Black Book is seeing car values that bloomed during the spring market now wilting in the summer heat.
This week’s Black Book Market Insights report indicated nearly all car segments sustained a significant decline in values, signaling summer seasonality.
Conversely, editors noticed the truck space had three segments finish with an increase in value during the week.
“Depreciation in car segments has increased after the Spring season. Pickup trucks, which usually retain strength in the summer months, went up in values last week,” Black Book executive vice president of operations Anil Goyal said in the latest report.
According to volume-weighted data, Black Book determined overall car segment values decreased by 0.44% last week. That’s up from the four-week average decline of 0.32%.
Values of compact cars and prestige luxury cars dropped the most, sliding by 0.68% and 0.69%, respectively.
Again based on volume-weighted information, editors learned that overall truck segment values (including pickups, SUVs, and vans) dipped by 0.12% last week. That’s 2 basis points above the four-week average drop of 0.10%.
Among trucks, values of subcompact crossovers decreased the most, sliding by 0.72%.
Turning next to what Black Book observers spotted when watching the lanes at nearly 60 sales nationwide, a representative connected with an independent dealer in Arizona who described the competition for inventory.
“The price range that we look for our independent store is becoming more difficult to source,” the dealer said. “We look for clean vehicles in the $10,000 to $17,000 range and find ourselves competing more and more with the franchise stores as well as the independent dealers.”
In other parts of the country, active bidding by franchised and independent stores seemed to be brisk. Here is Black Book’s latest anecdotes:
—From Texas: “The auction inventory was low today, which kept the values up as bidding was brisk.”
—From Florida: “The market seemed slightly lower. The rental and lease lanes did well, but they seemed to have lowered their floors to make the deal.”
—From Illinois: “One of the buyers for a large retail chain of stores is reporting that business is good, and the prices remain elevated.”
Veteran dealers likely will say tax season isn’t what it used to be when some stores registered a significant portion of their annual retail sales fueled by refunds.
Well, KAR Auction Services chief economist Tom Kontos explained that based on the May wholesale data he reviewed, this year’s tax season might have rekindled memories of those active years.
According to ADESA Analytical Services’ monthly analysis of wholesale used-vehicle prices by vehicle model class, wholesale used-vehicle prices in May averaged $11,667, which is up 1.5% compared to April and 5.0% relative to May.
Kontos indicated compact and midsize cars were two notable segments that experienced overall average price declines for the month.
“It would appear that the 2019 spring/tax season market started later but lasted longer than other years as average wholesale prices were up on both a month-over-month and year-over-year basis in May,” he said in the latest installment of the Kontos Kommentary.
“Retail used-vehicle sales, including CPO sales, provided demand-side support for wholesale values,” Kontos added.
Popular vehicles that might have ended up as certified pre-owned units — late-model midsize cars and SUVs/CUVs — both generated price climbs in May. As he does regularly, Kontos examined these units when holding constant for sale type, model-year age, mileage, and model class segment.
For those cars, the year-over-year lift came in at 5.6% (or $669) to rise to $12,612. For those SUVs, the year-over-year jump was 0.7% (or $156) to $21,013.
Kontos continued his regular update by noting average wholesale prices for used vehicles remarketed by manufacturers in May softened 1.2% month-over-month and 0.7% year-over-year.
He mentioned prices for fleet/lease consignors in May ticked up 2.0% sequentially and 5.5% annually.
Finally, Kontos said average May prices for dealer consignors rose 1.7% versus April and 4.3% compared to May of last year.
ADESA Wholesale Used-Vehicle Price Trends
| |
Average |
Price |
($/Unit) |
Latest |
Month Versus |
| |
May 2019 |
April 2019 |
May 2018 |
Prior Month |
Prior Year |
| |
|
|
|
|
|
| Total All Vehicles |
$11,667 |
$11,489 |
$11,114 |
1.5% |
5.0% |
| |
|
|
|
|
|
| Total Cars |
$8,945 |
$8,942 |
$8,662 |
0.0% |
3.3% |
| Compact Car |
$6,800 |
$6,863 |
$6,483 |
-0.9% |
4.9% |
| Midsize Car |
$7,690 |
$7,724 |
$7,626 |
-0.4% |
0.8% |
| Full-size Car |
$8,142 |
$7,938 |
$7,845 |
2.6% |
3.8% |
| Luxury Car |
$13,863 |
$13,862 |
$13,304 |
0.0% |
4.2% |
| Sporty Car |
$14,946 |
$14,790 |
$14,453 |
1.1% |
3.4% |
| |
|
|
|
|
|
| Total Trucks |
$13,828 |
$13,596 |
$13,200 |
1.7% |
4.8% |
| Minivan |
$8,581 |
$8,393 |
$9,939 |
2.2% |
-13.7% |
| Full-size Van |
$12,988 |
$13,398 |
$13,636 |
-3.1% |
-4.8% |
| Compact SUV/CUV |
$11,393 |
$11,367 |
$11,051 |
0.2% |
3.1% |
| Midsize SUV/CUV |
$12,199 |
$11,720 |
$11,449 |
4.1% |
6.6% |
| Full-size SUV/CUV |
$15,482 |
$15,203 |
$14,291 |
1.8% |
8.3% |
| Luxury SUV/CUV |
$19,381 |
$19,045 |
$18,678 |
1.8% |
3.8% |
| Compact Pickup |
$11,023 |
$10,655 |
$9,422 |
3.4% |
17.0% |
| Full-size Pickup |
$17,172 |
$16,914 |
$16,278 |
1.5% |
5.5% |
Source: ADESA Analytical Services.
With wholesale prices softening as summer officially arrives this week, Black Book is noticing that dealer activity is rebounding a bit at the auction even if action at their showrooms is not at an optimum level.
This week’s Market Insights report showed that values for both cars and trucks decreased at rates much above the average editors spotted during the past four weeks.
“Car segments are in a steady depreciation pattern, in line with seasonality. SUVs and pickups (except for luxury) show strong retention,” Black Book executive vice president of operations Anil Goyal said in the latest report.
Volume-weighted, editors indicated overall car segment values decreased by 0.46% last week. That figure is more than double what Black Book computed at the four-week average (down by 0.22%).
In the car space, Black Book noticed values of subcompact cars decreased the most, dropping by 0.90%
Again volume-weighted, editors determined overall truck segment values (including pickups, SUVs and vans) softened by 0.16% a week ago. Like with cars, that truck reading more than doubled the four-week average that came in at 0.07%.
Among trucks, Black Book found that values of subcompact luxury crossovers softened the most, sliding by 1.10%.
Turning next to the anecdotes Black Book representatives collected by attending nearly 60 sales nationwide, lane watchers shared these comments, including:
— From California: “The sale was active both on the floor and through the simulcast. Prices are holding firm for the most part.”
— From South Carolina: “We had a good crowd throughout the sale which was encouraging. Small and midsize SUVs were selling well today.”
— From Michigan: “Dealers are saying that difficulty with inventory acquisition along with below average retail business is currently holding them back.”
— From Illinois: “Prices were strong across the board today. Due to low inventories, even the vehicles with hail damage brought good money.”
Remember Cash for Clunkers? J.D. Power Valuation Services does, and its May wholesale vehicle price data triggered memories of that federal government program to bolster sales of new, fuel-efficient models.
Analysts shared in the latest installment of Guidelines that wholesale prices of used units up to 8 years in age declined by an average of 0.7% in May. J.D. Power Valuation Services indicated the month’s result was significantly better than the previous five-year average decline of 1.9%, producing the best May performance since 2011.
“Looking back, prices in May 2011 were bolstered by a shortage of used units resulting from depressed new-vehicle sales in 2009. Declining new-vehicle sales during this period in addition to the Car Allowance Rebate System (CARS), also known as Cash for Clunkers, created a situation where there were significantly fewer used units available in May 2011,” analysts said in the report.
The May movement meant the J.D. Power Valuation Services’ Seasonally Adjusted Used Vehicle Price Index increased by 1.2 points relative to April to land at 121.0.
Analysts added their track of used-vehicle wholesale prices now have risen for three consecutive month, leaving the May reading 1.9% higher than a year ago.
At the segment level, J.D. Power Valuation Service noticed patterns similar to April with mainstream SUV and pickup segment prices coming in as some of the strongest in the industry in May.
“Affordable mainstream passenger segments didn’t see the same strength they have in recent months, however, the outlook for these segments remains positive for the remainder of the year,” analysts said.
On the luxury side, J.D. Power Valuation Services determined May produced mixed results. However, midsize premium cars turned in their best performance for the May period since 1996.
“Prices for remaining premium segments were depressed, due in part to continuing increases in wholesale volume,” analysts said.
With Cash for Clunkers still on their mind, J.D. Power Valuation Services experts explained that stemming from March, April and to some degree May’s stronger than anticipated performances, used-vehicle prices are expected to increase in 2019 relative to 2018.
J.D. Power Valuation Services’ 2019 forecast expects used prices for vehicles up to 8 years in age to increase by approximately 0.2% to 0.7%.
“As new-vehicle prices rise, and affordability concerns increase, consumers will continue turning to used vehicles as alternatives to their new counterparts,” analysts said. “Even with increasing levels of used supply, healthy consumer appetite for used vehicles will help keep used values strong.”
Black Book’s lane watcher stationed at a sale in Pennsylvania succinctly summed up the dealer and wholesale price activity contained in the firm’s latest Market Insights report.
The Keystone State representative said, “The auction is simply not as active as it was just a couple of weeks ago.”
Editors noticed wholesale prices for both cars and trucks softened at greater rates last week than they had on average during the previous four weeks.
Volume-weighted, Black Book indicated overall car segment values decreased by 0.36% last week. In comparison, editors said market values for cars had decreased by 0.22% on average during the prior four-week period.
Among cars, editors reported values of prestige luxury cars, and full-size cars decreased the most, sliding by 0.63% and 0.62%, respectively.
Again looking at volume-weighted data, Black Book found that overall truck segment values (including pickups, SUVs and vans) decreased by 0.16% last week. Truck market values ticked down by 0.07% on average during the previous four weeks.
Values of sub-compact crossovers and sub-compact luxury crossovers declined the most as editors pinpointed the drops at 0.65% and 0.67%, respectively.
“The overall depreciation rises as buyer interest wanes a little after a strong spring market. Trucks are retaining values better than cars,” Black Book executive vice president of operations Anil Goyal said.
The latest report also included observations from other parts of the country since Black Book attends nearly 60 sales each week. The other anecdotes included:
— From South Carolina: “Cars in the rental lane were getting more interest than the SUVs and trucks due to the more aggressive floor prices on those units.”
— From Michigan: “The supply challenge continues with auction inventory being down along with fewer trades coming in.”
— From Tennessee: “The number of buyers bidding is below normal. The higher price vehicles are hard to sell creating opportunities for the smaller size SUVs.”
Through a new partnership between Black Book and inventory procurement platform Drivably, Black Book’s automotive intelligence and vehicle valuation data are powering Drivably’s dealer inventory acquisition ecosystem.
Black Book says that in helping dealers find the right inventory opportunities, Drivably bases its recommendations on criteria such as a dealer’s unique preferences, historical dealership performance data, individual market and valuation data.
Drivably automates the buying process to help dealers, who spend a great deal of time appraising, analyzing, and bidding on cars for their dealership.
Black Book says that by using Drivably’s platform, dealers can spend time on more important business-related activities while making more money from the cars they buy.
Black Book’s executive vice president of revenue Jared Kalfus said in a news release that valuation precision is an important aspect of inventory acquisition to get the most margin at the retail sale.
“Black Book’s data analytics and insights will power the recommendation model that results in the Drivably score, increasing profit potential for each dealer on the Drivably platform,” Kalfus said.
In addition to a dealer’s unique preferences, Drivably’s model uses data from Black Book such as history adjusted valuations and retail market insights.
Drivably chief executive officer Tyler Hall said that simply analyzing the local market is not enough. Other data is extremely important in recommending the right inventory to dealers, he said.
“As online inventory acquisition becomes more mainstream, it will become increasingly more important to leverage the right data to make the right decisions,” Hall said. “With Drivably and Black Book, dealers can trust that our platform’s recommendations are accurate.”
This week’s Black Book Market Insights report showed the days’ supply of new full-size pickups currently sits at a four-year high, well above 100 days.
While editors are thinking automakers might push incentives to get those new trucks over the curb at franchised dealerships, Black Book isn’t seeing prices soften for full-size pickups moving down the lanes.
“The depreciation rates normalized last week after a strong spring market. Pickups continued to show strength in values,” Black Book executive vice president of operations Anil Goyal said in the latest report.
Volume-weighted, Black Book determined overall truck segment values (including pickups, SUVs and vans) decreased by just 0.08% last week. In comparison, truck values edged up by 0.03% on average during the previous four-week period.
As mentioned, editors noticed the values of pickups increased the most with full-size models rising 0.22% and small trucks climbing 0.47%.
Meanwhile, in the car space, Black Book’s volume-weighted data showed overall car segment values softened by 0.31% last week. That’s quite a bit more than the four-week average, which was a 0.05% dip.
Among cars, editors indicated values of prestige luxury cars decreased the most, declining by 0.67%.
Turning next to what Black Book representatives in the lanes saw at nearly 60 sales nationwide, the anecdotes reflected a mixed bag of observations. Here is the rundown:
— From Michigan: “Consignment has been low, which would normally result in high sales percentages, but lower retail demand has had an effect.”
— From Florida: “We had a good sale this week. However, some of the franchise dealers mentioned slow retail sales.”
— From South Carolina: “More no-sales, and the values seem to be slipping a bit.”
— From Massachusetts: “All but one of the commercial consignors reported good sales today.”
— From California: “The southern California market remains good with the bank/repo lanes performing the best today.”
Update on the specialty market
As they do at the beginning of each month, Black Book editors gave a report about what’s happening in the specialty markets. Here is what they said:
— Collectibles: “This has been a great year so far for collectible vehicle auctions, and the two most recent sales did not disappoint.”
— Recreational vehicles: “As we make the transition from the end of spring to the beginning of summer, interest in used RVs remains strong. Dealers are reporting good traffic on their lots and websites, and the auction companies have seen their volumes rise a significant amount.”
— Powersports: “As we near the high point of the year for the powersports market, values are up nearly across the board, but by fairly modest amounts in most segments this month.”
— Heavy duty: “Higher mileage units continue to enter the market while demand remains steady, leaving buyers with no option but to purchase less desirable units.”
— Medium duty: “Steady volume is helping keep downward pressure on the overall market as used prices continue to depreciate.”
Dealers likely set their sights on retailing used vehicles during Memorial Day weekend rather than being quite as active in securing more inventory from the lanes last week.
The collection of data and observations included in Black Book’s latest Market Insights report offered a variety of evidence to indicate the wholesale landscape is transitioning from spring to summer.
“The spring market uptrend is over, but prices remain stable. The late-model and lower-priced vehicles have the strongest demand,” Black Book executive vice president of operations Anil Goyal said in the latest report.
Reflecting what Goyal noted, editors said their volume-weighted data showed overall car segment values decreased by 0.17% last week. In comparison, car values edged up by 0.02% on average during the prior four-week period.
Within cars, Black Book reported values of high-line vehicles — luxury cars, prestige luxury cars and premium sporty cars — decreased the most, softening by 0.54%, 0.64% and 0.66%, respectively.
Again, looking at volume-weighted data, editors noticed overall truck segment values (including pickups, SUVs, and vans) remained nearly flat, ticking down by just 0.01%. Truck prices have been stable during the past four weeks, edging up by 0.04% on average.
Perhaps frustrating dealers who need them, Black Book pointed out values of full-size pickups increased the most, rising by 0.19%.
Black Book’s anecdotes from the lanes after attending nearly 60 sales nationwide began with an auction owner in Washington.
“The market has slipped a little in the last couple of weeks, but the 30-40K-mile, late-model vehicles are very strong,” the auction owner said.
Editors gathered other recaps primarily west of the Mississippi River, including:
— From Florida: “The buyers were not as motivated today. The rental and lease lanes lacked variety resulting in lower sales percentages.”
— From Pennsylvania: “The market is slower after a strong March/April push. One of the lanes, which had mostly $10,000-range vehicles, sold almost all of them.”
— From Massachusetts: “A mixed bag in the lanes today, but the overall market was flat or slightly down.”
— From Ohio: “Low-sales rate results in a captive finance consignor lane where the floors were being held high.”
The unofficial start of summer is just ahead with Memorial Day weekend coming, but the wholesale market is still seeing a few signs of the spring market.
This week’s Market Insights report from Black Book indicated that the spring market has been persistent through the middle of May.
“Prices remained stable for a second consecutive week, retaining the spring season strength while luxury vehicles dropped further,” Black Book executive vice president operations Anil Goyal said in the latest report.
Based on volume-weighted information, editors noticed overall car segment values decreased by just 0.05% last week. In comparison, these market values had increased by 0.09% on average during the prior four-week period.
Among cars, Black Book reported values of luxury cars decreased the most, sliding by 0.78%.
Again looking at volume-weighted data, editors determined overall truck segment values (including pickups, SUVs, and vans) decreased by just 0.02% last week. Like cars, Black Book mentioned truck values edged 0.09% higher on average during the previous four weeks.
Within trucks, values of full-size luxury crossover/SUVs declined the most, dropping by 0.59%.
Next, Black Book shared anecdotes its representatives collected at nearly 60 sales nationwide. The rundown began with what an auction general manager in Pennsylvania told Black Book.
“Late model, off-lease units remain very hot. Dealers are clamoring for those low mileage, clean, retail ready vehicles that are in short supply,” the auction GM in the Keystone State said.
The other observations included:
— From Florida: “The sale was up and down with the result being more no-sales. The bank repossessions had the highest sales percentages.”
— From South Carolina: “Prices remain fairly stable and auction reports sales conversions around 65%. The smaller passenger vehicles continue to bring strong money.”
— From Massachusetts: “More franchised dealers were bidding and buying today, which may indicate further softness in new-vehicle sales. They are buying late model used vehicles at auction.”
With observers noticing some cleaner vehicles moving down the lanes, Black Book said its data showed this year’s spring market extending into a seventh week.
This week’s Market Insights report also offered a glimpse into the latest specialty markets as the industry sets its target on summertime wholesale and retail activities.
“Markets registered a slight uptick last week, even after car prices have been up for seven consecutive weeks,” Black Book executive vice president of operations Anil Goyal said in the latest report.
According to volume-weighted data, editors noticed overall car segment values increased by 0.08% last week. That reading is just a portion of the four-week average rise of 0.22%.
In car segments, Black Book reported compact cars showed the most lift in values (rising 0.33%) while prestige luxury cars showed the highest decline (dropping 0.48%).
Again considering volume-weighted information, editors found that overall truck segment values (including pickups, SUVs, and vans) ticked up by just 0.05% last week. That level is half of the four-week average of 0.10%.
Among the truck segments, Black Book determined compact vans produced the highest rise in values (up 1.18%) while full-size luxury SUVs sustained the most significant decline (0.33%).
Turning next to what Black Book lane watchers spotted a nearly 60 sales nationwide, the top anecdotes reflected the possibility that dealers found more vehicles that were front-line ready. Here is the rundown:
—From Pennsylvania: “The auction sold around 65% today which made for a really good sale. We had a good number of clean, front-line vehicles.”
—From Indiana: “Retail is really strong here. Low consignment has resulted in more buyers than sellers.”
—From Nevada: “Several dealers expressed frustration with the low number of units available. The truck values improved but the midsize and full-size crossovers were definitely in demand.”
—From Tennessee: “The quality of the vehicles in many lanes was the best I have seen in a while.”
Specialty markets update
As they do near the beginning of each month, editors also shared their latest observations about the specialty markets. Here is what Black Book relayed:
—Collectibles: So far, Black Book indicated 2019 has been a great year for collectible vehicle auctions. “It seems that every week we hear about another record setting performance,” editors said. “We’re seeing a significant surge in the interest in later model or nearly new exotics, especially if they are ‘as new’ with little or no miles.”
—Recreation vehicles: Spring has officially arrived, according to Black Book, and many dealers have been reporting increased activity on their lots. Editors noted auction volume was up slightly over last month, with wholesale prices increasing as well.
—Powersports: Black Book explained the Powersports market sees steady gains for May as the industry enter the height of the spring selling season. Editors added most segments are up, but by smaller amounts than last month, with entry-level, mid-size, and sport bikes seeing the greatest demand.
—Heavy duty: Whether the need for late model used over the road and regional units is becoming satisfied or not, Black Book acknowledged the miles they are showing on their ECM alone is really affecting their value.
—Medium duty: Editors closed by stating used-truck prices continue to fall as an increase in new and used inventory continues to add downward pressure on the overall market.
