ATLANTA -

In developments described as “long anticipated,” the downward slide of the Manheim Used Vehicle Value Index continued in April, extending the reading’s decline to four months in a row.

Manheim indicated wholesale prices (on a mix-, mileage- and seasonally adjusted basis) declined 1.0 percent in April, bringing the index level to 119.2, which was 5.5 percent lower than a year ago.

“Although April marked the fourth consecutive monthly decline in wholesale used-vehicle values (and produced a cumulative decline of 3.9 percent since December), the recent movement has been neither alarming nor disruptive to the market,” Manheim economist Tom Webb said.

“Indeed, the easing was long anticipated and, in fact, probably mitigates some of the decline that many were expecting in the back half of the year,” Webb continued. “Moderating strength in the retail market, however, suggests the possibility of further pressure on wholesale values.”

All six vehicle segments that Manheim tracks softened year-over-year in April. But as other firms have noticed, pickup truck prices held up best in Manheim’s analysis, ticking down just 0.3 percent.

Prices within three other segments didn’t drop as much as the overall average. That group included luxury cars (down 4.7 percent), SUVs and CUVs (down 4.0 percent) and vans (down 3.5 percent).

Meanwhile, compacts and midsize cars both decreased noticeably last month. Manheim pinpointed the compact price drop at 7.7 percent and the midsize price falloff at 8.2 percent.

“Midsize and compact cars have been the most price-competitive segments of the wholesale market both in recent months and over the course of the past year,” Webb said. That’s not surprising given the offerings, pricing, and financing options available on midsize and compact cars in the new-vehicle market.

“Prices for pickup trucks continued to be strong due to increased demand (as a result of the improvement in the housing industry) and limited supplies in the wholesale market, especially for units with less than 100,000 miles,” he went on to say.

Pockets of Strength in Various Price Points

Despite the overall easing in wholesale values, Manheim acknowledged buy-here, pay-here dealers experienced no relief in their acquisition costs.

“Indeed, those operators holding their average per vehicle costs steady had to accept a vehicle with considerably higher mileage,” Webb said.

Manheim mentioned prices for rental risk units sold at auction (adjusted for changes in mix and mileage) were 4.1 percent lower in April than year-ago levels.

“Vehicles selling just below the price point for many rental risk units were the weakest segment of the wholesale market in April,” Webb said.

Used-Vehicle Sales Stable in April

Webb recapped CNW Research information that indicated total used-vehicle sales rose less than 1 percent in April, but used-vehicle retail sales by dealers (excluding private-party transactions) fell by 1 percent.

Nevertheless, Webb emphasized sales for the first four months of the year moved 5 percent higher overall and 7 percent for dealers.

“That's a noteworthy achievement in the face of otherwise tepid consumer spending,” Webb said. “Clearly, the ample flow of retail credit is boosting the used-vehicle market.”

Webb went on to point out that results for the seven publicly traded dealership groups show that used unit retail sales rose 6.5 percent on a same-store basis in the first quarter of this year, marking the 15th consecutive quarterly increase.

“Unfortunately, gross margins continued to decline,” Webb said. “On a sales-weighted basis, it was the 13th consecutive quarter that used vehicle retail gross margins were lower than their year-ago levels.

“Given that F&I income is likely going to come under pressure, these narrow margins will prevent dealers from becoming aggressive bidders at auction,” he went on to say.

New-Vehicle Sales Pace Eases

Webb also noted that for the first time since October of last year, the seasonally adjusted annual selling rate for new cars and light-duty trucks slipped below 15 million in April.

“Although it is still generally expected that full-year sales will be closer to 15.5 million than 15.0 million, the recent decline in consumer confidence, already low savings rates, and the overhang of possible negative regulatory and policy changes suggest that manufacturers and dealers may have to become more aggressive in pushing the market in order to reach their sales targets,” Webb said.

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