November might have been the last month for a while that truck segments lead their smaller counterparts in terms of retained value.
Midsize pickup trucks may have had the best used-vehicle price strength last month, but continuing a trend discovered in recent weeks, truck segments are now showing greater depreciation than cars.
The latest Black Book Market Insights report showed car prices at auction dropped by an average of $55 or 0.52 percent, while truck prices fell by an average of $97 or 0.64 percent last week.
The car depreciation rate last week was lower than the average rate of 0.69 percent seen in the previous eight weeks, while the truck’s decline is higher than the 0.56 percent rate seen during the four prior weeks.
But depreciation will have to speed up much more than that to put a damper on the price strength truck segments have enjoyed over the majority of 2015.
“Trucks and cars reversed trends with trucks depreciating more than cars last week. However, this increase is not enough to put a dent in the strong valuation for trucks, as seen in year-to-date trends,” said Anil Goyal, Black Book vice president of automotive valuation and analytics.
Truck segments that saw the highest rate of price decline last week included the passenger minivans (down by 1.41 percent or $157), compact SUVs (down 1.39 percent or $260) and compact CUVs (down by 1.17 percent or $133).
The full-size SUVs and full-size passenger vans performed the best last week among the trucks, with slight 0.1 percent and 0.06 percent drops, respectively.
On the car side of the market, once again the entry level cars led the pack in depreciation with rates falling by 0.76 percent or $45. The prestige luxury car segment (down by 0.73 percent or $216) and entry midsize car category (0.71 percent or $57) also saw hefty declines. The upper mid-size car segment saw the lowest depreciation last week for cars, with prices dropping by 0.35 percent or $34.
On top of outlining last week’s wholesale price movement, this week’s Black Book report also included dealer sentiment from around the country that shows inconsistencies in terms of buyer demand on older- versus later-model units.
For example, an auction attendee in Tennessee was overheard noting, “Poor selection here today with a lot of low prices as dealers were dumping old stock,” while another buyer from Pennsylvania said, “Not much variety in the lanes today, many no-sales.”
But comments from the lanes also show that dealers may be prepping for tax time. Black Book editors heard one auction attendee say last week, “Older clean cars were in demand here today, must be prepping for tax time.”
Midsize pickup trucks may have had the best used-vehicle price strength last month, but the more intriguing development may be among some slightly larger segments.
According to a Black Book analysis, midsize pickup prices on Dec. 1 were down just 1.1 percent from where they were on Nov. 1. This movement represented the lowest month-over-month depreciation of any segment.
But if you look just a bit deeper into Black Book’s data set, you will see that four full-size vehicle types were among the top segments for retention.
Full-size SUVs were No. 4 on the list, as their values declined just 1.7 percent month-over-month. Coming in at No. 5 were full-size passenger vans, whose values were off 1.9 percent.
Sixth was full-size cargo vans (down 2.0 percent), followed by full-size pickups (down 2.1 percent) at No. 7.
“In analyzing the depreciation patterns this late in the year, it’s interesting to see that many full-size segments are experiencing lower price declines, signaling continued strength for large vehicles,” said Anil Goyal, Black Book’s vice president of automotive valuation and analytics.
The industry overall was down 2.8 percent month-over-month, Black Book said. Car segments dipped 3.1 percent, while trucks were off 2.6 percent.
The vehicles included in Black Book’s data set are from the 2010 through 2014 model years. All 25 segments in the set showed month-over-month price declines. The second-lowest decline was the prestige luxury car (down 1.4 percent), with the compact pickup (down 1.6 percent) in at No. 3.
Cox Automotive chief economist Tom Webb explained last month’s movement of the Manheim Used Vehicle Value Index confirmed two trends. Webb said it is now certain that the full-year 2015 Manheim Index will post an increase on both an annual average and year-over-year basis.
Even though Webb discussed increases in the monthly report, Manheim noticed that wholesale prices (on a mix-, mileage-, and seasonally adjusted basis) actually ticked lower in November after posting increases in each of the previous five months. This latest movement brought the Manheim Used Vehicle Value Index to a reading of 125.1 for November, which represented an increase of 1.5 percent from a year ago.
“Although the upward movement in wholesale pricing this year defied market expectations, it did not defy market realities. Consider, for example, the robustness of the retail market where both new unit retail deliveries and used CPO sales are poised to set all-time highs,” Webb said when Manheim posted the latest index report on Monday.
“As a result, rather than dreading the higher wholesale volumes, remarketers are embracing the opportunity to re-engage retail customers and fleet buyers to their brand or services,” he continued.
“Some lessors are still posting a gain-on-sale for end-of-term units,” Webb went on to say. “To be sure, that situation will change shortly, but wholesale consignors will continue to find a receptive market for their vehicles as long as the retail markets remain so strong.”
Market class and consignor segment trends
Looking deeper into Manheim’s data showed that prices for pickups spiked 12.3 percent higher year-over-year in November. That figure was nearly double the combined increases for the three other vehicle segments that registered price rises.
Analysts also spotted price increases in November for midsize cars (up 2.6 percent), vans (up 2.2 percent) as well as CUVs and SUVs (up 2.0 percent).
Leading the price decliners were compacts, which Manheim indicated were off by 6.6 percent last month. Prices for luxury cars also softened by 4.4 percent.
“As expected, wholesale prices for luxury cars suffered in November due to large volumes,” Webb said.
“In November, compact cars erased some of the losses they incurred earlier in the year, but they remained the weakest market segment overall,” he continued. “Prices for pickups and sports cars remained strong in November, and for the full year.”
Manheim calculated that a straight average of all auction prices showed less of a bump higher in November than in each of the last three years.
Webb also mentioned average mileage was the lowest since April 2012. He pointed out the average auction price for dealer-consigned units in November declined relative to October, but was up about 5 percent from a year ago.
Rental risk pricing moves up in November
Manheim reported that a straight average of auction prices for rental risk units marked 3.5-percent climb in November relative to October and a 2.5-percent rise year-over-year.
On a mix- and mileage-adjusted basis, analysts noticed prices were up 1.2 percent during the month and up 0.8 percent year-over-year.
“Relative to the past four years, rental risk prices are now in the high range after dipping in the summer months due to a high volume of older, rough-condition vehicles being sold,” Webb said.
“Average mileage on rental risk units remained above 45,000 miles in November, as it has for every month this year but one,” he added.
November sales recaps
As he does with each Manheim index update, Webb touched on the most recently new- and used-vehicle sales performance.
In November, Webb pointed out that new vehicles sold at a seasonally adjusted annual rate of more than 18 million for the third consecutive month.
“If December sales are strong (and there is little reason to believe they won’t be), full-year new vehicle sales will be close to, or may even eclipse, the record 17.4 million units sold in 2000,” Webb said.
“It’s true that incentives are once again rising faster than transaction prices (a sure sign of a fatiguing market),” he went on to say. “But even if the market takes a deserved rest, 2016 promises to be another healthy year for sales.”
Webb also noted used-vehicle sales, which were up 1 percent year-to-date through October, were estimated to have advanced at a faster pace in November. CPO sales declined 4.7 percent in November, but are up 8.7 percent year-to-date “and are destined to set a new record for the year,” according to Webb.
“More important, dealers continue to report quick turns and strong F&I income in their used vehicle operations,” Webb said. “Higher-than-expected trade-ins have more often produced retail profits than wholesale losses.”
As supply continues to grow, with over 800,000 off-lease vehicles expected to enter the remarketing cycle next year, average vehicle price retention is expected to weaken in 2016.
While 2014 to 2015 had some of the strongest vehicle retention in recent memory, this trend will start to reverse beginning next year, according to a report from Black Book.
Take a look at these numbers from Black Book data:
When the economic downturn hit, three-year average vehicle retention was at 38.7 percent in 2008 and 40.6 percent in 2009.
From there, retention levels have consistently grown through this year as leasing and new-car sales fell off during the Great Recession, causing short supply and putting upward pressure on used prices.
Retention hit a high point in 2014 and 2015, with average retention sitting at 51.2 percent. But this is likely the last year we will see this trend play out.
In 2016, Black Book expects retention to drop to 48.8 percent, further lowering to 45.9 percent in 2017. In 2018, Black Book’s editors are predicting a rate of 43.6 percent retention.
Listen up, folks. The same old wholesale trends you have come to expect this year are changing — and changing fast.
Those watching the auction lanes this year have seen the truck segments outperform their smaller counterparts throughout most of 2015, but over the course of November, trucks started to lose a bit of their momentum.
And this past week, according to the latest Black Book Market Insights Report, the truck segments declined at a significantly quicker pace than the car categories.
Overall, truck wholesale prices fell by an average of $77 (or 0.47 percent) over the Thanksgiving holiday week, while cars only dipped by $33 or 0.22 percent.
For comparison, the average depreciation rate for cars over the previous four weeks had been 0.82 percent.
The switch up prompted Anil Goyal, vice president of automotive valuation and analytics at Black Book, to point out, “The steep downward market trend seen over the last four weeks in the car segments took a pause last week with relatively better value retention.”
The car segments seeing the best price retention last week were the entry midsize (down by 0.09 percent or $7), near-luxury (down by 0.14 percent or $21) and prestige luxury car (down 0.11 percent or $32) categories.
The compact car segment saw the biggest percentage drop, though it still only fell by 0.33 percent or $24.
For trucks, the decline of 0.47 percent was smaller than the average depreciation rate of 0.63 percent seen over the previous four weeks, when depreciation for these units started to pick up in November.
Among the trucks, the compact pickup, compact SUV, midsize pickup and subcompact CUV segments saw the best price retention last week, with rates holding steady with no change from the prior week.
The worst performing truck segment was the minivan cargo category, which saw prices drop by an average of 1.04 percent or $66 last week, followed by the midsize CUVs, which saw prices drop by 0.88 percent or $138.
Wholesale value declines last week continued to be strong, as seasonality takes its toll on the lanes.
According to the latest Black Book Market Insights report, wholesale prices for cars fell by 0.72 percent or $78 last week, while the trucks took an average hit of 0.44 percent or $68. These are much higher declines than what was seen during the same week last year when rates fell by 0.42 percent for cars and 0.31 percent for trucks.
“Wholesale values have declined at a relatively high rate in recent weeks, a foreseen trend, caused by the impact of seasonality,” said Anil Goyal, vice president of automotive valuation and analytics.
Comment from the lanes echo this analysis. Black Book editors overheard a buyer from Washington say, “Prices continue downward in this location on most segments,” while an auction attendee from Illinois noted, “Prices are down slightly from last week in this particular area.”
Once again, the entry-level and entry midsize car segments saw prices drop the most this past week. Entry-level cars saw a price decline of 1.29 percent or $77, while the entry midsize car segment fell by 1.12 percent or $92.
Out of the car segments, the prestige luxury segment was the best performer with a slight drop of 0.12 percent or $34.
Among the trucks, the compact pickup (down 0.01 percent) and compact SUV (consistent with the prior week) segments proved strong, seeing little to no change for the week.
The largest decline for the trucks was seen in the minivan cargo segment, which saw rates drop by 2.34 percent or $116. Interestingly, Black Book pointed out in its monthly depreciation report for October that this same segment experienced the largest price drops last month, as well, declining in value by 5 percent.
Compact CUV prices also fell by quite a bit last week, with rates dropping by $112 or 0.97 percent.
This week’s report also included a Q&A with some of the industry’s leading remarketers, who offered insight on auction strategies for key segments, CPO programs and off-lease plans.
To check out Black Book’s interview with Tom Cornellier, manager, auction operations and eBusiness, vehicle remarketing at Ford; and Dan Kenney, manager, remarketing at GM, see here.
As auction values continue to drop, dealers are also paying less for trade-ins that come into their dealerships.
According to the November edition of the NADA Official Used Car Guide, trade-in values dropped by 2.8 percent relative to October.
While car values fell by 3.2 percent, trucks saw a 2.2 percent decline. This trend mirrors that of auction values, as trucks continue to outperform cars in the depreciation arena.
Subcompact and compact car trade-in values took the biggest hit, falling by an average of 3.6 percent.
Mid-size car values declined by 3.3 percent. Luxury car values performed better with a smaller average drop of 1.6 percent.
Highlighting price movement for the larger vehicle trade-ins, compact utility, midsize utility and midsize van prices fell by an average of 2.3 percent. Large pickup and utility prices dropped by just 1.4 percent.
According to NADA UCG, so far this year trade-in values have dropped by an average of 12.7 percent. Cars have experienced a heftier drop of 14.8 percent this year, while truck trade-in values are 9.4 percent lower than rates seen at the beginning of 2015.
Wholesale prices were on the way down last month due in part to a lessening in demand, but according to Black Book data, depreciation varied widely based on vehicle size.
Black Book reported the average price of used vehicles for model years 2010-2014 declined by 2.6 percent last month, which was up significantly from the 1.5-percent drop seen in September.
Trucks continued to outperform cars, with prices dropping by 2 percent for the month, while cars saw a larger 3.3-percent decline.
Interestingly, two van segments — at opposite ends of the “size” spectrum — saw the most noteworthy price movements.
First up, the cargo minivan segment, which includes models such as the Dodge Grand Caravan, saw the highest depreciation last month with prices dropping by 5 percent. Vehicles in this segment finished the month off with an average segment price of $7,530, which is down 16.3 percent year-over-year when these units were going for an average of $10,739.
On the other hand, the full-size cargo vans saw the lowest depreciation in October, with rates dropping by just 1 percent. This segment, which includes units such as the Mercedes-Benz 2500 Sprinter Vans, were going for an average of $19,608, which is only down 3.7 percent from October 2014.
Other noteworthy price comparisons include:
- Compact car prices dropped by 3.6 percent last month, while compact pickup prices only dropped by 1.1 percent
- Full-size car rates dropped by 3.3 percent, while full-size pickup prices declined by 1.4 percent.
- Compact CUV prices fell by 2.6 percent, while the larger full-size SUV models only took a 1.8-percent hit in October.
“As expected, we’re seeing some of the highest depreciation levels of the year driven largely by lowered demand at wholesale auctions around the country,” said Anil Goyal, vice president of automotive valuation and analytics for Black Book. “We believe this trends will continue through the end of the year and we should finish 2015 with overall depreciation nearing 14.0 percent. It’s important to note that this is still slightly lower than what the industry experienced prior to the recession.”
After dropping by 3.5 percent in September, October used-vehicle prices held up a bit better, but depreciation has picked up again this month.
According to the latest Guidelines report from NADA Used Car Guide, used-vehicle prices fell by 2.8 percent in October.
Jonathan Banks, executive automotive analyst at NADA Used Car Guide, pointed out this October’s showing was also the best performance for the month in three years; prices in both 2013 and 2014 dropped by 3.6 percent during the same month.
“In dollar terms, the 0.8-percentage point difference translates into a nearly $175 improvement in monthly depreciation for a $20,000 vehicle,” Banks explained in the report.
Last month’s trends caused NADA Used Car Guide’s seasonally adjusted vehicle price index to move up 0.4 percent to 122.5. This reading is more than a point higher than the 121.3 figure seen in October 2014.
Segment trends fell in line with seasonality last month. Banks reported, “as is usually the case for October,” compact, midsize and large cars, as well as mid-size vans, took the biggest price hits.
- Compact car prices dropped by almost 4 percent.
- Midsize van and large car prices each dropped by 3.4 percent.
- Midsize car prices declined by 2.9 percent.
“It’s worth noting that while the group’s losses were top-of-industry, October’s declines were measurably better than what occurred in both September and over the past few years,” Banks said.
For example, after five consecutive months of price drops of more than 4 percent, subcompact cars only took a hit of 2.3 percent last month.
For trucks, once again, “depreciation was again generally superior to that of cars,” said Banks.
Price movement highlights among trucks last month include:
- Large pickups depreciated by 2 percent in October, after dropping by 2.8 percent in September.
- Midsize pickups declined by 1.3 percent.
- Compact utilities saw a drop of 2.6 percent.
- Midsize and large utility prices dropped by 2.3 percent and 1.9 percent, respectively.
Though prices have held strong for pickups for most of the year, the tides have turned a bit in November. During the first week of November, truck prices took the biggest hit seen this year — and last week, prices took another hefty plunge.
According to the latest Black Book Market Insights report, trucks experienced one of the largest price declines this year in the lanes last week, with prices falling by approximately 0.80 or $125.
Going back to Guidelines and taking a quick look at luxury segment movement last month, luxury compact and mid-size utility depreciation led the group, with rates dropping by almost 3 percent and 2.4 percent, respectively.
“The month was among the worst for the two segments over the past two years,” Banks said in the report.
Luxury cars bucked recent trends and performed better than the utility segments; luxury compact car and mid-size prices dropped by a combined average of 2 percent. Luxury large car prices only saw a slight 0.6-percent decline.
Year-to-date trends
According to NADA, overall depreciation for the year comes in at 12.3 percent, which is a bit stronger of a drop than 2014’s 11-percent decline through October.
Here is a year-to-date segment breakdown:
- Subcompact car prices have dropped by 17 percent.
- Luxury large cars lead the pack in terms of depreciation with a decline of 18 percent.
- Compact car, midsize car and large-car prices have dropped by an average of 14 percent.
- Midsize van prices have fallen by 13 percent.
- Large utility, mid-size utility and compact utility declines range from 8 percent to 10 percent.
- Midsize and large pickup prices have dropped by just 4.5 percent.
The rest of the year
For this month, NADA UCG expects used vehicle prices up to 8 years old to fall by 2 to 2.5 percent compared to October.
Banks noted that those this month’s forecast is worse than 2014’s 1-percent drop in November, it is in line with the nearly 2-percent declines seen from 2011 to 2013 for the month.
“Prices of non-luxury cars and mid-size vans are scheduled to drop by approximately 2.5 percent, while mainstream utility and truck losses are expected to average roughly 2 percent,” said Banks. “Luxury car and utility losses are projected to be in the range of 2.5 percent to near 3 percent.
Depreciation should improve in December, NADA UCG reported, with expected declines of 1.5 percent to 2 percent.
“If the market performs as expected, prices on an indexed, full-year basis would be 0.6 percent lower than 2014’s record-high average,” Banks concluded.
After strong used pickup prices contributed to wholesale prices rising in the lanes in October, the tides quickly turned this month as seasonality is taking its toll.
During the first week of November, truck prices took the biggest hit seen this year — and last week, prices took another hefty plunge.
According to the latest Black Book Market Insights report, trucks experienced one of the largest price declines this year in the lanes last week, with prices falling by approximately 0.80 or $125.
Black Book editors pointed that out seasonality is contributing to price drops among both cars and trucks, but it is interesting that truck declines are occurring while gas prices remain low at an average of $2.22 per gallon nationally.
“Gas prices are remaining low, but no longer seem to be helping truck values that have been stronger than the values of car segments so far this year,” said Anil Goyal, vice president of automotive valuation and analytics.
The biggest declines in the truck segments were seen among the midsize SUVs (down 1.76 percent or $293), compact pickups (down 1.46 percent or $210) and the compact SUVs (down 1.18 percent or $229).
The best performing group was the midsize pickups, which saw a slight price increase of 0.10 percent or $11.
Illustrating the change in truck trends, Black Book editors head an auction attendee from Michigan noted, “Trucks are still doing well, but there are some soft spots showing up.”
The cars were experiencing the impact of seasonal lows, as well, as wholesale prices dropped by an average of 0.83 percent or $91 last week. Black Book reports this is higher than the average depreciation rate of 0.71 percent for cars seen over the previous four weeks.
Among the cars, the near luxury (down 1.16 percent or $187), luxury level (down 1.02 percent or $199) and the entry level (down 1.01 percent or $61) segments saw the biggest price drops last week.
The best performing car category on a percentage level was the premium sporty car segment, which experienced a 0.48 percent or $178 drop.
Leading up to November, trucks and SUVs had seen some of the strongest residuals in the industry this year.
According to ADESA Analytical Services’ monthly analysis of wholesale vehicle prices by model class, auction prices were up 1.1 percent last month when compared to September — and strong pricing among trucks had a direct impact on this movement.
In fact, according to the latest edition of Kontos Kommentary from ADESA Analytical Services’ Tom Kontos, this increase was driven largely by “upticks in truck prices.”
In October, wholesale prices for full-size pickups rose by 12.7 percent year-over-year to finish the month off at an average price of $14,469. Compact pickups saw rates spike by 6.5 percent from October 2014, coming in at an average of $7,793 last month.
Kontos explained that although pickups are out-performing the market, wholesale prices were still looking stable all around.
But as the industry approaches winter, it seems no segment is immune from the impact of seasonality.
