015, the SAAR averaged 17 million.
The average new vehicle transaction price was $33,453 in July, according to Kelley Blue Book. That was up 2.6% from a year ago, and flat relative to June. According to Autodata, incentive spending was up 7% from a year ago – and, of course, you never know what the true lease residual support will end up being until end-of-term.
Used vehicles: solid sales with strong profits. Preliminary estimates suggest that total used vehicle retail transactions rose again in July. For certain, we know that CPO rose 11% during the month and 12.3% year-to-date.
In the second quarter of 2015, the seven publicly traded dealership groups posted their 24th consecutive quarterly increase in same-store retail used unit sales. The sales-weighted gain was 6.9% – the best since the fourth quarter of 2013. And, despite narrowing margins, record profits were achieved.
Rental risk prices slip again. Auction prices for rental risk units (adjusted for broad shifts in market class and mileage) declined for the fourth consecutive month in July. On a year-over-year basis, prices were down 4.3%. Unadjusted prices were down a more substantial 11.7% over the past year, and the average price slipped below $14,000 for the first time since October 2011.
Auction volumes for rental risk units in July continued to exceed their year ago level, but were in line with the pace of 2013 and 2012. New vehicle sales into rental increased less than 1% in July, resulting in a year-to-date gain of 5.9%.
Market segment and consignor segments. Pickups, SUVs, CUVs, and vans continued to have higher prices year-over-year. Luxury cars were also up, but the comparison was against weak year-ago pricing. Compact car prices were down 6.7% over the past year.
A straight average of auction pricing was up year-over-year for both commercially consigned and dealer-consigned units. During the month, the average price for dealer-consigned units defied seasonal forces and increased from June due to lower average miles.