ATLANTA -

Even though wholesale prices are almost 5 percent lower than they were this time last year, May’s price slide was much smaller than any of the previous four months. What’s behind the change?

According to Manheim chief economist Tom Webb, new- and used-vehicle price ratios are returning to more normal levels.

Consequently, Webb explained, the pricing impact of expanding wholesale supply may be less than previously expected.

Instead, the “dominant force” behind wholesale price changes during the rest of the year will be retail volumes and dealer profitability, Webb explained.

According to the newly updated Manheim Used Vehicle Value Index, wholesale prices (on a mix-, mileage-, and seasonally adjusted basis) slipped .1 percent last month.

This change brought the Index to a level of 119.1, which was 4.8 percent lower than the same period of 2012.

And though wholesale prices were down slightly as an industry average this past May, results differed for various price points and segments, among other factors.

For example, within market classes, pickups continued to perform much stronger in the lanes, with prices growing by .5 percent this past month.

Used-vehicle pricing for compact midsize cars “remained, however, under the pressure of competition from the new-vehicle market and increased wholesale supplies,” Webb said. Both segments saw a 6.3-percent year-over-year drop in prices this May.

Webb also reported that an analysis of mileage changes by wholesale price tiers showed that vehicles in the $11,000 to $13,000 price range were the weakest segment of the auction market in May, relative to a year ago.

“This hurt the resale performance of some commercial fleet managers, especially if their portfolio was concentrated in just a couple of specific models of midsize cars. If their portfolio had a large number of small crossovers or full-size pickups, they did much better,” said Webb.

Lastly, prices for rental risk units sold at auction (unadjusted for changes in mix and mileage) were flat compared with a year ago, and average mileage was down about 2 percent.

Webb also commented on the retail side of things late last week. He explained that used-vehicle financing is becoming more readily available, which will contribute to strong retail markets.

In fact, this past April, according to CNW, used-vehicle sales rose by 2 percent.

That said, Webb cautioned that even though used-vehicle sales are up, sales by dealers fell by 4.7 percent in May.

“Channel checks suggest, however, that inventory turn rates and net profits remain healthy for most dealers,” Webb added, noting that the drop in dealer sales may not be much of an issue for the used market.
 

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