Despite the Black Book Used Vehicle Retention Index now falling for five straight months, the latest reading is still 1.4% higher than a year ago.
Black Book reported on Monday that the April index reading came in at 113.6, representing a 0.2% dip from the March level of 113.8.
And editors pointed out their latest index mark remains higher than last April’s figure of 112.0.
Black Book tabulated that 14 segments finished the month in positive change territory, led by premium sporty cars at a 1.4% change followed by full-size vans at 1.2%.
The other segments that saw positive change during April included:
• Compact crossovers: 1.1%
• Sporty cars: 0.8%
• Compact cars: 0.7%
• Sub-compact cars: 0.6%
• Full-size pickups: 0.5%
• Minivans: 0.5%
• Full-size crossover/SUV: 0.4%
• Full-size luxury CUV/SUV: 0.4%
• Midsize car: 0.3%
• Midsize crossover/SUV: 0.3%
• Small pickup: 0.3%
• Full-size car: 0.1%
Black Book explained the Index has reflected a late start to the spring selling season, dropping each month since November. Editors noted SUVs and luxury vehicles showed the largest declines in March with minivans, compact to midsize cars and small pickups having modest gains.
Black Book also mentioned market share changes reflect a continued shift away from cars and toward more SUVs and pickups.
“That the index has declined for five straight months and it is still slightly higher than where it was a year ago is a testament to the sheer strength in the market we saw throughout 2018,” Black Book executive vice president operations Anil Goyal said.
“Much of the 2018 activity was spurred by economic strength, resulting in significant demand for affordable used sedan values. It will be difficult to replicate that activity over the remainder of 2019.”
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 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. It 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.
Make it five weeks in a row of wholesale values moving higher fueled by the 2019 spring market.
According to this week’s Market Insights report from Black Book, editors noticed several car segments continued to show strong week-to-week retention, especially vehicles that might turn with buyers looking to stay within a budget.
“Broad strength in the used-vehicle market continues. Last week marked the fifth consecutive week for positive adjustments to values,” Black Book executive vice president of operations Anil Goyal said in the latest report.
Based on volume-weighted data, Black Book indicated overall car segment values increased by 0.24% last week. That figure is on par with the two-week average, which was 0.27%.
Editors noticed values of compact cars increased the most, rising by 0.66%.
Again stemming from volume-weighted information, Black Book determined overall truck segment values (including pickups, SUVs, and vans) increased by 0.16% last week. That level is nearly double the two-week average of 0.09%.
In truck space, editors mentioned sub-compact crossovers and compact vans generated the highest increases, climbing by 0.49% and 0.36%, respectively.
Turning next to what Black Book’s lane observers spotted at nearly 60 sales nationwide, the anecdotes reflected a busy spring market. Here is the rundown:
— From Florida: “The vehicles with low CRs struggled more than usual. On the other hand, trucks in good condition brought really good money.”
— From New Jersey: “One of the lanes I watched had 96 vehicles consigned and sold 58. Of the 38 no-sales, 15 were cars and 23 were SUVs. Overall, cars seemed to draw more interest and command more money.”
— From Washington: “There was a nice variety of good, clean units, but overall, the consignment was down.”
— From Pennsylvania: “Not as many buyers as last week, which resulted in an average sale.”
— From Michigan: “Consignment was lower and prices were higher. Dealers are scrambling to acquire more vehicles.”
J.D. Power Valuation Services noticed wholesale prices closed the first quarter stronger than analysts initially expected. As a result, the firm again is adjusting its 2019 forecast after incorporating March’s information.
After six consecutive months of declines, analysts reported in the latest installment of Guidelines that the used-vehicle market bounced back in March. The rebound resulted in the J.D. Power Valuation Services’ Seasonally Adjusted Used Vehicle Price Index increasing by 1.1 points relative to February to 117.5.
J.D. Power Valuation Services explained March’s positive result comes after weaker than usual January and February performances, which triggered previous forecast updates.
“Typically, prices begin to heat up in the February period, especially for affordable mainstream segments, however, that was not the case this year,” analysts said.
“The lackluster start to 2019 was driven by lower than expected and delayed federal tax returns,” they continued. “Historically, consumers have used tax refunds as healthy down payments on vehicle purchases. While there is still a lot of uncertainty surrounding the tax situation, it did begin to improve around the middle of February. The improvement was likely too late to be realized in February as it does take time for refunds to be realized and hit bank accounts.”
J.D. Power Valuation Services cited federal data that indicated average refunds distributed through the end of March reached $2,873, a figure only $20 below the same period in 2018. However, the firm pointed out the overall amount of refunds issued by the IRS was down 2.2%
“There is concern that average refund amounts will decline further because a greater share of late filers usually owe money,” analysts said in Guidelines.
Updated forecast
No matter how potential buyers receive from in a tax refund, J.D. Power Valuation Services acknowledge the used-vehicle market is expected to slow in 2019.
But with March’s rebound now on the books, analysts’ outlook improved with their expectations for wholesale prices softening by 2% by the time this year finished.
Along with March’s data, analysts explained their forecast was influenced by “increasing levels of used supply along with more volatile credit conditions and increasing gasoline prices, which are expected to apply downward pressure on the used side of the market.
“Labor conditions are expected to have a neutral impact, while solid home prices and overall consumer appetite for used cars, which is supported by increases in equipment as well as more advanced safety and technology features, will help to balance out but not overweigh the anticipated negatives for the year,” J.D. Power Valuation Services went on to say.
More details about March wholesale price movements
In terms of the wholesale market, J.D. Power Valuation Services determined prices of used vehicles up to 8 years in age increased by an average of 2.7% in March. The month’s result was nearly identical to March of last year and more than 1 percentage point better than how the market performed in both March of 2016 and 2017.
At the segment level, analysts the biggest increases were recorded among mainstream small, compact and midsize car segments.
“As affordability continues to become more important, prices for these segments should continue to be bolstered due to their cost in relation to comparable SUVs and because of decreases in used supply of these segments,” J.D. Power Valuation Services said.
“Pickup trucks and large SUV prices were the softest on the mainstream side of the market,” analysts continued in Guidelines. “Gasoline prices have ticked up for the eight straight weeks now and are now up by 50 cents over the last 90 days. This is unlikely the reason for price softness last month in these segments, however, it is something that will be monitored closely.”
Dealers don’t have to meander through the lanes or go on their smart devices for significant spans to know the spring market is in full bloom.
How long it might last is the question Black Book looked to answer in its newest Market Insights report.
Editors indicated spring activity continued to roll on this past week, with four specific car segments and three truck segments generating the most price activity.
However, Black Book executive vice president of operations Anil Goyal doesn’t suspect that lane intensity will continue too much longer.
“The spring market continued to show strength last week. However, it’s not expected to last long as sales percentages are starting to come down from their peak,” Goyal said in the latest report.
An auction owner from South Carolina who talked with Black Book went so far as to make this assessment: “It feels like the robust spring market is beginning to fade. Our sales percentages are beginning to come down to levels that are typical during the summer months.”
According to volume-weighted information, Black Book determined that overall car segment values increased by 0.29% last week. That’s more than triple the average increase spotted during the previous four weeks; a reading at just 0.09%.
Among those cars, editors noticed full-size cars increased the most, rising by 0.76%. But sporty cars, subcompacts and compact cars weren’t far off that pace as each segment jumped by at least 0.53 percent.
Again, based on volume-weighted data, Black Book indicated overall truck segment values (including pickups, SUVs, and vans) ticked up by 0.19% last week. That level is slightly higher than the four-week average rise, which was 0.16%
In the truck space, minivans, midsize crossover/SUVs and small pickups generated the highest increases, climbing by 0.59%, 0.55% and 0.54%, respectively.
Furthermore, Black Book’s lane observers stationed at nearly 60 weekly sales nationwide collected anecdotes that further showed how the 2019 spring market is unfolding.
Here is the rundown from the other sale locations Black Book reported:
— From Georgia: “The spring market is still going strong. There was a good crowd with competitive bidding and very few no-sales. The only vehicles that seemed a little soft were the luxury vehicles.”
— From Pennsylvania: “This is a very hot market. Of all the lanes here, the truck lanes were the most active with most selling and for good prices.”
— From Michigan: “The market is up as dealers remain positive, although we are hearing reports of low trade-in volume.”
As KAR Auction Services chief economist Tom Kontos explained it, those crossovers and SUVs that rolled over the curb during the past couple of years as leased units are now “coming home to roost.”
According to ADESA Analytical Services’ monthly analysis of wholesale used-vehicle prices by vehicle model class, Kontos and the analyst team determined wholesale used-vehicle prices in March averaged $11,095 — up 3.0% compared to February and up 2.5% relative to March of last year.
Kontos pointed out that all vehicle segments experienced month-over-month increases with car prices going up more than truck prices, on average.
“Average wholesale prices and retail used vehicle sales were strong in March, typifying the usual spring/tax season market uptick,” he said in his latest Kontos Kommentary released on Monday.
“In addition, our analysis increasingly indicates that prices for car segments are beginning to hold up better, while crossover and SUV truck segments may be starting to have a tougher go. In recent years, the opposite has been true,” Kontos continued.
“As mentioned in previous commentaries, this is to be expected as more crossovers and SUVs start coming home to roost from strong new-vehicle sales over the last few years,” he added along with a video that can be seen here..
Kontos again took a closer look at fleet and lease trends for vehicles less than 3 years old and 45,000 miles on the odometer. When holding constant for sale type, model-year age, mileage and model class segment — using criteria that characterize off-lease units — Kontos noticed that prices climbed “significantly” on a year-over-year basis for midsize cars but dropped “substantially” for midsize SUV/CUVs.
Specifically, those car prices jumped $530 or 4.4% to $12,517 while those utility prices slid $688 or 3.3% to $20,336.
Kontos went on to mention all seller types saw monthly and annual average price increases in March.
The update showed that average wholesale prices for used vehicles remarketed by manufacturers increased 3.7% month-over-month and edged 0.1% percent higher year-over-year.
Prices for fleet/lease consignors rose 4.3% sequentially and 2.3% annually, according to ADESA data.
Finally, Kontos noted average prices for dealer consignors increased 5.7% versus February and 2.0% relative to last March.
ADESA Wholesale Used-Vehicle Price Trends
| |
Average |
Price |
($/Unit) |
Latest |
Month Versus |
| |
March 2019 |
February 2019 |
March 2018 |
Prior Month |
Prior Year |
| |
|
|
|
|
|
| Total All Vehicles |
$11,095 |
$10,775 |
$10,824 |
3.0% |
2.5% |
| |
|
|
|
|
|
| Total Cars |
$8,656 |
$8,339 |
$8,595 |
3.8% |
0.7% |
| Compact Car |
$6,716 |
$6,484 |
$6,661 |
3.6% |
1.6% |
| Midsize Car |
$7,564 |
$7,352 |
$7,591 |
2.9% |
-0.4% |
| Full-size Car |
$7,996 |
$7,780 |
$7,274 |
2.8% |
9.9% |
| Luxury Car |
$13,144 |
$12,633 |
$13,088 |
4.0% |
0.4% |
| Sporty Car |
$14,340 |
$13,412 |
$14,194 |
6.9% |
1.0% |
| |
|
|
|
|
|
| Total Trucks |
$13,145 |
$12,820 |
$12,779 |
2.5% |
2.9% |
| Minivan |
$8,408 |
$8,367 |
$9,876 |
0.5% |
-14.9% |
| Full-size Van |
$13,283 |
$12,287 |
$13,195 |
8.1% |
0.7% |
| Compact SUV/CUV |
$11,322 |
$11,095 |
$10,777 |
2.0% |
5.1% |
| Midsize SUV/CUV |
$11,371 |
$11,234 |
$11,031 |
1.2% |
3.1% |
| Full-size SUV/CUV |
$14,214 |
$13,628 |
$13,379 |
4.3% |
6.2% |
| Luxury SUV/CUV |
$18,281 |
$17,788 |
$18,290 |
2.8% |
0.0% |
| Compact Pickup |
$10,082 |
$9,692 |
$8,905 |
4.0% |
13.2% |
| Full-size Pickup |
$16,244 |
$15,662 |
$15,707 |
3.7% |
3.4% |
Source: ADESA Analytical Services.
Depending on where your dealership is situated, if the greening grass and volume of pollen in your neighborhood already haven’t indicated spring is in full swing, perhaps the buzzing at your favorite wholesale auction should show it.
This week’s Market Insights report from Black Book summarized the continued intensification of the spring market with lane watchers throughout the country relaying anecdotes about active bidding and more.
“The spring market trend continues with affordable used sedans rising the most in values. The crossovers are showing an uptrend as well, but not as strong as the sedans,” Black Book executive vice president, operations Anil Goyal said in the latest report.
According to volume-weighted data, editors determined overall car segment values increased by 0.25% last week. That’s quite a reversal of the four-week average, which represented a 0.10% dip.
Black Book pointed out subcompact cars increased the most with their values rising by 0.74%
Again based on volume-weighted information, editors indicated overall truck segment values (including pickups, SUVs, and vans) decreased by only 0.01% last week. Like cars, that latest reading is quite different than the four-week truck average, which was a decline of 0.28%
Values for compact vans led the way with an increase of 0.90%.
As mentioned, Black Book’s representatives at nearly 60 sales nationwide noticed auctioneers and ringmen stayed busy, watching for bids from dealers walking the lanes or submitting offers online. Here is the rundown:
— From Georgia: “Both inventory and attendance were up in numbers. The quality of the consigned inventory was subpar, but most sold anyway.”
— From California: “A strong sale with lots of action. More vehicles were purchased online as opposed to in the lanes.”
— From Pennsylvania: “A high percentage of vehicles sold as dealers were stepping up their bids. I heard some complaints from dealers about having to pay higher than normal prices to secure inventory.”
— From Wisconsin: “Almost everything is selling amid very active bidding. Prices are moving up on most models.”
While edging lower on a sequential basis, Black Book’s Used Vehicle Retention Index for March came in higher than a year ago, reflecting how the ongoing spring market has behaved.
On Tuesday, Black Book released its index for March, and the reading stood at 113.8, representing a 0.6% dip from February when it was 114.5. Editors pointed out the index is 1.7% higher than where it was a year ago when the reading sat at 112.0.
Black Book explained the index has reflected a late start to the spring selling season, dropping each month since November. Editors noticed SUVs and luxury vehicles showed the largest declines in March with minivans, compact and midsize cars, as well as small pickups having modest gains.
Black Book executive vice president of operations Anil Goyal pointed out that market-share changes reflect a continued shift away from cars and toward more SUVs and pickups.
“While the economy continues to expand, higher supply of used vehicles and affordability issues have continued to become headwinds for the industry,” Goyal said.
“The spring market is expected to provide a quick jolt to the market during April, but we expect the Index will feel the effects from slower retail demand of new vehicles that could lead to higher incentives,” he 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 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. It continued to remain relatively stable, rising slightly until May 2014 when it hit a peak of 128.1.
To obtain a copy of the latest Black Book Wholesale Value Index, go this website.
Black Book highlighted activity in the lanes and dealership showrooms is on the upswing as the spring market continues to blossom.
This week’s Market Insights report detailed not only the latest price movements, but also anecdotes from Black Book’s representatives at sales nationwide that indicated dealers are in need of inventory because of upticks in buyer demand.
“Auto auctions are seeing high-sales conversion rates with active buyers,” Black Book executive vice president of operations Anil Goyal said.
“Spring market is in full swing, and affordable cars have the strongest demand,” Goyal continued in the latest report. “Subcompact cars led the market last week with the highest lift in valuation.”
Volume weighted, editors determined that overall car segment values increased by 0.17 percent last week. In comparison, Black Book reported car values on average softened by 0.25 percent during the previous four weeks.
Editors pointed out that the mainstream cars and sporty car segments showed a strong lift in values with those subcompact cars leading the way with a gain of 0.57 percent.
Again volume weighted, Black Book determined overall truck segment volume (including pickups, SUVs and vans) edged down just 0.07 percent last week. That level was just a fraction of the four-week average, which was a dip of 0.36 percent.
In the truck segment, editors said minivans showed the most lift in values, rising by 0.55 percent, while luxury SUVs showed the most declines with the full-size category dropping by 0.57 percent.
Turning to those stories from last week’s sales, Black Book offered this collection from its lane observers:
— From Michigan: “The market remains positive. Dealers are reporting a more active retail market, which has pushed more buyers and bidding at the auction.”
— From Nevada: “Several dealers stated that tax refunds are starting to flow into the market, which is welcome news.”
— From Massachusetts: “Everyone seemed happy as retail is gaining steam, especially in the used market. This was the best sale this year.”
— From Maryland: “One of the best sales I have ever witnessed. Out of the 95 vehicles consigned in the lane, only two failed to sell, and they all brought good money.”
— From Georgia: “The lower end of the market is being driven up by buyers willing to pay over market value for specific models. Also, the sport cars and convertibles are getting hot.”
Update on the specialty market
As they do at the beginning of each month, editors also relayed their updates from the specialty market. Here is the rundown from Black Book:
— Collectibles: Editors indicated the collectible car world has gotten off to a good start this year. Black Book reported the first two months of the year generated more than $500 million in sales, and the auctions held in association with the Amelia Island Concours d’Elegance added another $80 million.
— Recreational vehicles: Now that spring is here, Black Book highlighted that dealers are seeing an increase in floor traffic on their lots and strong interest at shows. “We have noted an uptick in volume for the second month in a row at the wholesale auctions as dealers continue to fill out their inventories,” editors said.
— Powersports: Black Book determined entry-level, affordable and mid-range units lead the way as the powersports market enters spring. “Warmer weather has brought most segments of the market significant increases in value, which is a welcome development as the retail selling season is upon us,” editors noted.
— Heavy duty: As more over the road trucks dropped in wholesale value, Black Book noticed a few others held their own while a couple actually went up.
— Medium duty: Editors closed by mentioning auction prices continue a downward trend as demand slows and new and used inventory increases.
Black Book executive vice president of operations Anil Goyal made the call.
“The spring market is here,” Goyal said in a segment of this week’s Black Book Market Insights report that illustrates the strength of the spring market where several midsize cars and van segments posted a notable increase.
“Led by midsize cars and minivans, the used-vehicle market showed a seasonal lift,” Goyal added in the report.
Based on volume-weighted information, editors indicated overall car segment values increased by 0.12 percent last week. That’s much different than what they spotted during the previous four weeks as Black Book had car segment values softening by 0.38 percent on average.
As Goyal noted, midsize cars led the way by rising 0.52 percent or $41.
Again connected to volume-weighted data, editors determined overall truck segment values (including pickups, SUVs and vans) decreased by only 0.19 percent last week. That’s less than half of the four-week average, which was 0.41 percent.
In the truck space, minivans experienced the highest increase, jumping by 0.43 percent or $46.
And now what Black Book representatives stationed at nearly 60 sales nationwide noticed, here are the anecdotes that lane watchers shared:
—From Georgia: “Lower priced crossover SUVs are selling the best. Dealers are saying that they have not seen an abundance of customers with tax refund checks yet.”
—From Indiana: “A good sale, including lots of lease returns and daily rentals, with all selling well. Prices seem to be experiencing an uptick.”
—From Florida: “There was a good crowd today. Prices were up on small and midsize SUVs while trucks and full-size SUVs had either no price change or were down a little.”
—From California: “The sale was very strong with lots of bidding activity and higher prices.”
Data from the first two months of the year prompted J.D. Power Valuation Services to revise its wholesale price forecast for 2019.
And depending on the state of your dealership, the updated prediction could be valuable information to help sharpen your used-car strategy.
“With January and February’s weaker-than-expected performances, 2019’s outlook has worsened,” J.D. Power Valuation Services executive analyst David Paris said in a news release. “As a result, prices are forecast to fall by around 3 percent.
“Increasing levels of used supply, along with more volatile credit conditions and increasing gasoline prices, are expected to apply downward pressure on the used side of the market,” Paris continued.
The used-vehicle market continued its sluggish start to the new year, and as a result the J.D. Power Valuation Services’ Seasonally Adjusted Used Vehicle Price Index declined 1.3 points in February relative to January to 116.1.
Analysts explained in the latest installment of Guidelines that February’s decline marked the sixth consecutive month of declines in the used market and is “a trend we should expect to see more of throughout the course of 2019 as used-vehicle prices are expected to decline relative to 2018.”
J.D. Power Valuation Services elaborated about reasons for wholesale price weakness so far this year.
“In January the industry faced challenges because of extreme winter weather conditions as well as the 35-day government shutdown,” analysts said in the report. “The used market typically heats up in February; however, the month faced its own unique obstacles which suppressed the growth we normally see in used-vehicle prices.”
J.D. Power Valuation Services then drilled deeper into another attention-getting factor — concerns over tax law changes that have led to smaller refunds for many Americans as both the new- and used-vehicle markets benefit from tax refund season.
According to IRS Filing Season Statistics through the week ending Feb. 15, J.D. Power Valuation Services noted the total number of refunds issued was down 26.5 percent, while the average refund amount was down 16.7 percent relative to the same period in 2018.
However, the refund situation improved over the second half of the month. Through the week ending March 1, J.D. Power Valuation Services pointed out the total number of refunds issued increased but was still down 4.2 percent. However, the average refund amount reached $3,068, or a 0.7 percent improvement relative to the same period in 2018.
“During this time of the year, early filers begin receiving their federal refunds, which can be applied as healthy down payments for a new- or used-vehicle purchase. This was not the case through the first half of February,” analysts said in Guidelines.
“It does take time for taxpayers to receive and recognize their individual refunds; ultimately the improvement was likely too late to help the February’s result,” they continued.
Wholesale price moves by segment
J.D. Power Valuation Services continued its latest edition of Guidelines by taking a closer look at wholesale price moves at the segment level.
Analysts discovered price losses at the mainstream segment level were worse than expected and strayed from typical February results. They noted large utility prices were the softest on the mainstream side as declines reached 2.6 percent or nearly 2 percentage points worse than the segment’s previous five-year February average.
Elsewhere, J.D. Power Valuation Services noticed compact and mid-size utility segments turned in slightly better performances as prices declined by respective figures of 1.6 percent and 1.7 percent. Still the figures were counter to what’s happened during the previous five years as analysts pointed out combined prices for these segments appreciated by an average of around 0.5 percent in February.
Also of note, J.D. Power Valuation Services spotted that subcompact, compact and midsize car prices declined by a combined average of 1.4 percent in February. Typically, these segments generate price increases by 1 percent to 1.5 percent in the February period due to benefits associated with federal tax refunds, according to Guidelines.
On to the premium side of the market, J.D. Power Valuation Services determined losses were on average greater than their mainstream counterparts and fell within a range of 2.2 percent to 4.7 percent.
Analysts said luxury large utility segment prices experienced the biggest decline on both the mainstream and luxury sides of the market in February. The report noted wholesale prices for the group declined by an average of 4.7 percent, which was the largest decline for the segment on record and roughly 3 percentage points worse than the previous five-year February average.
J.D. Power Valuation Services went on to mention luxury compact car and luxury midsize car prices were also more depressed than typical for the month. Over the past 5 years, analysts said the pair has experienced losses of roughly 1 percent during February.
