Marginal Dec. price uptick closes stable stretch

ATLANTA - 

From at least a mathematician’s perspective, 2016 closed with Manheim noticing the least amount of volatility since the auction company created the Manheim Used Vehicle Value Index more than 20 years ago.

Manheim reported on Monday that wholesale used-vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) increased by 0.2 percent in December, which brought the index reading to 124.9. The mark represented a decline of 0.6 percent from a year ago.

Cox Automotive chief economist Tom Webb combined both high-level math with other bits of analysis to explain why wholesale prices finished the year on that trend.

“Despite significant increases in auction volumes in 2016, wholesale pricing was firm. On an annual average basis, the Manheim Index was even able to eke out a small gain of 0.3 percent, the third increase in a row,” Webb said.

“The most notable aspect of wholesale pricing in recent years has been the stability,” he continued. “After a sharp rise in wholesale pricing in 2009 and 2010 coming out of the recession, the absolute year-over-year change in pricing was less than 2 percentage points in each of the last six years.  Statistically speaking, this period has shown the least volatility in wholesale vehicle pricing since the Manheim Index’s inception in 1995.

“In addition to macro-economic and industry factors, this stability has been driven by better, and more efficient, remarketing practices that have enabled commercial consignors to anticipate, respond to, and, thus, minimize impending swings in wholesale pricing,” Webb said.

Looking deeper at price movements by vehicle segment, Manheim noticed pickups posted the only year-over-year price rise in December, moving up by 4.3 percent.

Prices for units in four other segments softened year-over-year in December as Manheim reported declines for luxury cars (down 0.8 percent), SUVs and CUVs (down 1.2 percent), midsize cars (down 3.7 percent) and compact cars (down 5.3 percent).

As for vans, Manheim said prices for those units remained unchanged in December when compared to a year earlier.

“Although overall wholesale prices have been very stable of late (a movement of only 1.2 percent over the past four years), the differences between market classes have been pronounced,” Webb said. “At the extremes, adjusted wholesale prices for pickups have risen 28 percent during this period, while compact car values fell 14 percent.

“Blame it on the tremendous consumer preference shift toward crossovers and away from small sedans,” he continued. “On the new-vehicle side, flexible production capacity enabled manufacturers to better adjust to this shift than in past cycles. 

“As a result, the share of new-vehicle sales accounted for by ‘trucks’ was more than 60 percent in 2016, up from only 45 percent in 2009,” Webb added.

So what do those trends mean for smaller units?

“Of course, the ‘production of used vehicles’ (i.e., past new-vehicle sales) can’t be adjusted,” Webb said. “As a result, the supply of used compact cars has been higher than what consumers demanded in recent years, and as a consequence, residuals suffered.”

Editor’s note: Watch for upcoming reports this week from both Auto Remarketing and SubPrime Auto Finance News as Webb shared more insights about the current state of the market and what might happen later in 2017.

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