What Black Book representatives heard dealers say in the lanes going into the Fourth of July holiday reinforced the latest data editors uncovered.
The midsummer holiday version of the Black Book Market Insights report showed how smaller and midsize car segments are continuing to lead with some of the largest depreciation rates seen in a while. Editors indicated subcompacts, in particular, have demonstrated significant depreciation over the last four weeks, sliding by 2.87 percent.
“Fuel prices moved down slightly, and truck and SUV demand remains high. Nonetheless, weekly depreciation rates are weighed down by ample wholesale volume and seasonality,” said Anil Goyal, Black Book’s senior vice president of automotive valuation and analytics.
Meanwhile in Pennsylvania, Black Book’s lane personnel spoke to dealers and relayed, “My sources tell me that SUVs and trucks are where it’s at. Says no one cares about the price of gas at the moment.”
Volume-weighted, Black Book determined overall truck values decreased 0.37 percent last week — the same movements as the prior week. Editors also pointed out that’s two consecutive weekly high depreciation rates in the last three months.
Black Book added that compact luxury crossover/SUV, compact van and midsize luxury crossover/SUV segments received the high weekly depreciation rates at 0.79 percent, 0.70 percent and 0.67 percent, respectively.
On the car side looking at the volume-weighted information, Black Book noticed overall car values decreased 0.54 percent last week. That’s the highest overall weekly deprecation rate since the first week of 2016.
Editors mentioned the compact and midsize car segments received the highest weekly depreciation rates at 0.83 percent and 0.81 percent, respectively.
As previously noted, Black Book determined that in the last month the sub-compact segment led depreciation rates at an accumulative adjustment of 2.87 percent, followed closely by compact cars at 2.83 percent and midsize cars at 2.39 percent.
Along with lane chatter in Pennsylvania, dealers in Michigan were also looking for vehicles that drink more fuel as the Black Book field personnel reported, “There is a lot of interest for trucks and SUVs below the $10,000 range at this location.”
Not far away in Minnesota, Black Book noticed, “Strong internet activity today, especially on low-mileage, clean-condition units.”
Moving South, representatives in Texas recapped that, “This is a strong import market here with very few no-sales today.”
And out West, Black Book found in Nevada that “the buyers were a bit more aggressive this week compared to last,” while in Arizona, it was a “good sale today with prices overall dropping just slightly.”
Specialty markets update
As they do on a monthly basis, Black Book editors shared their latest assessments of the specialty markets in conjunction with the Fourth of July.
—Collectibles: The collectible vehicle market continues to be “very healthy,” according to Black Book, “with several recent auctions enjoying record attendance and strong results.
—Powersports: Editors indicated prices are up again this month, most likely reaching their peak levels for the year for the street bike segments. “Similar to trends we have seen over the past year and a half, they are up by smaller amounts than their historical averages.”
—Recreational vehicles: Black Book determined the wholesale market was mixed last month, with motorized units adding to their impressive run and approaching an all-time high, while towables took a break and declined a bit, although they are still as high as they have been in the past several years.
—Heavy-duty trucks: At auction, editors mentioned late model, heavy duty, over the road and regional tractors made a better showing in June to an almost mirror image of April. “With several buyer levels bidding, this rally, so to speak, was probably a factor of replacing old equipment to help weather the heat of summer plus some really nice late models showing up at auction,” they said.
—Medium-duty trucks: This past month, Black Book said it saw a smaller rate of decline in the medium duty truck wholesale market. This past month, the 4- to 11-year-old models came down on average $203 or 1.1 percent.
An increase in used-vehicle supply coupled with heightened incentive activity will push used-car prices down by 5.2 percent below current levels by 2019, according to RVI Group’s recently released Risk Outlook report.
RVI predicts that leasing will increase through 2018, putting a growing supply of used vehicles into the market through 2020.
According to Polk Automotive Data included in the report, the lease penetration rate for the first quarter of 2016 was 23.4 percent of total sales, a 2.8-percent increase over the previous quarter and the highest lease penetration rate on record since 1992.
And RVI’s lease-supply index, which measures off-lease supply, was up 21 percent in May compared to a year ago.
In May, incentives were 8.9 percent of MSRP, an increase of 7.8 percent from a year ago. RVI predicts incentive activity will grow over the several years, reaching 9.6 percent by 2018.
The report takes a particular look at small SUVs, with RVI predicting that residual values in this segment will drop 9.6 percent below current levels by 2019. While the supply of small SUVs has decreased over the last two years, RVI expected to see a significant increase in supply over the next three years.
It was a “down” week, according to the latest Black Book Market Insights report. Every segment — with the exception of small pickups — saw broad declines in the seven-day period ending Friday.
Volume weighted, overall car values decreased by 0.43 percent last week, similar to the average depreciation rate of 0.40 percent seen in the previous four weeks.
Leading the weekly decline was subcompact cars at 0.96 percent, followed by luxury cars and prestige luxury cars declining at 0.68 percent and 0.57 percent, respectively.
Volume-weighted, overall truck values decreased by 0.37 percent last week. This is similar to the average depreciation rate of 0.30 percent seen in the previous four weeks.
Minivans and full-size luxury crossover SUVs led the weekly decline at 0.81 percent and 0.69 percent, respectively. Small pickup was the only segment with an increase — 0.22 percent — last week.
“The wholesale vehicle market experienced broad declines across most vehicle segments, led by the Sub-Compact Car segment continuing to drop the most,” Anil Goyal, senior vice president of automotive valuation and analytics, said in a news release.
Subcompacts have demonstrated weaker retention compared with the previous year due to rising supply levels and still-low gas prices.
Additionally, lack of spring market strength has worsened the YTD depreciation of subcompact car segment this year. (Click here for more on what's at play in subcompact depreciation.)
Black Book representatives in the auction lanes last week noted a mixed bag. In Florida, Black Book reported: “The market is still slowing down a bit in this location.” And in New Jersey: “Bidding started off on the low side today with many bringing low prices.”
One lane watcher in Tennessee noted, “The highline lanes had a lot of no-sales today,” while another in Tennessee reported, “Good sale here today with midsize cars bringing the most attention.” In Pennsylvania, one watched noted that trucks and SUVs were very much in demand.
Finally, a watcher in Texas reported: “Very hot at today’s auction but consignment and attendance were still normal to above.”
In a Black Book graph showing year-to-date used-vehicle value movements, the trend line for trucks shows more waves than the line for car segments.
But lately, both are consistently moving downward, the company said in the latest Black Book Market Insights report.
“Both car and truck segments are starting to show a consistent depreciation rate in the last four weeks, with truck depreciation picking up from the spring season,” Anil Goyal, senior vice president of automotive valuation and analytics, said in the report.
Bottom line: Trucks had the upper hand over cars in terms of value retention during the spring market. But the speed at which truck values have declined has increased in the past four weeks, Black Book said.
Car segment values fell 0.47 percent last week on a volume-weighted basis, which is consistent with 0.44-percent depreciation in the two weeks prior. Likewise, the 0.33-percent dip for trucks aligned with 0.30 percent dip from the previous two weeks.
The truck segment with the largest decline last week was the midsize luxury crossover/SUV, with a 0.78-percent drop. Among cars, the largest drop was for compacts (down 0.82 percent).
Full-size cars (up 0.06) was the only segment (car or truck) to see an increase.
To describe the plight of the minivan, TrueCar’s Eric Lyman invoked the late, great king of one-liners.
“To say that minivans have been the ‘Rodney Dangerfield’ segment of the auto market for many years, in terms of not getting the respect they deserve, is an understatement,” he said in a news release accompanying his company’s TrueSavings report, which spotlights several solid new-car specials on minivans for retail consumers.
“With the arrival of Chrysler’s clever new Pacifica, resilient demand for Toyota’s Sienna and the Honda Odyssey, and unmatched utility in terms of hauling kids and cargo it’s time to give minivans a fresh look,” said Lyman, TrueCar’s vice president of industry insights,
And perhaps a “fresh look” is warranted in the wholesale auction lanes, as well. It seems dealers are seeing some good deals on used minivans there, as well.
According to the latest Kontos Kommentary report from ADESA chief economist Tom Kontos, minivans had the largest month-over-month price drop of any segment in ADESA’s data set.
Their wholesale prices for May were down 7.7 percent from April.
(Granted, they were up 4.5 percent year-over-year).
Between June 3 and June 10, minivan wholesale prices fell 0.65 percent, according to Black Book. This marked the third-highest decline among the 13 truck segments tracked in the weekly Black Book Market Insights report.
Speaking again to the new-car retail side of the new-vehicle market, TrueCar senior industry analyst Cari Crane said in the report: “SUVs and crossovers have overshadowed minivans for a long time, but there’s definitely some new appeal for a lot of car buyers.
“This class of vehicle is hard to beat for family road trips, but attractive prices and reasonably good fuel economy also make them an excellent choice,” Crane said.
For instance, savings on a 2016 Dodge Grand Caravan SXT Plus are coming in at $6,320 off MSRP (based on market average price vs. MSRP).
The 2017 Chrysler Pacifica currently has a 36-month no-interest finance offer and the automaker is offering up to $1,500 in customer cash, TrueCar said, citing the OEM.
There's also a $269 per month/36-month month lease offer with $2,999 down on the Pacifica, TrueCar said.
Likewise, dealers may be able to find “attractive prices” on minivans when they hit the auction lanes.
It’s not just the supply boost that slowed wholesale vehicle values in May.
Some of the decline, says ADESA chief economist Tom Kontos, was driven by flat used-car retail sales and a dip in certified pre-owned sales (albeit year-to-date CPO sales are still up and at a record pace).
“This limited the demand side support for wholesale values, which are already receiving downward pressure from supply growth,” Kontos said in his monthly video recap of the wholesale vehicle market (which can be seen in the window above).
Citing data from the National Automobile Dealers Association, franchised dealers saw their used retail sales fall 0.5 percent year-over-year in May, while independents were up 1.2 percent, he said in his May Kontos Kommentary report. Both showed significant month-over-month growth, however.
According to Autodata Corp., CPO sales in May dipped 4.6 percent year-over-year and 4.8 percent month-over-month, Kontos said. This was the second consecutive sequential decline.
“The bottom line is, we didn’t get the kind of demand side support we had been getting in previous months, this year and last year, to support wholesale used-car values,” he said.
Overall, wholesale values fell 1.4 percent month-over-month in May. Prices continued to beat year-over-year comparisons, with May prices up 2.4 from the same month of 2015.
“But even that is largely because of the price strength of trucks,” Kontos said.
Truck prices were down month-over-month in May (1.3 percent), but were up 5.8 percent year-over-year. Car prices softened 1 percent from April and 1.7 percent from May 2015.
Manufacturer consignment was fetching prices 2.5 percent higher on a month-over-month basis and 2.8 percent softer on a year-over-year basis, according to the ADESA report.
Fleet/lease consignment prices dipped 0.6 month-over-month and 0.8 percent year-over-year. Dealer consignment prices were down 1.9 percent from April and up 2.3 percent from May 2015.
As wholesale prices for compact vehicles continued to soften, Black Book representatives in the lanes last week noticed a significant amount of dealers sat on their floor-plan wallets stemming from the frequency of units that rolled over the block without the hammer finalizing a sale.
According to the latest Black Book Market Insights report, the place where auction observers spotted no-sales happening more often a week ago occurred in Florida as one representative said, “There were quite a few no-sales today with an overall soft market.”
Another member of the Black Book team stationed in the Sunshine State mentioned, “Sellers didn’t get what they wanted for trucks today. There were many no-sales but some dropped their floor to make the sale.”
Meanwhile down in Texas, the lane watchers indicated, “Attendance and consignment were both low today but what sold brought really good money.”
And in Illinois, Black Book reported, “Buyers felt as though prices were higher somewhat this week compared to last.”
Soft conditions were noticed in Tennessee, too: “The market trend in this location was a bit slow today but clean full-size trucks are still in strong demand.”
Trucks also were keeping ringmen busy in Washington as a Black Book representative said, “Strong market at this location with 4WD trucks in demand.”
With demand for trucks still in place, Black Book editors noticed after reviewing their volume-weighted data that overall truck values decreased by 0.30 percent last week. The average depreciation rate in truck segments was 0.15 percent during the previous eight weeks.
As far as cars, overall volume-weighted car values decreased by 0.47 percent last week. Black Book pointed out this movement is worse than the average depreciation rate of 0.27 percent seen in the previous four weeks.
What triggered that overall decline a week ago were prices for subcompact cars and midsize cars experiencing a significantly higher drop in value of 0.87 percent and 0.79 percent, respectively.
Last week’s data also indicated compact van, subcompact crossover and minivan segments sustained the largest decreases at 1.59 percent, 0.79 percent and 0.65 percent, respectively.
Furthermore, three of those segments showed the greatest single-month valuation drop: subcompact cars (down 2.4 percent), compact vans (down 2.2 percent) and compact cars (down 1.6 percent).
“Subcompact cars saw the largest drop in values last month and they continue to experience downward pressure as demand is weak and supplies remain abundant,” said Anil Goyal, Black Book’s senior vice president of automotive valuation and analytics.
Wholesale vehicle prices climbed sequentially for the second straight month and posted a year-over-year gain for the first time in 2016.
But don’t take that to mean those supply-driven expectations for downward sloping used prices are suddenly over, Tom Webb warns in commentary accompanying the latest Manheim Used Vehicle Value Index.
“They do suggest, however, that dealers have continued to achieve efficiency gains that are allowing them to bid up auction prices even as gross margins narrow,” he said, referring to the two straight months the index has climbed sequentially.
“That’s encouraging to commercial consignors who have been expecting, and preparing for, greater weakness in wholesale pricing,” said Webb, Cox Automotive’s chief economist.
The May reading of Manheim’s index was at 124.5, which is up 0.6 percent year-over-year.
Pickups, whose prices were up 6.3 percent from May 2015, vans (up 1.5 percent) and luxury cars (0.6 percent) showed value gains.
Midsize cars and SUVs/CUVs were both down 0.3 percent. Compact cars showed the most contraction, as their prices fell 5.1 percent.
The latter found Webb posing this question in his comments: “Did compact car prices find a floor?”
On a mileage- and seasonally adjusted basis, their prices were up more than 2 percent month-over-month.
“If you’re optimistic, view it as a ‘dead cat bounce.’ Year-over-year, compact cars remained the weakest segment — and they too had a sizable number of off-lease units coming back,” Webb said. “So, yes, if a floor was found, that would be a good thing.”
Regarding Webb’s point on off-lease volume for compact cars, it has also led to these vehicles — along with midsize cars — grabbing the most share of the certified pre-owned market.
According to the Q1 Used Vehicle Market Report from Edmunds.com, 21.1 percent of CPO sales in Q1 were midsize cars and 20.6 percent were compacts.
The next closest was the compact crossover SUV, with a 13.6-percent share of Q1 CPO sales.
“Despite having little to negative year-over-year price growth, midsize and compact cars are the largest CPO segments,” Edmunds said in the report. “Leasing in these segments has become quite prevalent and has led to a healthy supply of vehicles that meet certification standards.”
Wholesale price trends are starting to settle into a pattern Black Book is expecting.
At least that’s the view of Anil Goyal, senior vice president of automotive valuation and analytics, when this week’s Black Book Market Insights report took a look at valuation activity from the first week of June.
“Weekly depreciation rates are beginning to align with the expected declines of weeks to come,” Goyal said.
Black Book’s report indicated full-size vans were the only segment with a positive change in values. Minivans and small pickups also showed light depreciation on the week, as did luxury cars.
Specifically looking at volume-weighted for cars Black Book noticed overall values decreased 0.41 percent last week. For comparison, the average depreciation rate at this point last year was 0.59 percent.
Analysts noticed prices for full-size cars and subcompact cars generated the steepest weekly depreciation rates at 0.63 percent and 0.59 percent, respectively. Analysts added all but two segments’ depreciation rates were higher than the prior week.
Looking at overall volume-weighted truck trends, Black Book said truck values decreased 0.30 percent last week. At the same time last year, the average depreciation rate for trucks stood at 0.25 percent.
The full-size van segment was the sole truck segment — and, as mentioned earlier, the sole segment period — to increase in value, ticking up by 0.11 percent.
Analysts determined that the compact luxury crossover/SUV segment received the highest weekly depreciation rate at 0.71 percent.
When Black Book personnel mingled with dealers last week, representatives found that activity buzzed in the lanes, especially in Pennsylvania.
One rep said, “Lots of good clean cars this week, and dealers were willing to pay to get them,” while another added, “Not much complaining about prices today; dealers need inventory.”
A similar feeling was spotted in Michigan as Black Book reported, “Bidding was active today with a lot of clean consignment. Dealers say retail has picked up this week.”
In Illinois, Black Book personnel noticed, “Wholesale auction prices remain stable in this location.”
A summertime event in Washington prompted this representative to mention, “The market was stronger this week with the big promotional sale going on.”
Finally in Texas, even though flooding rains continue to fall, Black Book personnel said, “Consignment was higher this week than last with prices holding up well.”
Specialty markets report
Black Book shared an update in the other segments of the wholesale market that it tracks, including:
—Collectibles: Traditionally, January in Scottsdale was the center of the collectible car universe, but Black Book indicated many of the major auction houses have added sales around the country that have grown into significant events in their own right.
—Powersports: After last month’s mixed bag, where some model years and segments went up while others declined a bit, Black Book discovered prices are up across the board. Analysts explained this pattern generally occurs a month or two earlier in most years.
—Recreational vehicles: Black Book reported the values of travel trailers sold at auction hit their all-time high this past month, closing above $12,000 for the first time. Not to be outdone, Black Book added that motorized units surged 15 percent to break through the $40,000 barrier, something they have not done since May 2013.
—Heavy-duty trucks: Analysts indicated rising depreciation is often a key result of rising numbers of available trucks at auction.
—Medium-duty: Black Book saw a greater rate of decline in the medium duty truck segment.
The average price of a used vehicle for model years 2010 through 2014 depreciated by 0.5 percent month-over-month in May, according to Black Book data. Cars saw slightly higher depreciation during that period at 1.0 percent, while trucks saw a 0.2-percent slide for the month.
Subcompact cars saw the largest depreciation in May at 2.4 percent. Vehicles in this segment, which include the Ford Fiesta, Hyundai Accent, Kia Soul, Chevrolet Sonic, Fiat 500 and the Nissan Versa, finished the month with an average price of $6,683, a 26.1-percent decrease from year-ago levels ($9,048).
Compact vans and cars saw similarly steep month-over-month declines, with the former dropping 2.2 percent and the latter falling 1.6 percent. Compact vans finished the month with an average price of $10,017, a 25-percent downward change from year-ago levels ($13,354), while compact cars finished the month with an average price of $8,070, a 22.6-percent decrease from year-ago levels ($10,425).
Minivan values were unchanged month-over-month during May. Vehicles in this segment, which include the Chrysler Town and Country, Kia Sedona, Dodge Grand Caravan, Nissan Quest and Toyota Sienna, finished the month with an average price of $15,206, a 17.2-percent dip from year-ago levels ($18,356).
Four vehicle segments saw sequential value increases during the month: full-size cars (up 0.1 percent), full-size pickup (up 0.1 percent), sporty car (up 0.2 percent) and subcompact luxury CUV (up 0.3 percent). Year-over-year, those segments were down 16.1 percent, 11.9 percent, 18.1 percent and 18.7 percent, respectively.
All segments were down year-over-year, with subcompact cars showing the largest decrease (26.1 percent).
“Now that summer is quickly approaching, it is not surprising to see in-demand segments such as sporty cars and subcompact luxury utilities see better demand and retention at the auctions currently,” said Anil Goyal, senior vice president of automotive valuation and analytics.
“We anticipate that this summer will see its usual pattern of higher depreciation settling in for most cars and even slightly higher patterns for certain truck segments due to higher volume.”
