OPENLANE: Wholesale Pricing Relief Not Expected Soon

Thanksgiving dinner might be on the table at about the same time OPENLANE expects significant wholesale price declines.

As the May OPENLANE Market Index hit 110 — the fourth time it’s been at this level or higher in the past two years — predictions about it receding anytime soon didn’t come from Nagi Palle, OPENLANE’s vice president of analytics.

Palle shared with Auto Remarketing Thursday that, “Typically you should see a falloff in some of the prices as we get into late fall and fourth quarter. I think that’s where opinion is a bit uncertain.

“What we expect is pricing to remain strong,” Palle continued. “I look at used-car retail volumes and they’re almost dead on in terms of past years. I think there’s a feeling that the used-car market is stronger than it is. But when you actually look at the numbers, the market is pretty stable; maybe it goes up or down a percentage point.

“But the wholesale supply is down significantly, so we expect wholesale prices to remain pretty strong over the next few months,” Palle went on to say.

After sliding between January and March, OPENLANE’s index reading has been on an upward climb since, settling just 1 point below its all-time high of 111 established in both September and December of last year.

“The summer months are always strong in the wholesale business due primarily to the retail market, but our OPENLANE Index is as high as it’s been in while,” Palle acknowledged.

“Over a two-year trend, prices are up about 14 to 15 percent, which is pretty significant,” he added.

Price Movement by Vehicle Segment

Moving along with May’s report, OPENLANE determined car prices increased last month, ending 3 percentage points above April of last year.

Contained within that segment, Palle told Auto Remarketing what dealers are experiencing: Prices for compact and fuel-efficient models are “through the roof. That’s what’s driving the price variance right now.”

But like overall wholesale prices, Palle doesn’t think compact cars can keep going on the path they’ve traveled the past two months, a journey that’s pushed wholesale prices more than 10 percent higher in response to fuel costs.

“When a segment goes up 10 or 12 percent in pricing, that’s always a bit of an anomaly, It’s not sustainable,” Palle insisted. “It’s not like a small car is always going to be worth 10 percent more than it was two months ago. Eventually it settles down.”

Two segments OPENLANE tracks moved little if at all in May.

Palle said minivan prices increased slightly, up 1 percentage point from April levels, while SUV prices were flat in May, ending even with April.

However, the segment that dropped — trucks — slipped by 1 percentage point from the prior month, extending a downward slope that’s been fairly consistent since May of last year.

“The truck market has really been hammered,” Palle began. “Fuel prices have clearly had an impact, but it speaks to the larger macroeconomic environment which relates to infrastructure spending and construction.