Temperatures are rising nationwide with the first official day of summer coming soon, but prices on certain cars and trucks keep dropping noticeably as auctions and dealers enter the summer months.
However this week’s Black Book Market Insights report indicated a few segments, such as sporty cars and compact vans, have remained strong during the last few weeks.
“The used-vehicle prices are dropping faster as we enter the summer lull with increasing no-sales in the auction lanes,” said Anil Goyal, executive vice president of operations at Black Book.
Volume-weighted, editors determined overall car segment values decreased by 0.24 percent last week. In comparison, the values had softened an average of 0.16 percent per week during the previous four weeks.
Within cars last week, Black Book determined midsize cars declined the most (0.55 percent or $51), while sporty cars increased the most (0.38 percent or $59).
Volume-weighted, editors found overall truck segment values (including pickups, SUVs and vans) dipped by 0.17 percent last week. In comparison, the values had decreased on average by 0.07 percent per week during the previous four weeks.
Among trucks last week, sub-compact luxury crossovers decreased the most (0.60 percent or $103) while compact vans increased the most (0.82 percent or $74).
As Goyal referenced, lane activity is starting to tail off a bit as recounted by Black Book’s representatives stationed at about 60 sales each week.
“Consignment is down as is the dealer attendance and participation at the auction,” the observer in Michigan said. “Thankfully, the Internet buyers continue to be heavily involved in purchasing the auction inventory.”
A similar scene unfolded in Pennsylvania where the Black Book personnel noted, “Dealers are hesitant about overstocking as we move into the vacation season. There were many no-sales in today’s auction.”
And the trend wasn’t confined to auctions west of the Mississippi as Black Book’s lane watcher in California added, “We had a good mix of inventory to choose from today, but the result was still a lot of no-sales.”
The other two anecdotes Black Book shared from its auction watchers reflected other trends often seen this year, including:
— From Indiana: “Retail on the used-car side is good. Nice vehicles remain scarce, especially regarding the truck market.”
— From Washington: “We had a low volume of inventory, and a lot of those were high mileage vehicles resulting in an average or below sale.”
ARI recently honored five of its best-performing auction partners based on scorecard metrics such as days to sell, days to write a condition report, days to fund and days to pick up.
ARI added that the company changed its scorecard format by sending to auctions monthly and added a new metric for days to remove company logos and branding.
The auctions collecting honors included:
— Region 1 Northeast: Mountain State Auto Auction, a third-time winner
— Region 2 Upper Midwest: Missouri Auto Auction, a seven-time winner
— Region 3 Southeast: Dealers Auto Auction of Chattanooga, a first-time winner
— Region 4 Southwest: Houston Auto Auction, a third-time winner
— Region 5 West: ADESA Northwest, an 11-time winner
Partha Ghosh, director of vehicle supply chain and remarketing for ARI said, “We put high expectations onto our business partners and are proud of all of the auctions that have excelled at winning these awards.”
As a first-time winner, DAA Chattanooga general manager Doug Rodriguez added, “We are extremely honored to receive this award from a great business partner. Our team has worked hard to ensure that all of our customers receive the best service we can offer.”
DAA Chattanooga is part of the Dealers Auto Auction Group, which has six auction locations in the Southeast including Dealers Auto Auction of Memphis, Dealers Auto Auction of Murfreesboro, Dealers Auto Auction of Huntsville, Dealers Auto Auction of Jackson, Dealers Auto Auction of Mobile and Dealers Auto Auction of Chattanooga.
“We value our partnership with ARI and are proud of this recognition,” said David Andrews, owner and chief executive officer of Dealers Auto Auction Group. “We look forward to a continued partnership and an even more successful year ahead.”
“We are very proud of the accomplishment that DAA Chattanooga has achieved. They work hard on our account, and it shows in their performance,” said Chris Clarke, manager of North American Remarketing of ARI
DAA Chattanooga, located at 2120 Stein Drive in Chattanooga, Tenn., has a facility that offers eight lanes on more than 50 acres. Services include full reconditioning, mechanical and transportation services.
The operation’s sale is held every week on Thursdays beginning at 9 a.m., and all auction lanes are simulcast.
Cox Automotive discovered two trends originating in May that might frustrate some dealerships, especially stores that might have landed a bit short of monthly goals. In May, wholesales prices moved higher as used-vehicle sales softened.
Before used-car managers reach for their stress balls, here are the specifics.
Cox Automotive determined wholesale used-vehicle prices (on a mix-, mileage- and seasonally adjusted basis) increased 1.25 percent month-over-month in May. This rise brought the Manheim Used Vehicle Value Index to 134.2, which marks a 4.9-percent increase from a year ago and the highest level since last November.
Prices for each of the six vehicle segments Cox Automotive tracks for its index update moved higher in May, with vans leading the way via a 10.2-percent climb.
Coming in roughly at half of that upward price pace were compact cars at 5.7 percent SUVs and CUVs at 5.0 percent. Midsize car prices jumped 4.0 percent, and prices for pickups rose by 2.0 percent.
Even luxury cars squeezed in with a 0.2-percent uptick.
Meanwhile, that slightly more expensive used metal didn’t roll over the curb quite as frequently in May.
According to Cox Automotive estimates, used-vehicle sales volume decreased by 1 percent year-over-year in May. However, analysts contend the annualized pace of used-vehicle sales is up 1 percent over last year.
Analysts also estimated the May used SAAR to be 39.7 million, flat on a month-over-month basis.
So what does all of the May data mean? Cox Automotive offered this clarity with the index update.
“Looking at trends in the weekly Manheim Market Report (MMR) prices, the traditional spring bounce this year started three weeks later than it did in 2016 and earlier years and peaked in April in week 15,” analysts said.
“Used-vehicle prices are now moving down but remain higher now compared to where they were at the beginning of the year than any of the last three years,” they continued. “Price comparisons to last year are starting to get tougher as 2017 saw very low depreciation starting in May and lasting throughout the summer.”
One other note about the wholesale market: Cox Automotive also noticed rental risk pricing strengthened.
Analysts indicated the average price for rental risk units sold at auction in May moved up 8 percent year-over-year. But rental risk prices softened 1 percent compared to April.
Cox Automotive added that the average mileage for rental risk units in May (at 43,000 miles) climbed 11 percent above year-ago readings but dipped 1 percent month-over-month.
Turning the page from the used-vehicle space, Cox Automotive also touched on May new-vehicle sales, which increased 5 percent year-over-year, triggered in part by one more selling day compared to May of last year.
Analysts pegged the May SAAR at 16.8 million, up from last year’s 16.7 million. However, the reading broke the streak of eight straight months of new SAAR coming in at or above 17.0 million.
Cox Automotive stated cars continue to see sharp declines as new sales in May fell 9 percent compared to last year. Light trucks outperformed cars in May and were up 14 percent year-over-year.
Combined rental, commercial and government purchases of new vehicles were up 18 percent year-over-year in May, led by increases in commercial (up 2 percent) and rental (up 30 percent) fleet channels, according to Cox Automotive.
“New vehicle inventories came in under 4 million units for the first time in three months, and inventories are at their lowest levels since January,” analysts said.
Cox Automotive closed its Manheim Index report by highlighting how strong economic momentum continues.
Analysts acknowledged the employment report for May was much stronger than expected as job creation increased to 223,000 when experts had expected 190,000. The prior two monthly numbers were also revised up for a net increase of 15,000 more jobs than originally estimated.
Consumer confidence, as measured by the Conference Board, increased in May to 128, the second highest level for the year and the third best level in more than 17 years.
Dealers expanding their wholesale search parameters to find the clean vehicles that fit their inventory needs impacted both the weekly and monthly wholesale price updates from Black Book.
Taking a look first at the monthly view, Black Book on Tuesday released its Used Vehicle Retention Index for May, describing a 0.8-percent increase during the month to push the latest reading to 112.9. That figure is up slightly from 112.0 in April.
Editors indicated the index has now ticked up 0.6 percent during the past 12 months.
The Black Book Used Vehicle Retention Index is calculated using Black Book’s published wholesale average value on 2- to 6-year-old used vehicles as percent of original typically-equipped MSRP. It is weighted based on registration volume and adjusted for seasonality, vehicle age, mileage, and condition.
Reflecting the strong end to the spring selling season, Black Book pointed out the latest index update contained 15 total segments with positive or unchanged results. Generating the strongest gains were:
— Subcompact cars: up 1.7 percent
— Compact crossover/SUV: up 1.7 percent
— Full-size cars: up 1.2 percent
— Sporty cars: up 1.0 percent
Editors added the Index now has shown a monthly decline in just three of the past 10 months dating back to August.
“The used-vehicle market is clearly benefitting from strong employment and consumer confidence currently, with many segments of both cars and trucks, large and small, seeing valuation strength over the last several months,” said Anil Goyal, executive vice president of operations at Black Book.
“After spring season, we typically see a decline in values in May. However, this year the used market is fairly stable, resulting in an uptick in our seasonally adjusted Index,” Goyal continued.
The index dates back to January 2005 when Black Book published a benchmark index value of 100.0. During 2008, the index dropped by 14.1 percent, while during 2016, the index fell by just 6.4 percent.
During 2011, the index rose strongly from 113.3 to 123.0 by the end of the year as the economy picked up steam and used-vehicle values rose higher. It continued to remain relatively stable, rising slightly until May 2014 when it hit a peak of 128.1.
The entire index report can be downloaded here.
Editors share latest via Market Insights
Meanwhile, looking at wholesale movements on shorter time comparison, this week’s Black Book Market Insights report showed car depreciation again accelerating more than trucks, led by three different luxury car segments.
“Wholesale markets show steady depreciation in values while overall consignment levels were reportedly lower last week,” Goyal said.
Volume-weighted, editors calculated overall car segment values decreased by 0.21 percent last week. In comparison, the market values had decreased by 0.10 percent on average during the prior four-week period.
As mentioned within cars, the luxury segments experienced the biggest drops, including:
— Near-luxury cars: down 0.43 percent or $69
— Luxury cars: down 0.40 percent or $77
— Prestige luxury cars: down 0.31 percent or $110
Volume-weighted, editors determined overall truck segment values (including pickups, SUVs and vans) softened by 0.10 percent last week. In comparison, the market values had decreased by 0.04 percent on average during the previous four-week span.
Among trucks, Black Book the luxury crossover/SUV segments performed the worst, including:
— Compact luxury crossover/SUV: down 0.37 percent or $73
— Midsize luxury crossover/SUV: down 0.26 percent or $56
— Full-size luxury crossover/SUV: down 0.26 percent or $86
After recapping the price movements, Black Book turned next to the anecdotes collected by its representatives stationed at about 60 auctions each week. That’s how editors learned about how dealers are on the hunt.
From Tennessee: “Consignment is still running low which is allowing the prices to remain fairly stable. Really nice vehicles are scarce and high,” the lane observer said.
From Pennsylvania: “A dealer stated that he is having to expand his buying area to find enough good, clean vehicles,” another auction watcher added.
Scenes from the Southeast gave further background to what’s happening at sales nowadays.
“Consignment was down. I watched a couple of dealer lanes and it seemed as if they were still trying to fetch the spring price points which resulted in a lot of no-sales,” Black Book’s representative in Georgia said.
Another observer in Florida added, “The sellers are trying to hold their floors on trucks, while luxury cars and older cars didn’t sell well.”
Finally, from up in Michigan, the sale recap went this way: “Dealer consignment and bidding was down this week and prices were on the soft side. Sports cars are doing really well.”
Update on specialty markets
With it being the first week of the month, Black Book also distributed its latest look on how the specialty markets are changing. Here is the rundown:
— Collectibles: Black Book recapped that buyers of the limited production Ford GT coupe were required to keep their vehicle for two years before selling it. Editors mentioned Ford has filed a lawsuit against actor John Cena, and his dealer, for prematurely selling his GT.
— Recreational Vehicles: Black Book noted that RV values at auction were mixed last month, with motorized units “taking a big hit, while towables managed a small gain.” With the exception of February, editors noticed that motor homes have been dropping consistently since last October.
— Powersports: Editors indicated powersports values heading into summer are steady or up modestly for most segments.
— Heavy-duty: Black Book indicated “serious” buyers showed up as Memorial Day weekend approached, while the volume of trucks at the heavy-duty auction venues dropped, helping to stabilize prices.
— Medium-Duty: This past month, editors determined that older Units (from model years 2007 through 2014) dropped an average of $117 or 0.6 percent, which is just $5 more than last month. Black Book added late models reported a positive trend compared to May’s results. Last month, late models (2015-2016) dropped $296, which is a $15 improvement.
Along with giving a rundown of the latest wholesale price movements, this week’s Black Book Market Insights report gave some perspective on a pair of factors shaping what dealers are buying at auction nowadays and why.
First off, editors noticed continued stabilization of prices for the majority of car and truck segments. Black Book indicated some segments such as sporty cars and sub-compact crossovers continue to see increases, even after the spring selling season.
“The used-vehicle market prices were stable last week after a good spring season this year on mainstream sedans. Sporty cars are experiencing an increase in seasonal demand,” said Anil Goyal, executive vice president of operations at Black Book.
Volume-weighted, editors indicated overall car segment values decreased by 0.09 percent last week. In comparison, the values softened on average of 0.18 percent per week during the previous two weeks.
Within the car segments, Black Book shared the mid-size car segment decreased the most in value last week, declining by 0.35 percent or $34.
Turning to volume-weighted truck data, editors found that overall truck segment values (including pickups, SUVs and vans) ticked 0.05 percent lower last week, similar to the average decrease per week spotted during the previous two weeks.
Among trucks, Black Book pointed out that the sub-compact crossover increased the most in value last week, rising by 0.14 percent or $17.
Beginning the rundown of what Black Book representatives in the lanes noticed last week, the first anecdote originated out of Indiana where an observer said, “Lots of repos, off-lease and rental units, and they all sold well.
“Escalating fuel prices do not appear to be affecting the truck market as of now,” the Indiana lane watcher added.
Black Book mentioned that in some counties in the nation, the average gasoline price is above $4 per gallon.
Editors added the U.S. Energy Information Administration expects U.S. regular gasoline retail prices to reach a summer peak of $2.97 per gallon in June, before falling to $2.86 per gallon in September.
Beyond fuel costs, another lane observer described an additional element shaping what dealers are securing at the auction.
“Buyers are becoming more cautious as they are only buying vehicles to replace a recent retail sale,” Black Book representative in Florida said.
Nearby in Georgia, it was a mix of what’s typically seen in the lanes, as well as an anomaly.
“As usual, the institutional lanes were the best as the dealer lanes started off good but quickly moved to mostly no-sales. Interestingly, the cheaper vehicles were of no interest to the buyers,” the auction watcher in Georgia recounted.
“The final anecdote surfaced out of Colorado where Black Book’s lane watcher said, “Vehicles that are 5 years old or newer are selling the best. Our market is still good.”
Going beyond just the metrics, KAR Auction Services chief economist Tom Kontos explained why the latest wholesale price movements reflect auction successes — especially when it comes to handling off-lease vehicles.
According to ADESA Analytical Services’ monthly analysis of wholesale used-vehicle prices by vehicle model class, values in April averaged $11,116, which represented a 2.7-percent lift compared to March but a 0.2-percent dip relative to April of last year.
Analysts indicated average prices were down on a year-over-year basis for both cars and trucks, but luxury cars and minivans were segments with significant volume that had strong year-over-year price gains.
“Average wholesale used vehicle prices registered their second consecutive year-over-year price decline in April,” Kontos said in his latest installment of the Kontos Kommentary. However, April prices were seasonally strong, despite softer retail demand.
“Prices appeared to be particularly strong for off-lease vehicles, which is testimony to the effectiveness of upstream sales in preventing oversupply of these units at physical auctions,” he continued.
Kontos also continued his deep dive into trends involving fleet and off-lease vehicles that are 3 years old with less than 45,000 miles on the odometer.
When holding constant for sale type, model-year age, mileage, and model class segment, he found that average prices moved higher on a year-over-year basis for both midsize cars and midsize SUV/CUVs. Midsize car prices climbed 4.0 percent or $465 to $12,180 while prices for midsize SUVs and CUVs rose 4.3 percent or $875 to $21,233.
“This analysis indicates that wholesale values for off-lease units are holding up well despite the overall softening market trend and is evidence of the effectiveness of new remarketing approaches in redistributing supply into various sales channels,” Kontos said.
Drilling deeper into the April data, Kontos went on to note that average wholesale prices for used vehicles remarketed by manufacturers rose 4.6 percent month-over-month and 11.5 percent year-over-year.
Prices for fleet/lease consignors were up 2.3 percent sequentially and up 5.8 percent annually.
And average prices for dealer consignors were up 4.5 percent versus March but down 1.5 percent relative to April of last year.
Kontos closed with data he collected from the National Automobile Dealers Association that showed retail used-vehicle sales by franchised dealers softened 12.6 percent year-over-year and 12.0 percent on the same time comparison for independent dealers.
Kontos added that April certified pre-owned sales were down 14.6 percent from the prior month and down 5.8 percent year-over-year, according to figures from Autodata Corp.
“It should be noted that both the NADA and Autodata sales numbers are based on fewer selling days in April, which tends to overstate the declines,” Kontos said. “On a year-to-date basis, CPO sales are up 1.5 percent versus last year.”
Kontos elaborated about the market in a video available here and at the top of this page.
ADESA Wholesale Used-Vehicle Price Trends
| |
Average |
Price |
($/Unit) |
Latest |
Month Versus |
| |
April 2018 |
March 2018 |
April 2017 |
Prior Month |
Prior Year |
| |
|
|
|
|
|
| Total All Vehicles |
$11,116 |
$10,824 |
$11,141 |
2.7% |
–0.2% |
| |
|
|
|
|
|
| Total Cars |
$8,778 |
$8,595 |
$8,968 |
2.1% |
-2.1% |
| Compact Car |
$6,562 |
$6,611 |
$6,805 |
-0.7% |
-3.6% |
| Midsize Car |
$7,701 |
$7,591 |
$7,962 |
1.5% |
-3.3% |
| Full-size Car |
$7,553 |
$7,274 |
$8,504 |
6.6% |
-8.8% |
| Luxury Car |
$13,474 |
$13,088 |
$13,317 |
2.9% |
1.2% |
| Sporty Car |
$14,625 |
$14,194 |
$14,694 |
3.0% |
-0.5% |
| |
|
|
|
|
|
| Total Trucks |
$13,139 |
$12,779 |
$13,187 |
2.8% |
–0.4% |
| Minivan |
$9,901 |
$9,876 |
$9,060 |
0.2% |
9.3% |
| Full-size Van |
$13,807 |
$13,195 |
$13,005 |
4.6% |
6.2% |
| Compact SUV/CUV |
$11,096 |
$10,777 |
$11,083 |
3.0% |
0.1% |
| Midsize SUV/CUV |
$11,425 |
$11,031 |
$11,773 |
3.6% |
-3.0% |
| Full-size SUV/CUV |
$13,878 |
$13,379 |
$14,085 |
3.7% |
-1.5% |
| Luxury SUV/CUV |
$18,645 |
$18,290 |
$19,055 |
1.9% |
-2.2% |
| Compact Pickup |
$9,407 |
$8,905 |
$9,326 |
5.6% |
0.9% |
| Full-size Pickup |
$16,137 |
$15,707 |
$16,520 |
2.7% |
-2.3% |
Source: ADESA Analytical Services.
While an auction general manager in Texas shared short-term expectations for what might be happening in the lanes, the newest Black Book Market Insights report also highlighted a noteworthy development that just occurred.
Editors determined truck values stabilized last week following several weeks of volatility, while cars saw higher demand at auction.
“Sedans drop in value, but sporty cars see a seasonal increase with summer around the corner. Luxury cars and crossovers experience a larger decline,” said Anil Goyal, executive vice president of operations at Black Book.
Volume-weighted, editors indicated overall car segment values decreased by 0.27 percent last week. In comparison, values had increased on average by 0.12 percent per week during the previous four weeks.
Within cars, Black Book noticed the sporty car segment increased the most in value last week, rising by 0.18 percent.
Again volume-weighted, editors noticed overall truck segment values (including pickups, SUVs, and vans) decreased by just 0.05 percent last week, same as the average drop per week in the previous four weeks.
Among trucks, Black Book said the sub-compact crossover segment increased the most in value last week, moving 0.22 percent higher.
Turning next to what Black Book’s representatives captured at sales nationwide, one lane watcher caught up with a general manager of an auction in Texas.
“The nicer, more expensive vehicles have softened here. Our market feels like it has another month or so before we see increased volatility across the board,” the GM said.
The scene at a couple of locations revealed how the hammer isn’t falling with as much frequency as it did during the height of the spring market.
Out of Georgia: “There was an abundance of no-sales in both the rental/lease lanes as well as the dealer lanes. In addition, the less expensive older vehicles that sold well recently experienced sporadic sales.”
Out of Michigan: “Consignment is down, but anything nice sells and for good money. Retail remains good but certainly not great.”
And speaking of retail, what’s occurring in Tennessee is perhaps a reflection of dealership activity.
“Sub-compact and units under $10,000 are in demand. The higher priced vehicles are much harder to turn,” the lane watcher in the Volunteer State said.
Finally, the report out of Pennsylvania might have given another glimpse of what prices at the pump are doing to dealer buying activity at the auction.
“A dealer out of New York who typically buys trucks stated that he is purchasing more passenger cars than he can remember,” the Black Book representative said.
KAR Auction Services is pulling in $820 in fees per transaction at its ADESA auction locations.
However, says chief financial officer Eric Loughmiller, only half of that amount is the auction fee.
The rest?
“That’s the value-added services we’re able to drive off of those locations,” Loughmiller said by phone shortly after the company’s latest quarterly earnings call.
“And that number’s growing — probably growing even beyond where we would have predicted it’d be five years ago,” Loughmiller said during the interview, which also included KAR chief executive Jim Hallett. “It’s just that those services are in real demand.”
Those services include things like reconditioning, transportation, dent and paint work, and key-cutting services.
They represent not only revenue opportunities in the traditional sense of how an auto auction is operated, but a means through which KAR can extend its services to new ventures.
Take, for instance, KAR’s recent purchase of mobility and fleet management software company STRATIM.
Auctions, acquisitions provide opportunity
STRATIM offers “a marketplace of suppliers” to help mobility fleet operators manage their fleets more effectively, KAR chief operating officer and chief strategy officer Don Gottwald said in a phone interview with Auto Remarketing shortly after the February purchase.
So that gives KAR opportunities on the front and back ends of the fleet process.
For instance, some of those could come as the cars are entering the mobility fleets, with things like installing various technologies on the car. And on the back end, it may be removing that technology when the car is de-fleeted and then selling the vehicle.
Other tasks that might include things like cutting keys, fixing dents, sale preparation and shipping — all of which KAR could provide to companies with mobility fleets.
But KAR is not going away from the brick-and-mortar auction fundamentals, either.
“The No. 1 thing is, we’re still going to sell cars in the lane,” Hallett said during the phone interview after company’s latest earnings. “Make no mistake about that. That’s not going away. The second thing, is really being able to expand the breadth of services that we offer.
“When you think of all the reconditioning, the paint and body, the mechanical, the dents, the transportation, the logistics … all those services not only will continue to exist for a certain segment of vehicles of the portfolio, but then we believe there’s an opportunity to expand those services,” Hallett said.
“And then we think there’s an opportunity to bring in new services that we haven’t even talked about yet,” he said. “And there will be a tie-in with STRATIM there, as well, in terms of some of the services that we’ll be able to provide.”
Hallett again emphasized that the brick-and-mortar auction isn’t going anywhere.
“Yes, digital and online will cannibalize some of the physical, but I believe there’s an opportunity to expand the market,” he said. “In expanding the market, one plus one is equaling something more than three.”
Off-lease spike drives demand
Underscoring the demand for ancillary services is the high numbers of off-lease vehicles, which are the biggest vehicle group in terms of use of these amenities, said Hallett.
And when there is as much used-car supply as there is now, sellers are having to set themselves apart from the competition.
Unlike, seven years ago, when buyer demand outweighed supply by so much that cars going through wholesale often weren’t even washed, instead just going straight through the auction to be sold, Hallett said.
“And you’d get $500 more than you got three months ago,” Loughmiller said.
Hallett added: “But where there’s a lot of off-lease cars, oversupplied market, there’s a lot of competition in the lanes. And these dealers and commercial consignors are having to make a decision: How do I differentiate my car in the lanes? Why should someone stand in my lane and bid on my cars versus stand over in my competitor’s lane?
“And oftentimes, the difference is, the amount of money that they’re willing to invest in reconditioning,” Hallett said.
The ancillary services can also be applied to cars that ultimately sell online, Loughmiller said, and reconditioning can actually increase likelihood of sale online
There are some services that KAR provides where the car physically goes to a location, plus other “services that we take to the car” examples of the latter being key cuts, fixing dents and refueling vehicles.
“Bringing STRATIM into the equation here and combining it with what we do at physical auctions, it’s a pretty good strategy for how we can get to cars outside of cars that are just brought to physical auctions or sold at physical auctions … even cars that are sold online, they’re going to need these services,” Hallett said. “And we can eventually get to the online buyer and provide those services.”
While analysts noticed April’s wholesale price movements went in a direction not seen during that particular month in seven years, the team at J.D. Power Valuation Services is projecting the change in May prices won’t be as dramatic as seen a year ago.
According to the latest installment of Guidelines, J.D. Power Valuation Services is expecting wholesale prices for vehicles up to 8 years in age to decline by about 0.2 percent in May. That’s only a fraction of what analysts recorded in May of last year when prices decreased by 1.7 percent.
The report indicated there are a variety of environmental factors in play that could help or hinder used-vehicle sales; thus, impacting wholesale prices.
“Negative forecast factors hurting used vehicles continue to be incentives, an anticipated increase in used supply, worsening credit conditions and increasing gasoline prices,” analysts said.
“However, positive factors such as favorable labor conditions, strengthening housing prices along with long-term quality improvements will outweigh the negatives,” analysts went on to say.
April pricing recap
With prices remaining stronger than anticipated, April represented the second-highest upward move of the J.D. Power Valuation Services Seasonally Adjusted Used Vehicle Price Index recorded so far this year.
The reading climbed 1 point higher to 117.1, leaving the index 3.4 points above what J.D. Power Valuations Services posted in April of last year.
What pushed the reading was an increase of 0.2 percent in vehicle prices for units up to 8 years in age. Analysts said in Guidelines that April’s behavior was “atypical” since it was the best performance for that specific month since 2011.
“Looking back, we’ve observed the development of a trend that began in 2014,” analysts said in the report. “It seems that prices have been stronger year-over-year for the April period.
“This can be attributed toward an extended spring rebound in used-vehicle prices that we traditionally see during the first quarter of the year,” they added.
Looking at price moves at the segment level, J.D. Power Valuation Services noticed that mainstream segments performed “very well” in April with the exception of large utilities, which softened by 1.3 percent. Prices for large utilities now have dipped for four consecutive months.
What’s triggered the decline, according to Guidelines, is the steady rise in auction volume for these particular models. Analysts pegged the year-over-year volume jump in April for large utilities at 33.2 percent and the year-to-date rise at 31.4 percent.
Enjoying price increases slightly above the overall April figure were midsize cars and large pickups, which both experienced a 0.6-percent uptick, according to J.D. Power Valuation Services.
Switching to luxury vehicles, analysts pointed out the pricing bright spot stemmed from luxury compact utilities climbing by 0.7 percent. Otherwise, “luxury segments didn’t fare as well as their mainstream counterparts.”
The recap in Guidelines showed that the luxury segment sustaining the most dramatic price decline in April included luxury large cars, which dropped by 5.7 percent.
“However, it’s important to remember overall volume of this segment is extremely small,” analysts said. “In fact, it’s the smallest of all the segments we examine.
“As a result, any material decline in individual model wholesale prices is extremely amplified,” they added.
To reinforce the point, J.D. Power Valuation Services cited the April price drop-offs of the 2013 and 2014 Lincoln MKS. Auction prices for these vehicles plummeted by 26 percent and 19 percent, respectively.
For more analysis from J.D. Power Valuation Services, see the podcast below with Jonathan Banks, the company’s vice president of vehicle analysis and analytics, recorded at NADA Show 2018 earlier this year.
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Black Book has made the call. Spring market 2018 is finished.
This week’s Black Book Market Insights report included that declaration as well as reinforcement of that stance coming via what representatives spotted in the lanes nationwide.
“The spring market season is over as values show mild declines across the board. Mainstream sedans have been in demand in the used market even as sales declined for new sedans,” said Anil Goyal, executive vice president of operations at Black Book.
Volume-weighted, editors determined that overall car segment values decreased by 0.08 percent last week. In comparison, Black Book recapped that values had increased on average by 0.18 percent per week during the previous four weeks.
Likely reflecting summer’s official approach, Black Book pointed out the sporty car segment increased the most in value last week, rising by 0.38 percent.
Again volume-weighted, editors indicated overall truck segment values — including pickups, SUVs, and vans — also softened by 0.08 percent last week, similar to the average drop of 0.07 percent per week that Black Book recorded during the previous four weeks.
Among trucks, editors found the compact van segment increased the most in value last week, surging 0.97 percent higher.
Part of what helped Black Book editors learn the spring market wrapped up for the season included the anecdotes lane representatives collected while attending sales nationwide. The rundown began in Massachusetts.
“For the first time in many weeks, the sellers reported that their results were just OK. This is a change from the robust activity from the last several weeks,” Black Book’s representative in Massachusetts reported.
Down in Georgia, a similar situation unfolded with the lane observer saying, “The prices continue to soften here. An active buyer said that the market had stabilized and prices were no longer going up but starting to drop.”
Out West, the hammer didn’t drop as frequently, either.
“Lots of high-mileage vehicles and no-sales in the lanes today. Dealers are being much more selective,” said Black Book’s lane watcher stationed in California.
While the overall spring market might be finished for the year, Black Book also shared a pair of recaps where the wholesale space showed one last gasp for the season.
From Michigan: “Retail in our area is positive but not exceptional. There was good bidding activity this week at the auction.”
From South Carolina: “Small and midsize sedans continue to be in demand and the buyers are willing to pay up for them.”
