Only twice since 1997 has the analyst team at J.D. Power Valuation Services seen February wholesale prices move this way.

According to the latest Guidelines report and in a reversal of what typically occurs in February, J.D. Power indicated wholesale prices of used vehicles up to 8 years old fell “substantially” last month, dropping 1.6 percent compared to January.

The report noted the decline was counter to the 1-percent increase expected for the month and marked just the second time in the past 20 years prices fell in February. The other instance came a year ago, and the dip was just a “scant” 0.2 percent.

NADA Used Car Guide’s seasonally adjusted used vehicle price index fell for the eighth straight month, declining 3.8 percent from January to 110.1. Analysts noticed the drop was by far the worst recorded for any month since November 2008 as the result of a recession-related 5.6 percent tumble.

Analysts also mentioned February’s index figure was 8 percent below the year-ago reading of 119.4, representing the index’s lowest level since September 2010.

“February’s outsized drop is likely due to a variety of factors,” analysts said via Guidelines. “Manufacturers dialed up incentive spending 18 percent last month to help reduce new vehicle inventory levels that are at a decade-plus high.

“In addition, late-model auction sales volume (vehicles up to 3 years old) continued to move higher, rising by 6 percent versus the four-week period ending Jan. 30,” they continued. “Finally, federal tax refunds — which historically support demand and thus pricing through a given first quarter — haven’t been distributed quickly compared to past years.”

As referenced by Cox Automotive chief economist Tom Webb as well, the delay stems from new laws requiring the Internal Revenue Service to withhold refunds claiming the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) until mid-February, with the hold applying to the entire refund and not just the portion associated with the credits.

“The IRS cautioned EITC and ACTC filers that refunds wouldn’t start arriving in bank accounts until the week of Feb. 27,” J.D. Power said. “Checks would take longer to receive, of course.”

Per the IRS, the total number of refunds issued through Feb. 10 was nearly 52 percent lower than over the same period last year while the total amount distributed fell from $94 billion to $29 billion, a drop-off of 69 percent.

The situation was much better by the week of Feb. 24, however, as total refund numbers and amounts were still down by 11 percent and 10.5 percent, respectively.

“The sizable sum of disposable income sidelined in February logically played a role in pinching used vehicle demand over the month,” analysts said.

At the segment level, J.D. Power determined mainstream segment prices were “almost universally” softer than what is typical for February.

Dropping 2.1 percent, analysts said prices for the “ailing” subcompact car segment fell most among non-luxury vehicles, while large utility prices decreased 1.9 percent.

“While subcompact car price weakness is a running trend, it appears softer large utility prices are developing into one as well,” J.D. Power said via Guidelines. “Following several years of relative strength, the large utility segment has turned in subpar performances in five of the past seven months.”

Analysts also pointed out that compact and midsize utility prices were also “weak,” falling an average of 1.6 percent or about 1-percentage point worse than what occurred last year. Compact and midsize cars, two segments whose prices normally firm up most over the first quarter, experienced a 1.5-percent decline on average, according to the report.

As has been the case for numerous months, analysts found that midsize and large pickup prices slipped by roughly 0.5 percent last month, the least in the industry.

J.D. Power went on to mention luxury segment losses were bookended by the luxury large car segment’s 3.1-percent drop and the luxury midsize utility segment’s 0.9 percent decline.

“Overall, luxury segment losses were generally in line with what occurred during the month the past few years,” analysts said.

So what price trends could develop in March? J.D. Power closed its segment on pricing in the latest installment of Guidelines by looking ahead.

“February’s unusually soft showing makes pinpointing where used prices will go over the next few months a bit more challenging. However, given the slower than usual rollout of federal tax refunds, it’s assumed prices will be somewhat stronger in March and April than originally anticipated,” analysts said.

For March, J.D. Power predicted prices of vehicles up to 8 years in age should increase by approximately 2.5 percent and then decline by 1 percent in April. Expectations are roughly 1-percentage point better than last month’s forecast.

“Across segments, mainstream car prices should rise close to the industry average in March with mainstream truck and utility increases slightly less,” analysts added. “Luxury segment prices are expected to rise by an average of 1 percent to 1.5 percent over the month.”

Director of market intelligence Larry Dixon elaborated about these points further in the video available here and at the top of this page.