Webb: Second Straight Month of Record-High Wholesale Index
ATLANTA — Amid widespread wholesale gains, the Manheim Used Vehicle Value Index in April hit a record level for the second consecutive time and showed an increase for the fifth straight month.
Specifically, the index was 120.7 in April, compared to the previous high of 119.9 set in March. April's index was also 13.2 percent stronger than the year-ago level, according to Tom Webb, Manheim's chief economist.
"Pricing strength in the wholesale used-vehicle market remained broad-based as an improved labor market and increased credit availability boosted the demand for the limited supply of wholesale units," Webb explained.
All major segments showed double-digit wholesale price gains, Webb reported, but compact pickups and full-size vans were especially stout.
There was some "relative weakness" among some midsize cars, which downwardly impacted by "competitive pressure" from their new-vehicle counterparts, he added.
Looking at various classes in more detail, wholesale prices for vans jumped 21.1 percent year-over-year, while SUV/CUV prices were up 15.6 percent from April 2009.
Pickup prices saw a 14.2-percent lift, and midsize cars moved ahead 13.6 percent in price.
There was a 13.1-percent upswing in values for compact cars, while luxury car prices climbed 11 percent.
"With respect to price tiers, the exceptional strength that we saw in March in mid-priced units moved further down in price points," Webb shard. "Quality lower-priced units were in particularly short supply and, as a result, attracted strong bidding."
On the retail side of the market, first-quarter used sales jumped over 8 percent versus the same period of 2009, Webb noted, citing CNW Research.
When viewing preliminary data for April, it looks like there was a modest uptick.
In the same vein, dealer groups were reporting healthy used operations, Webb went on to add.
"Likewise, earnings reports from the seven publicly traded dealership groups showed strong used-vehicle operations in the first quarter," he noted. "On a sales-weighted basis, same-store used unit retail volumes rose more than 12 percent.
"It was the biggest percentage gain they ever recorded. Unfortunately, the higher sales were accompanied by a decline in gross margins of more than 1 percentage point," Webb continued. "That narrowing of margins was, however, more than offset by increased efficiencies."
Moving over on new side, things have been "OK," but not as solid as the used-retail market, he indicated. Specifically, April's seasonally adjusted annualized rate for new-vehicle sales was at 11.2 million units, compared with 11.8 million vehicles in March and the 10.9 million SAAR in the first quarter.
In essence, the only way to describe the rebound on the new side is "modest." That said, the lift in transaction prices and firm inventory control should benefit used values, Webb pointed out.
"For this stage in the cycle, the recovery in new-vehicle sales can only be called modest. But, it is important to note that manufacturers are achieving significant increases in average transaction prices," he explained. "That, coupled with a continued tight hand on inventory levels, will provide further support to used-vehicle values."
Looking at some overall economic trends, Webb noted that consumer confidence was higher in April than it was in March, but this should always be looked at carefully.
More specifically, Webb cited the Conference Board's Index of Consumer Confidence, which reached 57.9 in April, compared to its level of 52.3 in the previous month.
Webb explained that the most recent reading was more than twice as high as the February 2009 trough. But, take that gain cautiously, as April's index was lower than the September 2008 reading.
And that time period of 2008 was not particularly blissful economically, as "the economy was shedding hundreds of thousands of job per month," he pointed out.
"To be sure, consumer confidence measurements always have difficulty in making up past losses (so the focus should be on the trend, not the level), but it appears that a residue of angst remains within the household sector," Webb pointed out.
"That angst, however, has not stopped consumers from spending. Total retail sales, (without) autos, rose 0.6 percent in March. It was the third consecutive monthly gain and was greeted by analysts as an upside surprise," he continued.
"In addition, as with used vehicles, the gains in retail sales were broad based, incorporating the high-end, the low-end, and everything in between," Webb added. "Although the stimulus provided by tax refunds is now over, retail sales should continue to increase nicely, if employment gains continue to roll in at a six-digit rate every month. And, we expect that those types of employment gains will occur."