Investment observers asked Cox Automotive economist Tom Webb why wholesale prices aren’t softening, given how volume is on an upward track and likely to gain steam next year when even more off-lease units fill the lanes.

Webb countered by sharing not only what’s going within showrooms, but also moves by used-car managers at both physical and online auctions to explain why steady and perhaps slowly rising wholesale prices are likely to be the norm for the foreseeable future.

The inquiries came since the Manheim Used Vehicle Value Index moved up 2.8 percent in September, marking the fourth month in a row in of a year-over-year uptick. During his opening comments of his latest quarterly conference call, Webb said that if prices bounced up and down significantly, only one small faction of the industry might benefit. And Webb said that group only would be wholesalers if “they do it right.”

Webb then looked to distinguish dealers on Main Street from stockbrokers on Wall Street.

“Most dealers are not speculating on what used prices are going to do,” Webb said. “They’re interested in what they are and they have to live with that.

“If there is a significant erosion in pricing in the wholesale market shortly after they make a purchase it’s not a good thing,” he continued. “But it’s not that much better if they suddenly accelerate and they could say they should have bought more.”

No matter how many vehicles dealers want to include in their inventory, they’re likely to find lots of choices, especially since Webb is thinking off-lease volume might surge beyond 3 million units next year.

“Again, those off-lease numbers are big,” Webb said. “Those 3 million vehicles have to be sold. They will be sold and then they have to be retailed and retailed at a profit.

“We have a certain number of vehicles that have to change hands in the wholesale market regardless of whether there’s demand there or not,” he continued. “The pricing has to adjust. I would say the key factor is helping used-vehicle prices overall is the ability of the dealer to subsequently retail that unit in short order at a profit. All of that has remained favorable.

“That’s why I would continue to suggest that you wouldn’t have any significant collapse in pricing. Sure, there might be some downward pressure on pricing, but no collapse as long as the retail environment remains favorable,” Webb continued.

And Webb said the environment remains favorable, especially for certified pre-owned sales where much of that off-lease volume is likely to land. CPO sales continue to be strong, aided in part by what Webb described as a consumer financing market “that is as good as it’s ever been.”

The other component to wholesale price stability that Webb mentioned is how dealership are leveraging inventory management technology. Of course, Cox Automotive has its offerings from Manheim, vAuto and segments of the company. DealerSocket enhanced its inventory management solution when it acquired Inventory+ from Dealertrack Technologies this year.

And CarMax recently described how inventory management is placing the company into a better position to thrive with more off-lease units available.

“The inventory management tools have been out there for some time, but initially they were totally adopted by used-car managers,” Webb said. “Almost all dealers are taking a much more analytical approach in terms what they acquire, how they acquire and the prices they’re willing to pay and also the price they’re willing to put on it at retail, too.

“They’ve become much better at all of that. So to the extent that you can go out there with more confidence that you’re going to earn a given gross in a given amount of time, the amount of what I would call risk premium that you have to put into your auction bid gets reduced,” Webb went on to say.