Webb: Tight Wholesale Market & Climbing Prices Push Manheim Index to New High

ATLANTA - 

For the second time already this year, the Manheim Used Vehicle Value Index reached a record high.

Manheim’s Tom Webb explained wholesale used-vehicle prices on a mix, mileage, and seasonally adjusted basis rose 1.9 percent in April against the previous month, leaving the index reading at 126.6. During the past year, Webb calculated adjusted wholesale prices have risen 4.9 percent.

The index opened 2011 at its previous high, 124.9. After a dip in February, the reading began another upward climb.

“Lower wholesale supplies and higher retail demand continue to be the driving forces behind strong used-vehicle residuals,” Webb surmised.

“In addition, wholesale used-vehicle prices are also now being supported by the new-vehicle market’s tight inventories, steady demand and higher net transaction prices,” he continued.

Premium Price for Fuel-Efficient Models

As any dealer who is scouring the lanes is readily seeing, prices for compact and midsize cars are escalating.

Manheim determined year-over-year price jumps by these two car segments far outdistanced the overall wholesale market rise. Midsize car prices are 13.3 percent higher, while compact models are up 17.7 percent.

“April’s wholesale market reflected an accelerating shift toward the fuel-efficient market classes and increased premiums being paid for by higher fuel-efficiency within a given model lineup,” Webb explained.

“On a year-over-year basis, almost all compact and midsize cars have experienced double-digit price increases, while full-size SUVs and pickups have shown price declines,” he continued.

Manheim pinpointed these declines at 2.7 percent for pickups and 3.5 percent for SUVs.

“Over the past six months, the divergence has been even more startling,” Webb went on to note. “Compact and midsize cars are up more than 60 percent (annualized), while large SUVs and pickups are up less than 5 percent.”

Also of note, the other two vehicle segments Manheim tracks made year-over-year price climbs in April. Van prices are up 2.4 percent, while luxury cars eked out a 0.8-percent price uptick.

Broad Consignor Segment Price Strength

Along with discussing prices by vehicle segment, Webb also shared how all consignor categories are showing strong wholesale pricing, too.

Manheim reiterated average auction prices for rental risk units and midsize end-of-service fleet cars each set records in March by surpassing the $14,000 and $10,000 levels, respectively. In April, the auction company determined their adjusted prices retreated slightly but were still at their second-highest levels ever.

Webb also pointed out average auction prices for dealer-consigned vehicles have set new records in each of the past three months.

More Details about Recent Used-Vehicle Trends

As reported previously by Auto Remarketing, Webb mentioned how the National Auto Auction Association indicated total auction sales declined 8.6 percent in the first quarter of 2011.

“April was expected to show another decline but at a smaller percentage,” the Manheim economist stressed.

“The reduced auction volume has come solely from the commercial consignor side, as dealer consignment is up by double-digits — but these are often older, higher-mileage units,” Webb continued.

At the same time that wholesale volumes have fallen, Webb pointed out retail demand has spiked.

Total dealer used-vehicle sales were up 10 percent in the first four months of 2011 and up 14 percent in April alone, according to CNW Research. Webb also stressed that certified pre-owned sales are on pace to set a new record this year.

“And, the seven publicly traded dealership groups have recorded five consecutive quarters of double-digit growth in same-store used vehicle sales,” Webb pointed out.

Steady Sales but Shrinking New-Vehicle Inventories

In April, Webb recapped that new vehicles sold at a seasonally adjusted annual rate of 13.1 million.

“Some retrenchment in the sales pace due to supply disruptions will likely occur next month and into late summer, but economic fundamentals still support our full-year forecast of 13.1 million,” Webb asserted.

Manheim indicated new-vehicle inventories stood at a 46-day supply at the beginning of April, but the count for May 1 has yet to be released.

“It likely will tighten,” Webb projected. “As we move into summer, we expect that a growing number of models will fall below the 25- or 30-day mark.

“Tight inventories, plus higher prices for energy and commodities, have led several manufacturers to increase sticker prices,” Webb went on to say. “And with discounts down and consumers opting for higher-contented vehicles, net transaction prices have risen even faster,  in spite of the overall shift from light trucks to cars.”

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