CARY, N.C. -

April will end up with the largest-ever year-over-year decline in the Manheim Used Vehicle Value Index, should current price trends remain on track.

Manheim parent company Cox Automotive debuted its first mid-month edition of this index that measures wholesale vehicle price activity on Friday and found that the Manheim index is at 125.2 halfway through April, down 9.6% compared to the first half of April 2019.

“If the mid-month value of the Manheim Index holds for the full month, the monthly decline will set a record,” Cox Automotive said, noting the 5.5% drop in November 2008 amid the Great Recession, which currently is the largest drop in the index.

Compared to March, wholesale prices in the first half of April are down 11.8%, Cox Automotive said.

Used-car prices are facing a one-two punch from weakening demand and supply “piling up,”  as CarGurus director of automotive industry and economic analysis George Augustaitis illustrated in a blog post Friday.

“While there are still consumers buying cars out of necessity, such as replacing a broken-down vehicle or a lease ending, overall demand in the market has declined,” Augustaitis wrote.

“This decrease in demand is causing the supply of used vehicles, both at the auction lanes and on dealer lots, to rapidly pile up and vehicles are left sitting. While dealers that are deemed ‘essential’ can still sell vehicles, those whose doors have remained temporarily closed are not moving any used inventory.”

Such simultaneous supply and demand curve changes have driven used-vehicle prices down significantly, a downturn that could last “for the foreseeable future,” he said.

However, there is some precedent for such declines.

“This is not the first time used vehicle valuations have declined. In 2008 and 2009, the supply for used vehicles outpaced the demand, which caused a drastic decline in prices. As the economy recovered, people went back to work, consumer confidence returned and these both helped increase the demand for used vehicles,” Augustaitis wrote.

“As the influx of demand quickly outpaced the supply, used vehicle values rapidly increased,” he said. “While the COVID-19 recession is not the same as the 2008 recession, the patterns are similar and we will eventually see the demand return — and a rebound in used-vehicle valuations will come with it.”

Over at J.D. Power Valuation Services, which measures the wholesale market based on vehicles up to 8 years in age, analysts said Thursday they are expecting a 7% decline in used-vehicle prices through June.

The recovery would then begin in the second half. 

“The outlook is centered on macroeconomic projections that remain highly fluid,” Jonathan Banks, their vice president of vehicle valuations and analytics, said in the analysis. “A major factor will be the national employment picture.“Our models assume that significant job losses will continue through the second quarter but will then be followed by a gradual recovery in the second half of the year,” Banks said. “Our forecast has prices falling by 2% on a full-year basis versus 2019.”

Wholesale prices for the week of April 6-12 were down 2.5%, a similar decline to the prior week, J.D. Power said. 

Used retail prices are faring a bit better, though. They were down only 1% week-over-week, Banks said.

“The difference in wholesale and retail price performance is due in large part to a disparity in sales activity,” Banks said. “While both have been significantly disrupted, franchise dealers’ used vehicle sales were approximately three times greater than wholesale sales over the past four weeks.”

There were 19,000 wholesale auction sales the week ending April 12, according to J.D. Power Valuation Services.  That’s up from 17,900 auction sales the week ending April 5.

*Clarification: J.D. Power Valuation Services had reported earlier this month that the week ending April 5 had fewer than 15,000 auction sales, which would have marked a record, news that was reported in Auto Remarketing.

However, the company explains that it receives lagging sales data each week that impacts previously reported figures. So, the less- than-15,000 figure was updated to 17,900 in the latest data.*

“It was encouraging to see wholesale auction sales hit 19,000 units during the week ending April 12. It represented a 7% rise over the prior week’s paltry 17,900 units,” Banks said. “It was not enough, however, to stem the downward trend on wholesale prices.”

There was an 80% drop in wholesale sales during the first two weeks of the month, both in terms of a year-over-year comparison and against pre-pandemic projections, J.D. Power said.

And since mid-March, there have been fewer than 130,000 wholesale sales, the company said.

“All in all, we have seen a decline of 300,000 units — or 70% — against our pre-virus volume forecast, which is having a detrimental effect on valuations across the board,” Banks said. 

The changing wholesale market dynamics around and pricing and volumes certainly impact consignors in the auction market, too.

During the company’s recent earnings call, Ally Financial chief financial Jennifer LaClair described the “wait-and-see” mode consignors like Ally are facing.

“It’s a really important area that we’re focused on as you think about our leasing yields and our remarketing gains. What we’re seeing right now is essentially the market is illiquid, and that’s the physical auctions as well as the digital auctions,” LaClair said.

“It’s just really hard right now to determine what fair pricing is. We were guiding towards a negative 5% to 7% in used-vehicle prices. It could potentially go down from there, but it’s just very difficult to know at this point,” she said. “We’re a bit in wait-and-see mode, and we think we’ll have a much clearer sense of used-car prices once shelter-in-place orders are lifted and auction activity can resume at more normal levels.”

LaClair said the lease extensions Ally is offering consumers is helping regulate some of the supply as it relates to demand.

“We think that overall positions the market to be stronger, as well. But it’s a really important focus area for us, and I think this is one of those areas to be determined as we go through the next couple of quarters,” she said.