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KAR notices wholesale prices still way above year-ago & pre-COVID readings

Wholesale prices are softening, but KAR Global’s September data show they still have a way to go before returning the level auctions and dealers saw a year ago — or even before the pandemic arrived.

According to KAR Global Analytical Services’ monthly analysis of wholesale used-vehicle prices by vehicle model class, wholesale prices in September averaged $12,928, which is down 4.2% compared to August.

However, that average remains 14.0% higher compared to pre-COVID/February and 15.9% relative to September of last year.

“Average wholesale used vehicle prices softened from their August peaks in September and into October as retail sales slowed and dealer inventories grew,” KAR Global chief economist Tom Kontos said in his latest installment of the Kontos Kommentary that contained the data.

“Prices remain up by double-digits on a year-over-year basis and versus pre-COVID,” he added.

Kontos also mentioned vehicles that often become certified pre-owned units still are posting average values higher than a year ago, too.

When holding constant for sale type, model-year-age, mileage and model class segment — using criteria that characterize off-lease units — KAR reported that prices were up on a year-over-year basis for midsize cars and midsize SUV/CUVs in September.

For those midsize cars, the jump came in at $963, or 7.9%, to move the average $13,203. For those midsize SUV/CUVs, the rise totaled $1,155 or 5.5%, pushing average values to $22,170.

Editor’s note: Coming soon is a feature about Kontos celebrating 20 years with the company.

Source: KAR Global Analytical Services.

Lane watch: Wholesale values dip for seventh consecutive week

Black Book reported wholesale values declined for the seventh week in a row.

Meanwhile, analysts said in their latest COVID-19 Market Update that after falling two weeks ago, retail prices for used vehicles have stabilized.

According to Black Book’s volume-weighted data, overall car segment values decreased 0.74% over the past week. The drop was larger than a week earlier when analysts pegged it at 0.59%.

“Compact cars have been extremely volatile throughout the pandemic, with a sharp fall initially, then followed by a steady rebound,” analysts said in the newest report.

“However, the values have been consistently falling since the last week of August,” analysts continued about those compact cars, which sustained a value drop of 1.62% to pace all car segments.

Also of note in the car space, Black Book mentioned that after 20 weeks of increases and general stability, the premium sporty car segment showed the first signs of declines, edging 0.09% lower this past week.

Moving on to trucks, Black Book’s volume-weighted information showed overall truck segment values (including pickups, SUVs and vans) softened 0.39% last week. That amount is slightly higher than the previous week’s decrease of 0.35%. 

Analysts pointed out that subcompact crossovers have had an average decline exceeding 1% during the past four weeks with the most recent drop equaling $121.

“Sub-compact crossovers are a newer segment in the market, but consumer preference is still for the larger crossover/SUV options,” Black Book said.

And while full-size trucks remain in short supply on dealer lots — keeping significant depreciation in check — analysts noticed that values for small pickups took a notable dive this past week, sliding by 1.11%.

To close with a brief glance at the retail landscape as mentioned previously, Black Book pointed out that retail prices fell two weeks ago but have since stabilized.

“However, not all segments are performing equally,” analysts said. “As has been the case with the wholesale market, the overall retail market is being skewed by the strength of the full-size trucks and certain SUV segments that continue to garner a higher price.

“Other segments such as compact cars and compact crossovers are seeing larger declines in retail prices due to a larger supply in the market,” they added.

Lane watch: Volume rebound continues to lag previous value surge

Both Black Book and J.D. Power Valuation Services are reporting that wholesale prices are continuing to soften after the profound rebound they made this summer following the initial onset of the pandemic.

However, both firms are seeing wholesale volume still being soft in the auction lanes as we get deeper into autumn.

According to J.D. Power Valuation Services’ latest Used Market Update, wholesale auction sales of vehicles up to 8 years old for the week ending Oct. 11 remained unchanged at 78,000 units, representing the fifth consecutive week that sales failed to surpass the 80,000-unit threshold.

Analysts also noted that sales for the week were approximately 19% lower than what’s typically recorded for the period.

Black Book looked to explain why volume remains stifled in its latest COVID-19 Market Insights.

“Rental companies held back some units to cover Hurricane-related rentals,” analysts said in the report. “Repossessions are slow to hit the market as the process slowed down significantly compared to pre-COVID days.

“Dealers are reporting that they are starting to send more unwanted units to auctions. This is great news as auctions have been low on available volume after the strong sales that were experienced over the summer months,” Black Book continued.

As far as values go, Black Book’s volume-weighted data showed that overall car segment values decreased 0.59% last week; not quite to the level analysts spotted a week earlier when they noticed car values declining by 0.92%.

Black Book indicated that subcompact cars had the largest decline for a second week in a row, exceeding 1%. 

“Premium sporty cars with their low volume continue to retain their value well and experienced stability in pricing for a fourth week in a row,” analysts added.

On the truck side, Black Book’s volume-weighted information indicated that values in the overall truck segment (including pickups, SUVs and vans) declined by 0.35% last week, nearly mirroring the exact decrease recorded a week earlier of 0.34%. 

The smaller crossover segments — subcompact and compact — had another week of large declines, dropping by 0.74% and 0.68%, respectively. But Black Book mentioned the depreciation drops for minivans and compact vans were even more significant as each segment retreated by more than 0.80%.

Also of note, Black Book said full-size pickup values dipped by another 0.19% last week.

Looking deeper into autumn, J.D. Power Valuation Services offered a forecast, projecting potential wholesale price paths when this tumultuous year closes.

“Despite a slowing used market, wholesale prices remain strong,” analysts said in their update. “Prices are expected to continue to move lower through October and into November as pent-up demand has been satisfied and pandemic-related macro-economic headwinds increase.

“By year's end, prices are expected to be greater than pre-virus levels,” they continued. “It is important to note, however, that while the outlook is relatively optimistic, there remains a great deal of uncertainty surrounding the effect of new virus outbreaks, the potential for another round of federal stimulus, overall employment conditions.

“Given these unknowns, a heightened degree of market volatility should be expected,” J.D. Power Valuation Services added.

Lane watch: Why dealers are now ‘exercising caution’

Dealerships sold millions of used vehicles during the summertime, including a four-month stretch of year-over-year sales gains.

However, Black Book isn’t necessarily seeing buyers and managers rushing to replenish store inventory.

According to their newest COVID-19 Market Insights released on Tuesday, analysts highlighted a typical autumn wholesale price cooldown, explaining that those softer prices aren’t always bringing the hammer down to send vehicles onto transport trucks bound for stores.

“Retail demand has softened, but dealers are still in need of inventory after the strong summer sales. However, they are exercising caution in purchasing high-priced inventory,” Black Book said in the latest report. “Instead, they are being very selective with their purchasing decisions. 

“Lower-mileage used vehicles continue to be good substitutes for the models that still lack in new supply, like full-size trucks that have days’ supply well under 30 days,” analysts added.

Speaking of those full-size trucks, analysts noticed prices for those units finally dipped after 19 weeks of increases. Full-size truck values dipped by 0.18%.

Triggered in part by that movement, Black Book’s volume-weighted data showed overall truck segment values (including pickups, SUVs, and vans) declined by 0.34% last week, nearly doubling the previous week’s drop of 0.19%.

Analysts mentioned that both mainstream and luxury subcompact crossovers continue to experience heavy value declines as they plummeted by 1.13% and 0.98%, respectively.

Black Book also pointed out that new-model inventory levels of full-size crossovers and SUVs continue to be low, too, “so depreciations are remaining fairly stable.” Those units edged down by just 0.05% this past week. 

On the car side, value depreciation accelerated compared to the previous week.

According to Black Book’s volume-weighted data, analysts said overall car segment values decreased 0.92% the last week, up from the previous week’s drop of 0.66%.

Black Book noticed that mainstream car segments (subcompact, compact, midsize and full-size) all suffered declines of more than 1% with those sub-compacts leading the way at 1.40%.

The report mentioned that premium sporty cars continue to generate interest as values for those units ticked just 0.02% lower, counter to the overall car segments trends.

“Sales results at the auctions improved last week for many remarketers as many floors have now been adjusted to reflect the softening in wholesale values,” analysts said.

“This was not the case for all sellers, with many of the dealer lanes seeing a lot of ‘ifs’ and high no sale rates on a few luxury manufacturer lanes with remarketers holding firm to floors,” they added.

One other trend Black Book mentioned in the latest report directly correlated with how dealers are behaving in the lanes.

“A couple of weeks ago, we noticed the success the independents were finally having in being able to successfully bid against the larger buyers. However, this past week we did see that change a bit as the larger buyers got a little more aggressive in their bidding,” analysts said.

“This was especially true on the lanes where the remarketer was letting go of most any of the inventory that received a bid,” analysts went on to say.

Lane watch: Wholesale atmosphere improves for independent dealerships

Fall’s arrival appears to be bringing welcomed relief for independent dealerships looking to build their inventory. Black Book explained why through its latest COVID-19 Market Insights released on Tuesday.

Analysts recapped in the report, “This past week, we saw more independents being the successful bidder. This is a welcome sight as we’ve talked to so many buyers that struggled over the summer to compete with the money the larger buyers were willing to spend to secure inventory.”

Not only are those larger buyers such as CarMax and Carvana easing back, Black Book is seeing that independent stores and dealerships in general aren’t having to dip into the floorplan funds as much for wholesale units.

According to volume-weighted data, analysts determined that overall car segment values decreased 0.66% over the last week. That decline nearly doubled the figure Black Book recorded during the prior week when car values softened by 0.37%.

Analysts also pointed out that the smallest car segments — compacts and subcompacts — sustained the largest value drops, falling by 1.59% and 0.92%, respectively. Black Book explained the reason for the movement of these particular units by saying, “demand has softened in recent weeks with new inventory increasing and consumers continuing to shift their preferences to crossovers.”

Meanwhile in the truck world, overall truck segment values (including pickups, SUVs and vans) declined by 0.19% last week, according to Black Book’s volume-weighted data. It was nearly a carbon copy of the prior week decline in truck values, which was 0.18%. 

However, value declines for subcompact crossovers and subcompact luxury compacts far exceeded the overall reading, dropping by 1.17% and 1.39%, respectively. Black Book said, “Fuel prices remain low, so these fuel-efficient segments are being passed over by consumers for the larger compact and midsize segments that provide more utility and passenger space.”

Analysts also extended the ongoing dialogue about full-size trucks since their upward value moves “continued to lose steam.” Values for these units rose by 0.54% three weeks ago, followed by a 0.12% rise two weeks ago. Last week, values of full-size trucks ticked up by just 0.02%.

“At the auctions last week, it was observed that some trim levels showed weakening in values, and it is expected that this will continue into this week,” Black Book said.

“However, new inventory remains low so it is not expected that values will experience large declines until new supply increases,” analysts added.

Black Book wrapped up its latest wholesale observations by recapping conversations that analysts and other lane representatives had with consignors.

 “Sales results continued to be mixed this past week with some sellers adjusting floor prices and ready to move their inventory and others holding firm to floors and willing to experience high no sale rates,” analysts said.

“In particular, the luxury sellers are holding firm to floors and seeing sales rates falling in the 20% range. Full-size trucks and large SUVs continue to bring strong attention on the lanes,” they continued.

“Many remarketers we are talking to are letting us know that they are short on inventory and are prepared to ride out the traditional fall softening in the market,” analysts went on to say. “The only big adjustments they are making to floors are in their older, rougher inventory and on sedans where demand is low.”

Those full-size pickups keep wholesale prices climbing

Full-size pickups are built for hauling capability, and these particular vehicles certainly are carrying wholesale prices higher.

Referenced by KAR Global chief economist Tom Kontos, as well, Black Book senior vice president data science Alex Yurchenko described what full-size pickups did to wholesale prices as Black Book shared its Used Vehicle Retention Index for September.

According to the newest reading released on Monday, the index rose 1.8 percentage points from August to September to land at 130.8.

“Overall, the Index increased slightly in September,” Yurchenko said in a news release. “The increase was driven mostly by the strength of the full-size pickup segment in the first part of September as most of the other segments saw a drop in the index.

“We expect the continuation of weakening of most of the segments including full-size pickups in the next several months as the economy remains weak and there is an expected glut of used supply,” Yurchenko continued.

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.

The index dates back to January 2005 when Black Book published a benchmark index value of 100.0 for the market.

During 2008, the index dropped by 14.1% while during 2016, the index fell by just 6.4%. 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. I

The index continued to remain relatively stable, rising slightly until May of 2014 when it hit a peak of 128.1.

To obtain a copy of the latest Black Book Wholesale Value Index, go to this website.

Pickup prices continue to be noteworthy in KAR Global’s latest wholesale data

If Tom Kontos wanted to speak in the language of his nationality when describing wholesale prices for pickups, the KAR Global chief economist would say “idiaítera dynatós,” which is Greek for “particularly strong.”

Pickups are among the seven vehicle segments with wholesale prices at least 26% higher than a year ago, according to the August Kontos Kommentary released on Thursday.

Overall, KAR Global Analytical Services monthly analysis of wholesale used vehicle prices by vehicle model class showed that wholesale prices in August averaged $13,498 — up 0.9% compared to July, up 19.1% from pre-COVID/February and 20.1% higher than August of last year

“Wholesale used-vehicle prices continued to outperform expectations in August and well into September, especially when looked at on a year-over-year basis. On a month-over-month basis, however, August prices were fairly flat relative to July,” Kontos said.

“Weekly data on prices and conversion rates in late August and throughout September did indicate some softening in demand, and this will be explored more fully in our September report,” he continued.

“Prices for pickup trucks are particularly strong, as demand for these units exceeds both new and used supply,” Kontos went on to say.

As he does monthly, Kontos also delved deeper into 3-year-old midsize cars and midsize SUV/CUVs, using criteria that often characterize off-lease units by holding constant for sale type, model-year age, mileage and model class segment.

Kontos noted prices were up on a year-over-year basis in August for both of these segments with those midsize cars rising $1,005 or 7.9% to $13,676 and those midsize SUV/CUVs climbing $1,603 or 7.5% to $23,092.

Source: KAR Global Analytical Services.

Lane watch: Floors not expected to change even as values continue to soften

Wholesale values are continuing their typical autumn descent, according to the COVID-19 Market Insights released by Black Book on Tuesday.

However, analysts and auction observers noticed that consignors aren’t budging much when it comes to the floors for the limited volume of vehicles going through the wholesale market nowadays.

With that scenario as the backdrop, Black Book got into the details of the latest price movements for both cars and trucks.

Based on volume-weighted data, Black Book determined overall car segment values decreased 0.37% over the past week, nearly mimicking the exact drop seen during the previous week that was 0.38%.

Dealers who needed midsize cars might have found bargains when the hammer came down as Black Book said values for those particular units dropped 0.89% this past week.

Conversely, analysts found that values in the luxury car segment rose 0.37%, “but it is expected that will be short-lived.”

Analysts continued in the report by saying, “This segment saw high no sale rates on the lanes this past week with sellers unwilling to adjust floors yet. The few units that did sell garnered a strong price, but overall demand appeared to be softening.”

Meanwhile, on the truck side, Black Book indicated its volume-weighted information showed the overall segment (including pickups, SUVs and vans) values decreased by 0.18% last week, much more than the 0.02% dip the segment experienced a week earlier.

Analysts pointed out that small crossovers took the hardest valuation hits with sub-compact, compact and sub-compact luxury segments all sustaining declines of more than 0.50%. 

Values for those highly sought-after full-size trucks rose for the 18th week in a row, according to Black Book’s tracking. However, the increase of was just 0.12%, only a fraction of the prior week jump of 0.54%.

Black Book wrapped up their latest auction update with a trio of observations that other dealers and used-car managers might be experiencing, too.

“The auctions were a mixed bag of results last week with some locations reporting strength in sales rates and others seeing increases in no sales, particularly on luxury units and sedans,” analysts said. “Full-size trucks and SUVs continue to bring a lot of attention as sellers with these units are having better success. 

“Remarketers are letting us know they are short on inventory and don’t foresee that changing anytime soon,” analysts continued. “As a result, their plans to adjust floors are minimal. However, they are preparing for a softening in values for the remainder of the year.”

And which retailers are adding inventory nowadays? Black Book mentioned it’s not quite the same situation as what unfolded during the heat of summer.

“The big buyers (CarMax, Carvana, etc.) continue to be active at the auctions, but their zealous bidding and buying throughout the summer months has begun to slowdown,” analysts said. “Their need to be the final bidder — no matter the cost — appears to have lessened over the last two weeks.” 

Lane watch: 2 specific vehicle segments still drawing dealer interest

Judging by the wholesale price movements, if dealers can add compact luxury SUVs or full-size pickups to their inventory, they will. Otherwise, used-car managers appear to be reducing their enthusiasm for raising inventory levels higher with only about a week remaining in September.

Analysts shared those findings and more in Black Book’s latest COVID-19 Market Insights released on Tuesday.

“Retail demand hasn’t softened for all parts of the country, but much of the dealer sentiment is changing. September is seeing demand falter at many dealerships. This is a time of year that typically sees sales volume decrease,” Black Book said in the latest report.

“Dealers continue to source used inventory to stock their lots, but the pace is slowing,” analysts continued. “Some are hoping another round of stimulus will give their business another boost, but they are being cautious to not load up with too much high-priced inventory right now in case that doesn’t happen.”

When looking at Black Book’s volume-weighted data in the truck space, overall values — including pickups, SUVs and vans — dipped by just 0.02% last week.

Minivans dropped by a much greater rate as values for those particular units sunk 0.64%. What kept minivans from pulling down the overall segment reading more were those previously mentioned units that dealers seem to want.

In fact, Black Book reported values for those compact luxury SUVs rose 0.39% while values for full-size pickups that seemingly always are in demand climbed by 0.54%

“Full-size trucks continued to show dominance in the lanes as the short supply of new trucks is driving up the demand and prices of used,” analysts said.

Meanwhile on the car side, Black Book’s volume-weighted information showed overall segment values decreased 0.38% last week, surpassing the previous week’s decline of 0.26% that’s been part of a three-week stretch of downward movement.

Analysts pointed out that declines for the compact, prestige luxury, mid-size, sub-compact and sporty car segments all topped 0.40%.

“Premium sporty and near luxury car were the only segments to show continued appreciation,” Black Book said. “However, sales rates on luxury units were lower this past week, so it is expected those values will also begin to decline as sellers will likely adjust floors.”

And speaking of floors and other activities associated when the hammer drops, analysts shared a few other trends they noticed when watching online sales or conversing with their auction and dealer contacts.

“Bidding lost a lot of luster over the last week, especially in some of the luxury manufacturer lanes that experienced some extremely low sale rates; many that haven’t been seen since the early weeks of the pandemic,” Black Book said. “Sellers that appeared to have adjusted their floors or had full-size trucks to sell experienced the highest success rates. 

“If bids were prevalent again last week,” analysts added. “Throughout the summer, lanes didn’t have representation, but bidding activity was so strong that bids easily exceeded the floors. But now that bidding activity has slowed down, the lack of representation is leading to an increase in final bids that are waiting for a seller response.” 

Lane watch: Truck values dip for first time in 15 weeks

After racing higher when auctions began to move vehicles through the wholesale market again after the outset of the coronavirus pandemic, values are starting to make a noticeable turn lower, according to Black Book’s newest COVID-19 Market Insights released on Tuesday.

While the dollar amount might only fetch a drive-thru meal for you and your spouse, Black Book analysts noticed that their volume-weighted information for trucks showed values for the segment (including pickups, SUVs and vans) dipped by 0.07% or $13 last week.

However, Black Book said this decrease was the first one in the overall truck market in 15 weeks, dating all the way back to May 11.

Analysts noticed the sub-compact segments triggered the overall decline for trucks with the hardest hit being sub-compact crossovers declining by 0.86% and volume-leading compact crossovers falling by 0.42%.

“As supply of new units continues to struggle to meet demand in the full-size SUV and truck segments, the values continue to be strong with used prices increasing again this past week,” Black Book said in the latest report.

Meanwhile, based on volume-weighted data, analysts determined overall car segment values decreased 0.26% last week, marking the second week in a row of drops. The streak started with a 0.22% decline.

Like their counterparts in the truck world, analysts noticed sub-compact cars dropped the most as values for those units slid 0.65%. Analysts added that luxury cars and prestige luxury cars weren’t far off that pace, declining by 0.49% and 0.43%, respectively. 

Black Book added that sporty cars are in a stretch of decreases of 0.72% and 0.49%, “as many parts of the country are moving into the time of year that traditionally sees the demand for these cars decline as summer is coming to a close.”

Analysts also discussed the recent holiday weekend in the newest report.

“The weeks leading up to Labor Day saw increased ‘no-sales’ and ‘ifs’ as dealers waited to see how the holiday weekend turned out,” Black Book said. “Overall, the weekend was successful for many dealers, but they are still showing post-holiday buying restraint.

“Sales rates this past week were consistent with the week before Labor Day as dealers were selective in what they replaced on their lot,” analysts continued while pointing out that much of remarketers’ best inventory has already been sold. 

“The decrease over the last several weeks in sales rates is not only attributed to caution by dealers on the amount of used inventory they are purchasing, but also due to the available selection of higher quality units for buyers to choose from being diminished,” Black Book added.