It’s all the talk of the auction lanes, wholesale channels and dealership staff meetings nowadays: Tax season. And the situation also pushed February’s Manheim Used Vehicle Value Index reading 1.1 percent higher versus a year ago.

Manheim calculated that wholesale used-vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) rose 0.8 percent in February, lifting the index reading to 123.3.

“A surge in individual income tax refund disbursements in late January and early February played a role in propping up wholesale values last month,” Manheim chief economist Tom Webb said.

Prices associated with four of the six vehicle segments Manheim tracks monthly climbed higher in February with pickup prices leading the way by charging 7.5 percent higher year-over-year.

Manheim indicated van prices moved 2.8 percent in February with prices for midsize cars not far off with a jump of 2.6 percent. Prices for crossovers and SUVs ticked up marginally year-over-year in February, rising by 0.3 percent

Meanwhile, Manheim indicated compact car prices softened the most of any segment, declining 3.1 percent. Prices for luxury cars also was off in February, dipping by 1.9 percent year-over-year.

“Compact car pricing in the wholesale market remained very much a dogfight due to ample supplies and competitive pricing in the new-vehicle marketplace. Pickups remained in high demand in the wholesale market, and there was less-than-adequate supply,” Webb said.

“In February, lower-priced units sold very well at auction due, no doubt, to that influx of tax refunds. There was some weakness in units’ wholesaling for more than $20,000 — but, as always, that was very much make- and model-specific,” he continued.

Webb also mentioned rental risk unit pricing came in mixed last month.

“When measured as a straight average, rental risk prices were down from a year ago, but up relative to January,” Webb said. “After basic adjustment for mix and mileage, off-rental prices were up both year-over-year and sequentially.

“Average mileage on off-rental units sold at auction reached an all-time high of more than 42,300 miles in February. That reflects in part, a delayed defleeting and slow fleet deliveries on new units into the rental fleet,” he added.

Used-Sales Performance in February

Returning to the theme of tax season, Webb emphasized that February’s used retail sales performance was better than the unit numbers suggest.

According to CNW Research, total used unit retail sales declined 1.3 percent in February with dealer sales down 2.3 percent. That movement left dealer retail unit sales down 0.6 percent for the year.

“Despite slightly lower unit volumes industrywide, our dealer contacts still report that profits are on the rise, as throughput per store is higher and margins are stabilizing. And, CPO sales in the first two months of 2014 were up 12.3 percent,” Webb said.

“In addition, readily available retail financing (at attractive terms) made the used-vehicle retail market more profitable than the underlying unit sale numbers would suggest,” he continued.

Update on Tax Refunds

Based on his research, Webb contends that tax refunds are swelling above last year’s delayed disbursements.

By the middle of February, Webb indicated the IRS had processed 38.4 million tax returns, of which 31.3 million entailed refunds. He pointed out the dollar amount of those refunds totaled $100.5 billion, an increase of 23 percent from the year-ago pace that was depressed by delayed processing.

“Auctions saw strong wholesale pricing in all of the lower price tiers as a result of these swelling refunds,” Webb said. “It was, however, simply a timing issue.”

Webb explained his pointed by stating that in the third week of February, tax refunds slipped below their year-ago level.

“And full-year 2014 refunds are not expected to be abnormally high,” Webb said.

Nevertheless, Webb cited federal data that showed year-to-date refunds through Feb. 21 reached 40.4 million (up 6.2 percent from 2013). The dollar amount was $125.8 billion (up 10.6 percent year-over-year), and the average refund was $3,112 (4.2 percent than a year ago).

New-Vehicle Sales Commentary

Webb acknowledged that February new-vehicle sales came in disappointing again.

Webb indicated new car and light-duty trucks sold at a seasonally adjusted annual rate of 15.3 million in February, which brought the three-month moving average to that same level, “and — as we cautioned last month — below the 12-month rolling total. That’s usually not a good sign.”

The Manheim economist paused and said, “But, again, weather and delayed fleet deliveries were a significant factor. This will increase the pressure on manufacturers to push sales in the months ahead. Incentives were already picking up in late February; but they were mostly selective and were still down relative to average transaction prices, which continue to rise.”

All of those expectations led Webb to make one last point.

“With new-vehicle sales, incentives, fleet deliveries, and wholesale supplies now expected to grow after a weather-induced hiatus, some pressure on residual values should be expected,” Webb said. “The easing, however, will be moderated by what promises to be a continued healthy used-vehicle retail market.”