Even as tax season came to a close, prompting predictions of used-car value drops, Manheim reported Tuesday there was actually an increase in used-vehicle values in the second quarter.

The driver? Consumer demand, says Manheim analysts.

“Strong consumer demand drove an increase in volume and values for used vehicles in the second quarter as attractive financing put purchases within reach of more consumers,” the company reported.

The change was illustrated in the 1-percent spike in the Manheim Used Vehicle Value Index in the second quarter versus Q1 rates.

This translated to a 3.6-percent rise in the index year-over-year.

"While the overall economic picture has been cloudy at times this year, the automotive market has been a consistent bright spot," said Tom Webb, Manheim chief economist. "Consumers may have trouble qualifying for a home loan under today's mortgage requirements, but they have the credit and resources to purchase a car. These favorable auto lending conditions show no signs of letting up in the short-term and should help the used-car market."

Webb explained that the auto market has continued to lead economic recovery in the country, and strong retail demand and favorable credit conditions have continued to support used-car sales and dealer profits — a healthy market environment that has contributed to spikes in used values, even as used supply expands.

These conditions have also led to a change in the market “sweet spot,” Webb explained.

In June, the strongest pricing and lowest relative supply of vehicles in the wholesale market was in the $12,000 to $15,000 price range, according to Manheim data.

Last year, and in early 2014, the strongest pricing was often found in the $8,000 to $10,000 price range, he said.

Breaking it Down by Segment

Looking at wholesale price movement by segment in Q2, pick-ups and vans continued to see the strongest price retention rates.

According to Manheim, this strength has been driven mostly by demand from consumers and businesses for work vehicles, as construction rates continue to rise.

Prices were up 7.5 percent for pickups and 6.8 percent for vans during Q2 on year-over-year basis.

The larger segments continued to lead the pack, as the SUV and CUVs also saw spikes in values in Q2. These segments saw prices increase 2.5 percent over the year-ago period.

Webb contributed the price spike in compact and midsize CUVs to consumers who are looking for vehicles with both space and high fuel efficiency.  

Interestingly, one segment that has underperformed this year showed a bit of an improvement in Q2 — perhaps due to rising gas prices.

Compact cars ended June with prices up 3.9 percent year-over-year.

On the other hand, luxury cars showed signs of weakness this past quarter, falling 0.8 percent year-over-year.

It seems this segment is seeing the effects of expanding supply, as well as strong incentives, which are both putting downward pressure on prices.

Lastly, midsize cars — the largest segment of the market — showed a bit of a decline from Q1 tax season values, but prices are still up 4.8 percent from the year-ago period, according to Manheim data.

Supply to Push Prices Down

Though consumer interest may be driving up prices, the trend is not expected to last.

Many have been waiting for expanding used supply, driven by an increase in off-lease vehicles at auction, to push used-car rates down.

According to Manheim’s Webb, it won’t be long.

"An increase in supply of wholesale vehicles will inevitably put downward pressure on pricing," Webb said. "Used-vehicle values shouldn't fall off a cliff, but they likely will decline the rest of the year. This easing of prices should be modest and not disruptive to the efficient functioning of the market."

Besides expanding supply, Q3 is traditionally a slower time for activity on the lots as dealers and manufacturers make way for new models.

Webb also pointed out a longer-than-normal delay this year from rental companies means many of these units will make it into the lanes this summer, also serving to push used prices down a bit.

Editor's Note: Stay tuned to Thursday's Auto Remarketing Today for more insight on Q1 auction price movement from Manheim's Tom Webb.