NADA Used Car Guide Making Unprecedented Value Adjustments in View of Long-Term Market

By Joe Overby, Staff Writer
September 17, 2009

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McLEAN, Va. — During the first week of September, auction prices across the board were ahead of their August levels, according to NADA Used Car Guide, which also indicated that the coming month will likely show increased firming in wholesale values.

Specifically, through September's first week, the auction prices of cars, CUVs, SUVs and vans grew by just less than 1.5 percent each from August, while pickup-truck prices climbed slightly more than 1 percent, according to AuctionNet data.

"NADA is making unprecedented adjustments in select vehicle segments in response to what we believe to be a long-term repositioning of wholesale and retail market prices," officials explained. "Expect to see significant upward value adjustments in the October edition of the NADA Used Car Guide."

And although automakers are expected to boost production during the fourth quarter to replace units sold under CARS, NADA Used Car Guide said that OEMs will continue to show discipline in new-model production, be judicious with incentives and cut back on the number of units sold to rental/commercial fleets.

"These fundamental drivers stabilize used-vehicle prices by way of reducing supply and alleviating pricing pressure on used units," analysts shared.

NADA Used Car Guide expects that values of most segments will be static or up moderately for the rest of 2009.

Analysts said they based this prediction on the previously mentioned factors (disciplined new-model production, limited incentives, fleet sales reduction) as well as "decreased demand for new units and the continued availability of inexpensive fuel."

Looking at year-over-year AuctionNet price changes, SUVs showed the most improvement, as their values were up just over 30 percent. Pickups were close behind with a price jump of approximately 30 percent, while CUVs climbed roughly 15 percent and vans improved more than 10 percent.

Meanwhile, car prices remained flat compared to August 2008.

"Wholesale supply shortages due to decreased lease volume and vehicle trade-ins, as well as elevated dealer demand, have kept used vehicle prices at auction steady or have increased prices for many NADA segments," officials pointed out.

Wholesale Market Volatility

Continuing on, analysts also shared NADA's Weekly Historical Volatility Measure, which looks at price volatility and risk.

Basically, the HVM describes the amount of transaction price changes in given segments on a weekly basis, provides a picture as to how volatile averages are, and offers a projection of how values may change in the coming weeks.

During the first week of September, the most volatile wholesale segment were large SUVs, which had an HVM of 15.3 percent, followed by large pickups and compact CUVs at 12.7 percent each.

Intermediate compacts had an HVM of 12.4 percent, intermediate large vehicles were at 11.4 percent, luxury large vehicles were rated at 11.3 percent and mid-size vans were at 10.2 percent.

The industry average was 9.6 percent.

On the opposite end of the spectrum, premium luxury large units had the lowest wholesale volatility with an HVM of 4.9 percent. Also below the industry average were mid-size CUVs (6.5 percent), intermediate mid-size units (6.9 percent) and luxury large SUVs (7.2 percent).

Used-Retail Sales Begin to Climb

On the retail side of the used-vehicle market, after months of year-over-year declines in 2009, used sales have finally started to show improvements over 2008. Through July, used retail unit sales have climbed year-over-year for three consecutive months.

"While consumer demand for used vehicles and used retail prices have not shown the same degree of strength as on the wholesale side, directionally the trend is still positive," analysts pointed out.

"Wholesale market strength began in the first quarter of 2009," they continued. "However it was not until the middle of the third quarter that this strength carried over into the retail environment."

Auction/Wholesale