Why March used-car market sounded like Dickens book title


CARMEL, Ind. - 

KAR Auction Services chief economist Tom Kontos didn’t quote A Tale of Two Cities in his latest commentary about the wholesale market.

But Kontos did make a play on words similar to the novel by Charles Dickens, saying “the tale of two markets resumed in March.”

According to ADESA Analytical Services’ monthly analysis of wholesale prices by vehicle model class, Kontos indicated wholesale  prices in March averaged $10,904 — up 2.0 percent compared to February and up 1.0 percent relative to March of last year.

Kontos noted that all but one model class segment (compact pickups) showed month-over-month increases. He reiterated the year-over-year growth in minivan prices is exaggerated by newer models as discussed in January’s report.

The reason for saying March was a “tale of two markets,” Kontos explained in his latest Kontos Kommentary released on Thursday that wholesale prices were below year-ago levels for cars and above prior year for trucks. 

“Nevertheless, both groups showed price increases versus February’s unseasonably soft results, as retail sales and wholesale activity showed signs of the traditional spring/tax season market typical for used vehicles,” he continued.

Kontos elaborated about the wholesale market by going back to another of his descriptive words that a good author might use — bifurcated. He use the word meaning a split into two branches to reflect back on nine years ago when $20 often did little to move the needle on your vehicle’s gas gauge.

“In analyzing the current bifurcated market, it seems timely to revisit a study begun during the first episode of $4 gas in 2008, when truck prices softened dramatically and car prices rose,” Kontos said. “At that time, the price gap between full-size SUVs and compact cars had fallen from close to $13,000 in January of 2000, when SUVs were all the rage, to $2,162 in June of 2008, when gas prices hit $4 a gallon.

“In other words, dealers were paying high prices for small cars and low prices for big SUVs at that time, narrowing the price gap between the two,” he continued. “That turned out to be the all-time low for this price gap, which gradually rose to $8,293 by November 2016, as gas prices have fallen and the popularity of SUVs has recovered. 

“Per our March data, this gap has dropped to $6,675, perhaps indicating that SUV prices are moderating and compact car prices are recovering,” Kontos went on to say. “We will monitor this going forward.”

ADESA’s monitoring also showed that average wholesale prices for used vehicles remarketed by manufacturers in March rose 1.1 percent month-over-month but softened 1.7 percent year-over-year.

Analysts also noticed prices for fleet/lease consignors climbed 3.8 percent sequentially and 0.8 percent annually.

ADESA went on to point out average prices for dealer consignors increased 2.7 percent versus February and 1.3 percent relative to March of last year.

Breaking the data down by age, analysts found that prices dipped 2.5 percent year-over-year for current and one-model-year-old units —what Kontos said typically are off-rental units — and 2.6 percent  for three-model-year-old units —what Kontos noted as a good proxy for off-lease units.

Based on NADA data, Kontos closed by stating retail used-vehicle sales by franchised and independent dealers jumped 9.3 percent month-over-month and 1.6 percent year-over-year.

He also mentioned March certified pre-owned sales moved up 15.0 percent month-over-month, although they were down 0.3 percent year-over-year from last March’s all-time record levels, according to figures from Autodata Corp.

Kontos discussed the market further in the video available here and at the top of the page.

ADESA Wholesale Used-Vehicle Price Trends
   Average  Price  ($/Unit)  Latest  Month Versus
   March 2017  Feb. 2017  March 2016  Prior Month  Prior Year
           
 Total All Vehicles  $10,904  $10,688  $10,793  2.0%  1.0%
           
 Total Cars  $8,921  $8,732  $9,078  2.2%  -1.7%
 Compact Car  $6,732  $6,658  $7,050  1.1%  -4.5%
 Midsize Car  $8,006  $7,942  $8,107  0.8%  -1.2%
 Full-size Car  $8,346  $8,092  $7,803  3.1%  7.0%
 Luxury Car  $13,235  $13,015  $13,636  1.7%  -2.9%
 Sporty Car  $14,131  $13,478  $14,517  4.9%  -2.7%
           
 Total Trucks  $12,825  $12,650  $12,657  1.4%  1.3%
 Minivan  $9,012  $9,004  $7,939  0.1%  13.5%
 Full-size Van  $13,009  $12,838  $12,769  1.3%  1.9%
 Compact SUV/CUV  $10,894  $10,733  $11,065  1.5%  -1.5%
 Midsize SUV/CUV  $11,459  $11,319  $11,311  1.2%  1.3%
 Full-size SUV/CUV  $13,407  $13,140  $13,372  2.0%  0.3%
 Luxury SUV/CUV  $18,343  $18,258  $18,857  0.5%  -2.7%
 Compact Pickup  $8,793  $8,818  $8,614  -0.3%  2.1%
 Full-size Pickup  $16,142  $15,796  $15,773  2.2%  2.3%

Source: ADESA Analytical Services.

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