Manheim Used Vehicle Value Index — June 2015

Whole­sale Prices Rise Slight­ly in June

Whole­sale used vehi­cle prices (on a mix-, mileage-, and sea­son­al­ly adjust­ed basis) inched up in June after declin­ing in each of the pre­vi­ous four months. This brought the Man­heim Used Vehi­cle Val­ue Index to a read­ing of 123.9 in June, which rep­re­sent­ed a decline of 0.1% from a year ago.

After peak­ing in 2011, whole­sale prices remained strong and have moved in a nar­row range ever since, despite ever-grow­ing whole­sale sup­plies. The pric­ing strength is a tes­ta­ment to sol­id retail mar­kets, greater oper­at­ing effi­cien­cies, and good remar­ket­ing prac­tices. Cur­rent whole­sale pric­ing is now in line with his­toric norms and mar­ket fun­da­men­tals; but a fur­ther accel­er­a­tion in whole­sale sup­plies plus strong sea­son­al head­winds will like­ly put down­ward pres­sure on pric­ing.

New vehi­cle sales strong, trans­ac­tion prices up. New cars and light-duty trucks sold at a sea­son­al­ly adjust­ed annu­al rate (SAAR) of 17.1 mil­lion in June, down from a 17.7 mil­lion pace in May (a month that was boost­ed by sev­er­al cal­en­dar quirks). Sim­ply elim­i­nat­ing the ques­tion­able sell­ing day adjust­ment would put the sales pace for both months on par with each oth­er.

The SAAR on a three-month mov­ing aver­age basis was 17.1 mil­lion in June, the strongest pace in near­ly a decade. Both incen­tive spend­ing and inven­to­ry lev­els remain restrained. Indeed, in June, there were more cas­es of sales’ being lost due to restrict­ed sup­plies than sales’ being arti­fi­cial­ly boost­ed by man­u­fac­tur­er chan­nel stuff­ing.

The aver­age new vehi­cle trans­ac­tion price was $33,340 in June, accord­ing to Kel­ley Blue Book. That was up 2.5% from a year ago. The rise was the result of mod­el mix shifts, high­er trim lev­els, and straight price increas­es. The government’s new vehi­cle com­po­nent of the Con­sumer Price Index, which con­trols for mix and adjusts for qual­i­ty increas­es, has risen 0.8% over the past year and 2.4% over the past three years. Giv­en that the Man­heim Index has eased over this time, the ratio between the two series has now returned to its nor­mal range.

Used vehi­cle retail mar­ket remains sol­id. Total used vehi­cle retail sales rose in both April and May, after being down in the first quar­ter, accord­ing to NADA. CPO sales con­tin­ued their record pace, with sales up 17.6% in June and 12.5% for the first half of the year. And, Car­Max report­ed that same-store used unit vol­umes were up 4.9% for its fis­cal quar­ter end­ing May 31. Ana­lysts expect the new car deal­er­ship groups to show strong used vehi­cle oper­a­tions when they report sec­ond-quar­ter results lat­er this month.

Rental risk: Old­er, rougher vehi­cles push down prices. A straight aver­age of auc­tion prices for rental risk units declined 14.2% between March and June. After adjust­ing for broad shifts in mar­ket class and mileage, the decline was a more mod­est, but still sig­nif­i­cant, 6.5%. Much of the weak­ness was the result of old­er and rougher-con­di­tion vehi­cles’ being sold. For exam­ple, in the sec­ond quar­ter of 2014, 62% of the rental risk units sold were from one mod­el year past and 23% were from two mod­el years past. But, in the sec­ond quar­ter of 2015, only 31% of sales were from one mod­el year past and 55% were from two mod­el years past. Like­wise, in the sec­ond quar­ter of 2014, 45% of the risk units sold at auc­tion had a con­di­tion grade of 4.0 or bet­ter. In the sec­ond quar­ter of 2015, only 30% did.

Auc­tion vol­umes for rental risk units were up sig­nif­i­cant­ly in June and for the first half of the year. Mean­while, the num­ber of new units sold into rental declined 6% in June (due to a sig­nif­i­cant reduc­tion in GM deliv­er­ies), but were up 6.5% year-to-date.

Many deal­ers will no doubt like the near $2,000 reduc­tion in the aver­age auc­tion price for a rental risk over the past two months, as it will allow them to great­ly expand the cus­tomer base that they can get into a late-mod­el used vehi­cle. But, of course, deal­ers will be suc­cess­ful only if they can com­plete the addi­tion­al recon­di­tion­ing work quick­ly and cost-effec­tive­ly.

Mar­ket seg­ment and price tier trends. Pick­ups and vans were the only two major seg­ments with high­er prices year-over-year. With­in the van seg­ment, full-size com­mer­cial pas­sen­ger units and car­go vans were espe­cial­ly strong.

With­in the pric­ing tiers, as has been the case all year, there was weak­ness in the $9,000 to $11,000 range and strength in every­thing above $15,000. The vol­ume of vehi­cles offered in the $9,000 to $11,000 range was up con­sid­er­ably from a year ago.

A straight aver­age of auc­tion pric­ing was up year-over-year for both com­mer­cial­ly con­signed and deal­er-con­signed units. The aver­age mileage for deal­er-con­signed has stayed close to its year-ago lev­el. The aver­age mileage on com­mer­cial­ly con­signed units has declined.


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