When it comes to used-car prices, the sky might not be falling after all, if indications from a Manheim report bear out.
The auction company’s index measuring used-car prices increased for the first time all year, and the used retail market buzzes along at a solid clip.
The Manheim Used Vehicle Value Index came in at 124.7 in April, which was up 1.6 percent year-over-year. According to a report accompanying the index, wholesale prices climbed 0.5 percent from March on a mix-, mileage- and seasonally adjusted basis.
In an analysis accompanying the index, Cox Automotive chief economist Tom Webb downplayed the concern many analysts have expressed about used-car price declines.
“Although the Manheim Used Vehicle Value Index increased for the first time this year on a month-over-month basis, used-vehicle values have not collapsed the way many analysts have warned of for more than a year due to expected increases in wholesale supplies,” Webb said. “And in fact, what weakness we have seen is probably more a result of excessive new-vehicle inventory, not used.”
Edmunds executive director of industry analysis Jessica Caldwell echoed some of that new-car inventory concern in monthly sales day comments provided by the company.
“We’re seeing a dramatic lag in the 2016 model-year selldown. In April, 8 percent of vehicles sold were 2016 models, up from only 3 percent five years ago,” Caldwell said. “Inventory buildup is a top concern of automakers and all eyes are on whether cuts in production are enough to offset expected dips in sales.”
Black Book index shows rare gain, too
Another one of the indices measuring wholesale vehicle values has seen its first increase in 27 months.
While the April reading of Black Book’s Used Vehicle Retention Index (113.1) was just a hair above March’s (113.0), it’s at least a temporary pause to the gradual downturn that has been ongoing since January 2015.
The index, which is based on Black Book wholesale average values on 2- to 6-year-old vehicles, was at 126.8 that month before sliding for more than two years.
“April saw stronger seasonality trends than what we had been seeing during the last few spring seasons,” Black Book’s Anil Goyal said in a news release accompanying the monthly Used Vehicle Retention Index.
“There certainly remains a growing concern over rising supply levels, which typically leads to higher depreciation, but with prices on some segments seeing better value, consumers may be more willing to consider used vehicles in some key car segments.”
Spring has been more robust than anticipated, and the strength in car retention has been encouraging, says a spokesperson for the company via email when asked for Goyal's take on whether April was temporary relief or an encouraging sign.
However, prices are likely to move back into the usual summer depreciation, the spokesperson said.
Used-car retail appears strong
Moving over to retail, Webb — citing data from NADA — said that used-vehicle retail sales (including private sales) climbed 3.6 percent in the first quarter, with dealer sales up even more (5 percent for franchised, 5 percent for independents).
It appears April continued the momentum, based on Cox Automotive’s “channel checks.”
In late April, Edmunds was forecasting 3.6 million used-car sales for the month, up from 3.4 million in March, with a SAAR of 38.4 million for both months.
Meanwhile, ALG was forecasting 3.32 million used-car sales for April, which would have been off 0.8 percent year-over-year.