Like KAR Auction Services noticed as well, both Cox Automotive and J.D. Power Valuation Services are watching closely how Hurricanes Harvey and Irma are impacting used-vehicle prices in September. And evidence is prompting analysts to modify their expectations for where the price readings might be by the end of the month.
According to a note shared with Auto Remarketing, Cox Automotive chief economist Jonathan Smoke is already seeing early indicators that would push the Manheim Used Vehicle Value Index to a fifth straight record high. Smoke noted that prices are on pace to be 3 percent higher on a sequential basis and 6 percent above the year-ago reading.
“These are significant increases,” Smoke said. “If the pattern holds for the rest of September, we will be seeing the strongest annual price gains since 2010, when the economic recovery was beginning, and used car supply was severely limited.
“All seven light-vehicle segments are seeing price gains month-to-month and year-over-year. Even lowly midsize sedans, which have been seeing price declines for 10-straight months, are seeing gains this month,” he added.
Meanwhile, the team at J.D. Power Valuation Services highlighted in the September issue of Guidelines that wholesale prices of vehicles up to 8 years in age are expected to decline by approximately 1.8 percent this month; much less than the 3.4 percent drop analysts recorded in September of last year.
Before the storms ripped through Texas and Florida, J.D. Power Valuation Services indicated that its September expectations included a 2.8-percent price dip with projected demand prompting analysts to make an adjustment.
“The impact of recent hurricane activity has affected the market for new and used vehicles in the United States,” analysts said in the report. “We have updated our September 2017 values to better reflect current market conditions.”
“While estimates of the number of vehicles damaged by Hurricanes Harvey and Irma have a large range, it is clear the reduction in vehicle supply and the accompanying demand for replacements is significantly large. As a result the used-vehicle market will be affected,” they continued.
Analysts added that they are “monitoring this situation closely. Based on previous corollary events, we are implementing adjustments to our forecasts for values in September and October and potentially further into the future.”
As far as September goes, J.D. Power Valuation Services still thinks car losses are expected to outpace softening of prices of trucks and SUVs.
“Midsize and large pickups continue to perform very well and are forecast to outperform the industry average,” the report noted. “Losses for all premium segments are forecast to fall by slightly more than the industry average for the month.”
And as the industry moves deeper into fall with the ramifications of Harvey and Irma in play, J.D. Power Valuation Services reflected back on Superstorm Sandy (October 2012) and Hurricane Katrina (August 2005), noting how each storm trigged moderate and brief increases in used-vehicle values that “are not readily explained by coincidental economic factors.”
Analysts went on to say in the report, “The historical corollaries suggest the impact will dissipate after three to four months. Additional updates will be provided regarding adjustments in the future based on all available information and analysis.”
August price analysis
In the same installment of Guidelines, J.D. Power Valuation Services reported that wholesale prices of vehicles up to 8 years in age softened by 1.2 percent in August. Looking back over the past five years, price declines averaged 2.2 percent during August.
As a result of the latest movement, J.D. Power Valuation Services’ Seasonally Adjusted Used Vehicle Price Index rose by 1.1 percent to 111.5; the largest index climb since May of last year.
Looking at segments, large cars led the price declines, softening by 2.6 percent and falling in line with the average decrease of 2.4 percent analysts spotted during the past five years.
Midsize van values dipped by 2.1 percent in August with decreases for compact and midsize utilities both coming in at 1.3 percent.
On the premium side of the market, the report mentioned losses for luxury large utilities (down 2.3 percent) and luxury midsize cars (down 2.2 percent) led the way. However, analysts spotted a 0.4 percent uptick for luxury large cars, the first positive August movement for this segment since 1998.