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ATLANTA — A rise in the March Manheim Used Vehicle Value Index to a record level even took Tom Webb by surprise when he discussed the wholesale market during his quarterly conference call on Wednesday.

The index climbed to 119.9 in March, marking the fourth consecutive month of an increase and a 13-percent overall jump since March 2009.

"Pricing strength in the wholesale used-vehicle market became more broad-based in the first quarter of 2010 as record tax refunds and improved retail credit availability reinvigorated the market for lower-priced vehicles," Webb shared.

"Meanwhile, prices for late-model, higher-priced, units stayed strong despite the increase in new-vehicle incentive activity in March," he continued.

When asked about his prediction of relatively flat index figures coming this year, Webb conceded that his forecast turned out to be askew more than he anticipated. However, Webb delved deeper into his research to find value-increase triggers.

"Certainly the fundamental forces are leaning in an upward direction. Again, I would expect some moderation or plateauing of the index itself," Webb stated.

"Quite frankly, the month of March was much, much stronger than I expected. I thought maybe I was off, but I've talked with people who are attuned at looking at the market in March, people who are actually out there buying and selling vehicles, and they were quite surprised, also," he went on to say.

"I think what really helped in March was the broadening of the market," Webb pointed out. "Before we had a price increase on late-model vehicles but now it's moved down into the mainstream models, even the lower priced units. I think that's reflective of a better retail environment."

In fact, vehicles that fall into the $5,000 to $8,000 segment have seen the highest percentage change since the beginning of the year. This segment has climbed nearly 10 percent, while units in the other four segments have hovered at about 5 percent.

Webb also believes the record federal income tax refunds are pushing retail demand for moderately priced used vehicles. He noted that as of March 13, $175.4 billion in federal individual income tax refunds had been disbursed. This total is $6.3 billion or 3.7 percent higher than the year-ago period.

As a further point of reference, Webb indicated that the 2009 tax refund amount was 13 percent higher than what the federal government returned to taxpayers back in 2008. In fact it was a sum of about $19.5 billion higher.

"The number of refunds in 2010 is falling behind 2009's pace, but the average dollar amount is up nearly 10 percent," Webb pointed out.

"Although we would generally consider the number of refunds to be an important — if not the most important — measure, it is noteworthy that this year's higher average refund was driven by programs especially important to used-vehicle buyers; most notably, the Earned Income Tax Credit which was increased and expanded," he continued.

Revisiting Toyota Residual Values 

As the automaker that's probably received the most media attention so far this year, Toyota, was discussed again by Webb. Investment analysts asked Webb to discuss how residual values have shifted since Toyota has responded to recall turmoil with generous incentives.

"My best assessment is that relative to competing brands, certainly there has been some deterioration in (Toyota's) performance," Webb asserted. "The market is so strong that it doesn't mean Toyota residuals went down; in fact they went up. They just didn't go up as fast their competing makes.

"There's no problem on the retail or the wholesale side in actually moving the units at these prices. They're doing quite well," Webb went on to say.

"I'd be hesitant to say any of the brands really gained per se. Some of the brands they compete against are in very short supply. I think their prices went up probably as much as they were going to go anyway because of competitive pressures on the new-vehicle side," he added.

Webb wrapped up his Toyota discussion about the blurring between residual ramifications stemming from the OEM's recalls and incentive packages.

"I think it's difficult to parse out what was reflective of the recall-type issues and what was reflective of the incentive activity," Webb explained.

"If you just look at it by past relationships given the increases in incentive activity, you would have expected a decline in residual values. Residual values have held up well," he noted.

"On the other hand, there were incentives for the purchase of a certified vehicle," Webb interjected.

"Overall, I say it's hard to say, but generally speaking the incentives particular to Toyota didn't really hurt the used-vehicle values," he added. "Had they improved more if they had not been there? I don't know."