Kontos: Remarketers Get Unseasonal December Bonus
CARMEL, Ind. — There was an extra perk for remarketers who sold their consignments in the final month of 2009 instead of holding out for a seasonal price upswing at the start of the New Year. This was in large part thanks to a seasonally unexpected gain in December's wholesale prices, according to ADESA's Tom Kontos.
Specifically, ADESA noted that the average wholesale price during December was $9,939, a 10.2-percent year-over-year gain from the same period of 2008 and a 3.5-percent hike from the previous month.
"Those remarketers that elected to sell before year-end rather than wait for a seasonal price increase in January were rewarded with a greater-than-seasonal average wholesale price increase in December," Kontos pointed out.
Not to mention, besides this particular bonus, there are already other ways that remarketers gain from selling units earlier instead of later. Some of the advantages of selling sooner include opportunity costs of capital/time value of money, forgone depreciation and avoided interest expense, Kontos shared.
"Fortunately for remarketers who did elect to wait, January should again be a solid month price-wise, with used vehicle supply continuing to be tight and retail demand maintaining its growth as the economic recovery continues," he continued. "Dealers as well as remarketers can view the strength of new- and used-vehicle sales in December as a good precursor to retail demand during the tax season."
Breaking the data down further, all wholesale segments showed year-over-year price increases, while all but full-size vans climbed from November.
Overall, car prices inclined 5.5 percent compared to the prior year, as full-size cars led the way with a 15.6-percent upswing.
On truck side, prices were up 16.1 percent from December 2008, with full-size vans showing the heaviest increase at 26.9 percent, despite being down 1.6 percent from November and the only segment to show a month-over-month drop.
Explaining this monthly dip in further detail, Kontos noted: "Full-size vans are a relatively small-volume segment at auction and small changes in factors such as seller type and vehicle condition month-to-month can have disproportional impacts on average prices.
(He added that that full-size cars often follow this trend, as well.)
"Full-size vans also tend to reflect price trends seen in the medium-duty commercial van market, which has been soft due to weakness in construction, shipping and other applications that require these trucks," Kontos continued. "Compared to prior-year, however, prices for this segment have rebounded nicely — perhaps an indication that construction and commerce are rebounding as the economic recovery gathers steam."
Looking at seller types, showing the largest year-over-year price gains were OEMs, which were up 26.6-percent from December 2008 and 2.5 percent from November.
For fleet/lease consignors, their prices jumped 15.3 percent year-over-year and were relatively stable from the prior month (up 0.7 percent).
Prices for dealers consignment was up 23.2 percent from the prior year and 2.2 percent from November.
Continuing on, year-end auction industry inventory levels were 38 days, a significant decrease from the 73-day level in December 2008, which marked a record high.
This points to tight supply, Kontos noted.
Meanwhile, thanks to continued strong demand for available vehicles, conversion rates were higher than the norm of 60 percent, Kontos added.
On the retail side of the used-vehicle market, December sales jumped 8.2 percent from November, he noted, citing CNW Research.
Franchised dealers saw their used sales climb 7 percent, while independents showed a 9.5-percent increase.
Sharing Bureau of Labor Statistics data, Kontos noted that the consumer price index for used models jumped 5.8 percent year-over-year in November, which was the latest data available.