Managing the Financial Side of Commercial Fleets

Manheim: Used-Car Reports Signal Stability

April 10, 2017

Photo of 2014 Ram 1500 courtesy of FCA.
Photo of 2014 Ram 1500 courtesy of FCA.

Analysis of first-quarter sales reports signals stability in used-car values heading into the second quarter of 2017, according to Manheim. While wholesale used-vehicle prices declined by 0.5% in March, the Manheim Used Vehicle Value Index — a measure of wholesale prices adjusted for mix, mileage and season — came to a reading of 124.1. This is an increase of 1.3% from a year ago.

“While used-vehicle values have declined in five of the last six months, it has not been the collapse that many analysts have warned [of] for more than a year due to increasing wholesale supplies,” said Tom Webb, chief economist for Cox Automotive. “On the contrary, the used-vehicle market remains healthy while any weakness we’ve witnessed is overall due to an excessive new-vehicle inventory — not used.”

Pointing to the continued stability of the market regarding used-vehicle retail sales, total used retail sales in January and February — including private-party transactions — were up 5%. Growing on this strength, franchised dealer sales were up 6% and independent sales were up 7%, according to the National Automobile Dealers Association (NADA). Additionally, the credit and lending environment remains favorable.

Despite the continued overall stability, the new-vehicle environment continues to pressure used-vehicle values, and franchise dealers started both February and March with more than four million new units in stock. A variety of major incentives were applied to that inventory in February and the industry achieved a seasonally adjusted annual selling rate (SAAR) of 17.5 million. Available incentives were just as large in March, but sales slowed and resulted in a SAAR of 16.5 million — the lowest in just over two years.

For used-vehicle pricing trends, all car segments — except for truck segments — were down from a year ago. First quarter wholesale pricing for all vehicle segments included: 

  • Compact car prices, typically one of the weakest segments, experienced some relative strength in comparison to the other car classes and were down a modest 0.9%.
  • Midsize cars once again surfaced as one of the weaker segments compared with last year and had a decline of 1.6%. 
  • SUVs and CUVs increased 1.4% from last March and again remain weaker than the overall market. 
  • Pickups had the most significant increase of all car classes with an increase of 6.7% over a year ago, while vans saw a more modest increase of 3.9%.
  • Luxury cars represented the biggest decrease of all classes, dipping 1.8% over last year.

A straight average of auction pricing for rental risk units in March was up 3.5% from a year ago, reflecting a better mix of market classes and lower mileage. Representing a 10% decrease from this time last year, average mileage came in at 33,600 for rental risk units. SUVs and CUVs accounted for 33% of rental risk sales in March versus only 25% last year. The share accounted for compact cars fell from 29% to 25%. 

“Even when compared to last year’s high level, rental risk volumes sold at auction in the first quarter were up considerably,” Webb said. “This year’s off-rental volume was primarily due to fleet rationalization unlike last year’s high number of new units entering the fleet and, as such, off-rental auction volumes may weaken later in the year.”

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