| -

CARMEL, Ind. — An industry tipping point ADESA Analytical Services has pored over for several months finally came to be. It's regarding the financing level of retailed used vehicles.

The firm shared the latest data from the Federal Reserve Board that indicated used vehicles financed in April had an average retail price of more than $19,400. ADESA's Tom Kontos said this figure equals 61.7 percent of the average new-vehicle price financed that month.

Kontos explained "this put used-vehicle retail prices above the 60-percent threshold that ADESA Analytical Services emphasized for the last couple of months.

"It's as a level that causes many shoppers to opt for a new vehicle rather than a used vehicle," he pointed out.

"With used-vehicle demand weakening as a result, used-vehicle prices at wholesale could be expected to moderate from their peak in May," Kontos pointed out. "This is indeed what we witnessed in June, as average wholesale prices fell by over $250 per unit."

Kontos described the situation for purchasing dealers "as a welcome respite" from the general wholesale price escalation seen for approximately the last year and a half. Nevertheless, he cautioned that used-vehicle dealers still aren't out of the woods yet.

"The flip side is that declining retail demand makes it a bit harder to ultimately sell the vehicles despite their lower acquisition cost," Kontos indicated.

The ADESA economist also indicated that moderating wholesale prices can sway the dealings on the selling side of the equation, too.

"Moderating prices are a reminder of the cyclicality inherent (atmosphere) in the remarketing industry and a disincentive to holding or no-selling vehicles in the hopes of higher prices later," Kontos noted.

Overall, Kontos believes tight supplies of used vehicles can be expected to keep wholesale prices at relatively high levels for both buyers and sellers at auction and online in the months ahead.

Turning to ADESA Analytical Services' monthly analysis of wholesale used-vehicle prices by model class, the firm determined prices averaged $10,278 last month. Analysts found the figure was down 2.6 percent from May, but 1.4 percent higher than June of last year.

Kontos indicated full-size and luxury SUVs were the only segments that showed month-over-month increases. Full-size SUVs climbed 5.8 percent, while luxury SUVs edged higher by 1.5 percent.

Midsize cars and minivans — segments that ADESA stressed are particularly important to fleet remarketers — saw significant price declines in June. The midsize cars slipped 5.8 percent, while minivans dropped even more, 7.9 percent.

When looking at the data from a year-over-year perspective, full-size SUVs again compose the segment with one of the greatest price gains. Analysts have seen prices in this segment jump 13.3 percent since June 2009.

Delving further into the ADESA Analytical Services data, analysts revealed manufacturers registered a 6.7-percent month-over-month price increase and a 15.1-percent year-over-year rise. Among fleet/lease consignors, analysts found that they experienced a 2.7-percent sequential price decrease and a 3.3-percent annual increase.

Finally, ADESA noted that dealers saw a 2.4-percent average price decrease versus May and a 5.3-percent uptick versus June 2009.

"ADESA Analytical Services estimates that auction industry inventory levels stood at 30 days at month-end compared to 35 days last June — continuing to indicate tight supply and high auction throughput," Kontos explained.

The latest monthly commentary wrapped up with a discussion about retail used-vehicle sales based on data from CNW Research. The firm mentioned June's retail used-vehicle sales numbers were down 3.1 percent year-over-year for franchised dealers, but 8.2-percent higher for independent dealers. It left the industry with total retail volume up by 2.4 percent.

On a month-over-month basis, Kontos explained retail sales of used vehicles were up for both franchised and independent stores. On the franchise side, it moved higher by 7.8 percent and for independents it climbed by 9.1 percent. As a whole, the month-over-month increase came in at 8.5 percent.

Meanwhile, Kontos also mentioned Autodata findings about certified vehicle sales in June. They slipped by 7.5 percent versus May, but the amount was 3.2 percent higher when compared to June 2009.

Kontos concluded his commentary by referencing how the consumer price index for used vehicles rose by 16.2 percent year-over-year in May, the month with latest information available based on data from the Bureau of Labor Statistics.