October didn’t disappoint as a month that historically brings about some pretty dramatic price drops in the lanes.
Overall, the average price of a used vehicle for model years 2009 through 2013 saw the largest wholesale price drops this year with a 2-percent decline.
And according to Black Book data, this past month, two car segments saw prices drop by at least 4 percent: the full-size cars, with a 4 percent drop, and the compact cars, which saw prices drop 4.4 percent.
Full-size cars finished out the month with an average price of $11,848, while the compact cars wrapped up October with an average rate of $9,327 in the lanes.
And as gas prices drop, consumer interest in more fuel-efficient rides is waning, pushing rates down for some of the smaller segments.
In fact, three of the five segments with the largest October depreciation were all car segments and fall under the more fuel-efficient umbrella.
Compact cars led the pack with a hefty decline, followed by the entry-level cars and entry-midsize cars, both with a drop of 3.5 percent.
Ricky Beggs, editorial director of Black Book, said falling fuel prices are certainly having an impact on demand for fuel-efficient vehicles.
“Entering November, fuel prices continued inching near $3.00 per gallon, causing a continued ripple effect across the entire automotive landscape. These prices are expected to fall further, placing extended demand concerns on smaller cars ahead of the spring selling season after the new year,” Beggs said.
Switching gears to take a look at the sportier car segments, the story last month was quite different in this market.
For the second month, the premium sporty cars saw the lowest depreciation rate for all car segments, with prices declining by 1.6 percent. This segment finished out the month with an average segment price of $48,976.
Not surprisingly, given the strong price retention seen earlier this year, compact pickups led all truck segments in October with one of the lowest price drops for the month, seeing prices fall by 3.5 percent.
A compact pickup sold for an average of $15,907 in the lanes this past month.
This was right behind the full-size cargo vans with a 2.1 percent drop and the full-size passenger vans with a 1.7 percent slide.
Overall, domestic cars saw the steepest declines in October with a 3.2 percent drop, followed by the import cars, which saw prices decline 2.3 percent last month.
Domestic trucks saw prices drop by 2.1 percent, and import trucks fell by 1.3 percent.
With dealers shifting to “acquisition mode” in October, wholesale prices ended a five-month streak of declines, according to analysis in the Manheim Used Vehicle Value Index released Friday morning.
The report indicates that wholesale values (on a mix-, mileage- and seasonally adjusted basis) climbed last month, following five consecutive months of downward movement.
The Manheim Used Vehicle Value Index for the month came in a 121.8, off 0.4 percent from October 2013.
“After eliminating some inventory-heavy positions in the third quarter, dealers were once again in acquisition mode during October. Sure, non-seasonally adjusted prices fell during the month (they invariably do); but the decline was less than normal and came despite some significant increases in wholesale volumes,” Manheim chief economist Tom Webb said in the report. “Credit higher new-vehicle transaction prices, stable incentive activity, and renewed consumer interest in used vehicles.
“Nevertheless, fundamentals suggest further wholesale price declines are in the offing,” he continued. “It’s just that movements will not be — and never are — a straight line.”
Trend Lines in Rental Risk
Looking specifically at the rental risk segment of the market, Webb spotted a major increase in auction volumes for these units last month due to recall-delayed selling. Not to mention, the average mileage was 44,800 miles, an all-time high. Meanwhile these vehicles’ prices (unadjusted for market class/mileage changes) dropped 6 percent year-over-year.
On an adjusted basis, they fell 4 percent.
Vehicle Segment Movement
Prices on pickups jumped 7.0 percent year-over-year to lead the pack, followed by vans with a gain of 2.9 percent. The SUV/CUV class (up 0.3 percent) was the only other area to see an increase in price.
Compact cars fell 3.2 percent, midsize cars dropped 1.8 percent and luxury cars moved down 3.1 percent.
“Pickups and vans remain the strongest segments year-over-year, while midsize and compact car pricing continues to suffer from competitive new-vehicle pricing and greater consumer interest in the small crossover segment,” Webb said. “The multiyear decline in used luxury car pricing has abated in recent months.”
Webb also pointed out pricing strength for the $8,000 to $10,000 vehicle segment as well as within the higher price tiers.
Though the fifth week of October is traditionally one of the weakest for auction prices all year, this past week “didn’t stand out,” according to Ricky Beggs.
The Black Book editorial director reported in his latest “Beggs on the Used Car Market” video report that this past week’s performance was the “one positive” for the month in the lanes.
Last week, wholesale prices for cars dropped an average of $79, which was right in line with the previous two weeks’ changes, and just a bit higher than the month’s average weekly drop for cars of $74.
“While looking at the total percentage change of various segments during the entire month of October, and thinking about the recent drop in gas prices, this week down another $.06 to $3.06, the largest (price) drop was with one of the more fuel efficient segments,” Beggs said.
The compacts cars saw a 4.2-percent drop in price last week, followed by the full-size cars with a decline of 3.9 percent. The entry-level cars also saw a significant change, dropping 3.5 percent from the prior week.
Price changes for trucks were also surprisingly mild during the last week of October, with an average decline of $52. Beggs pointed out this downturn was much smaller than the average drop seen two weeks ago of $94.
“The full-size vans and wagons got back to a positive week-to-week movement, while the full-size crossovers and the luxury SUVs continue their higher dollar depreciation at -$132 and -$171, respectively,” Beggs said.
He also pointed out this could signal a seasonal trend. Last year, during the same week, truck prices dropped by an average of $50, with the full-size crossovers and luxury SUVs both showing drops of over $100.
See this week’s video report above, which features an interview with John Brasher, of Brasher’s Sacremento Auto Auction.
It looks like wholesale price drops are beginning to escalate even more in the fourth quarter, with auction rates expected to decline by almost 2 percent this week.
According to NADA’s AuctionNet data, at the industry level, prices in the lanes are predicted to fall by 1.9 percent, or $275, over the course of the week.
All segments are expected to see prices drop, and NADA predicts the compact and midsize car segments will see the most dramatic percentage price declines.
Compact cars are expected to see prices drop by 2.1 percent, or $200, while the midsize car segment is predicted to see a 1.1-percent ($125) decline.
“Fuel prices continue to decline, which never seems to help fuel-efficient segments,” said David Paris, automotive analyst are NADA.
According to Energy Information Administration released Monday, the average price of regular grade gasoline fell from $3.12 to $3.06 last week.
Interestingly, the trucks are also beginning to see larger price drops in the lanes, after experience stronger-than-average price retention for most of the year.
NADA expects large pickup prices to see a drop of 0.9 percent, or $200, this week.
The strongest price retention is predicated in the midsize utility and midsize van segments, which are each expected to see prices drop by $100 this week.
Four- and two-week AuctionNet wholesale average prices are created by collecting all AuctionNet records for vehicles up to 5 years of age for a specified period of time. Prices are then adjusted for changes in mileage and mix.
Current week prices are based on NADA's proprietary used-vehicle value model which includes assumptions for new-vehicle prices, used-vehicle supply, gasoline prices, and other economic factors.
| NADA Segment |
Average AuctionNet® Wholesale Price |
2-Week v. Current |
| 4-Week Average |
2-Week Average |
Current Week |
% Change |
$ Change |
| Compact Car |
$9,575 |
$9,450 |
$9,250 |
-2.1% |
($200) |
| Compact Utility |
$13,775 |
$13,700 |
$13,550 |
-1.1% |
($150) |
| Industry |
$14,375 |
$14,275 |
$14,000 |
-1.9% |
($275) |
| Large Pickup |
$21,425 |
$21,300 |
$21,100 |
-0.9% |
($200) |
| Large SUV |
$25,825 |
$25,575 |
$25,425 |
-0.6% |
($150) |
| Luxury Car |
$20,325 |
$20,175 |
$20,000 |
-0.9% |
($175) |
| Luxury Utility |
$25,000 |
$24,750 |
$24,575 |
-0.7% |
($175) |
| Mid-Size Car |
$11,075 |
$10,950 |
$10,825 |
-1.1% |
($125) |
| Mid-Size Utility |
$17,350 |
$17,325 |
$17,225 |
-0.6% |
($100) |
| Mid-Size Van |
$13,825 |
$13,650 |
$13,550 |
-0.7% |
($100) |
According to a Cars.com blog post, average listing prices of late-model vehicles hit a 2014 low this month, having slid $1,166 since the start of the year.
And here’s the kicker: there weren’t even enough qualifying cars to fill the list of Top 10 Biggest Price Increases.
“For an example of just how much used-car prices have weakened, you only need to look at this month’s list of cars with price increases: There were only nine models that met our inventory criteria,” wrote Mike Hanley of Cars.com, who authored the blog post that lists both the Top 10 Biggest Price Drops and Top 10 Biggest Price Increases for October.
Cars.com notes that cars must be from the 2011 through 2013 model years and have a minimum of 250 units within Cars.com’s national inventory to make either list.
Overall, model-year 2011 through 2013 cars had an average listing price of $22,071 this month, according to Cars.com. That’s a $283 (1.3-percent) month-over-month slide and a 5-percent decrease from January.
The used vehicle with the greatest listing price decrease (percentage-wise) in October was the Mitsubishi Galant, whose prices were off 4.2 percent month-over-month.
The Kia Sedona had the second steepest drop (3.9 percent), and the remaining eight vehicles in the Top 10 Biggest Price Drops all had price declines between 3.1 percent and 3.4 percent.
Conversely, the Audi A3 sported the largest sequential price increase at 6.0 percent. Interestingly enough, the four leaders of the Top 10 Biggest Price Increases were all Audi models. However, the gains for the A6 (up 2.2 percent), A5 (up 0.8 percent) and the A4 (up 0.7) were less pronounced.
No other model included in the analysis had more than a 0.1-percent increase.
All this is amid an October that Cars.com expects to be the best in seven years in terms of new-vehicle SAAR. Specificially, the company is calling for a new-car SAAR of 16.3 million — the best October reading since 2007.
Cars.com projects 1.28 million new-car sales, which beats year-ago figures by 6.4 percent and bests September by 2.9 percent.
“Lower gas prices helped fueled sales of SUVs and trucks in October,” said Jesse Toprak, chief analyst at Cars.com. “Consumer demand for new vehicles remained very healthy, resulting in the best October, in terms of unit sales, since 2004.
“We expect this robust pace of sales to continue in the months ahead and to finish the year with 16.5 million total units sold," Toprak added.
Expanding supply means lower used prices. And with a new flow of off-lease vehicles expected to hit the market in the coming years, many in the industry are wary of the impact on used-vehicle retail sales.
But AutoNation, who just experienced a 7.5-percent boost in third-quarter used-vehicle retail sales, as well as a successful overall quarter, has a different outlook.
Mike Jackson, chairman and chief executive officer of AutoNation, explained during the company’s conference call to discuss third quarter results that he has a “contrarian view” on this issue.
“If I look at the great crash of ‘08, ‘09, and ‘10, when new sales collapsed, then for the last few years, there has been an extreme shortage of used cars — which has inflated used-car values to record levels — has pushed pricing for used cars right up against new cars,” Jackson explained.
The executive pointed out this trend seen in the years following the Great Recession has caused considerable debate on the showroom floor between the price of a used car and the price of a new car.
In many cases, Jackson said, the company has had to discount the prices of used cars to “keep them away” from new values.
“That’s a unusual circumstance to have acquisition costs that high. Now, the table is turning. Used-car availability it going to be significantly higher over the next few years. I expect valuations to fall,” Jackson said.
With greater supply and lower acquisition costs, and used and new values heading back toward “normal”, company management expects higher volumes and margins in their used business.
“There could be a tactical adjustment in any given quarter with inventories moving … but if I look over the next several years, it makes me more optimistic about the used-car business,” Jackson concluded. “Regarding recent discussion on used vehicles, we view the improved supply and lower acquisition cost of used cars as a positive development. We believe volume and improvement for gross opportunities will exists in the used business due to increasing supply of used cars and lower acquisition costs.”
In fact, the company has already made big moves to increase used inventory, and the dealer group reaped these rewards.
Mike Maroone, president and chief operating officer of AutoNation, explained the company redoubled their used efforts during the quarter, the result of which was a solid performance.
“We great our used-vehicle inventory from Q2 to position ourselves for growth in Q3, and it paid off. We are working hard to increase sourcing used vehicles from trades to optimize our mix of used vehicles and to price each and every used vehicle to the market,” Maroone said.
In the third quarter, the company’s used-vehicle days’ supply was at 32, compared to 31 a year ago.
“At this level, we feel we are well-positioned heading into the new year,” Maroone said.
Interestingly, though more inventory at an industry level means lower prices, during the Q&A portion of the call, the company was asked why their revenue and gross profit on used vehicles continues to rise.
The company sold 56,584 used vehicles in Q3, with an average revenue per used vehicle retailed of $18,489 in Q3, up from $17,718 during the same period last year. Gross profit per used vehicle retailed came in at $1,620 during Q3, up from $1,528 a year ago.
Maroone explained this increase is due largely in part to a 16-percent spike in certified pre-owned sales.
“We consciously moved our used inventory levels up by 4,400 units, and we sold 3,400 more and still ended the quarter with a days’ supply of 32,” said Maroone. “So, we are really pleased with the effort, and we expanded margins. The aggressive move to stock more worked out well. And the CPO market continues to be a strong part of the business.”
As far as when the company expects used prices to begin dropping at a more rapid pace, Jackson pointed out the move has already begun.
“The index was at 125 right near the beginning of the year, and right now it is about 120, on a downward trend line. So it is a very manageable transition,” said Jackson. “We look at the lease rates of years ago and can calculate the return rate that is coming in the next year or two, and it is a substantial increase in availability over the next several years, and I expect this inflated index to continue on a gradual downward decline.”
Another hot topic in vehicle pricing these days touched on during the call — for both new and used — that was no-haggle pricing.
In light of Edmunds.com Lot Buddy offering as well as Sonic Automotive's new no-haggle True Pricing methodology, AutoNation was asked whether a similar move was in the works.
Though the company thinks a “lower intensity” of negotiation is what the consumer desires and transparency is key these days, management sees the ever-changing pricing world of manufacturer incentives as a “barrier” to a strict no-haggle policy.
That said, no-haggle pricing may have a place in the digital strategy of the company.
In late summer, AutoNation announced it was investing $100 million, over the course of 2014 and 2015, into a digital sales effort, aiming at making the AutoNation website transactional by the end of 2014.
“In our digital effort, though not underneath the AutoNation brand flag, we will launch SmartChoice pricing starting in the South Florida market in December when we go transactional. That will be very close to a no-haggle pricing. We think that’s where you need to be in the marketplace,” Jackson concluded.
With gas prices falling at a rapid rate, there are a number of consequent trends popping up in the lanes. But perhaps one of the most dramatic turns last week was seen among the truck segments.
Though truck prices have been performing well throughout the year, the segments fell by an average of $94 last week.
This is according to the latest “Beggs on the Used Car Market” video report, during which Ricky Beggs — editorial director at Black Book— reported that this drop was the largest weekly decline within the car or truck segments over the past year.
Interestingly, even as gas prices lower, the large segments are not seeing the usual consequent equity bump.
For example, the full-size cargo and passenger vans dropped $32 and $38, respectively, after seeing increases over the past four weeks.
Beggs pointed out that the past two weeks have brought with them the greatest weekly decline in gas prices over the past year.
The national average now sits at $3.12 per gallon, with is below last year’s low point of $3.19 during the week ending Nov. 11. Current gas prices are 24 cents below where they were during the same period of last year, “and there are still expectations of continuing declining prices,” said Beggs.
How is this trend impacting the wholesale market?
Well, five more fuel-efficient car segments all have over 0.5-percent price declines this past week, said Beggs.
And overall, the car segments saw a decline of $77 last week.
“That is a pretty consistent overall car market,” said Beggs. “The luxury-oriented cars along with the full-size car segment had increased levels of change this past week as compared to two weeks ago.”
See this week’s video report above, which features an interview with Doug Turner, director of asset management at J.D. Byrider.
Though some segments will fall outside the overall trend, wholesale prices are expected to remain flat over the course of this week, despite expected seasonal softness.
That’s according to NADA’s AuctionNet data, which shows that losses this week will be led by the compact car segment.
This fuel efficient segment is expected to see prices fall by 1.8 percent, or $175.
This may be due in part to lessening demand and lowering gas prices.
According to Energy Information Administration, the average price of regular grade gasoline fell from $3.21 to rest at $3.12 last week.
And Black Book reported Tuesday as gas prices drop and demand softens, entry-level and small cars are expected to see noticeable price drops this month.
The entry midsize cars are predicted to lead with the biggest drop, falling by 7.5 percent from the third quarter and 13.7 percent year-over-year. The compact cars will most likely follow with a 6.3-percent drop from Q3, according to Black Book data.
This week, midsize car prices are expected to see the second largest price drop in the lanes, falling by 0.5 percent (or $50), according to NADA.
Large pickups and compact utility segments are expected to decline slightly, as well, with drops ranging from $25 to $50.
However, all other segments are expected to see slight price appreciation, said David Paris, automotive analyst at NADA, except for the luxury cars, which are expected to see prices remain consistent with last week.
Luxury utility vehicles are predicted to see the biggest price increases this week, rising by $100.
Four- and two-week AuctionNet wholesale average prices are created by collecting all AuctionNet records for vehicles up to five years of age for a specified period of time. Prices are then adjusted for changes in mileage and mix.
Current week prices are based on NADA's proprietary used-vehicle value model which includes assumptions for new-vehicle prices, used-vehicle supply, gasoline prices, and other economic factors.
| NADA Segment |
Average AuctionNet® Wholesale Price |
2-Week v. Current |
| 4-Week Average |
2-Week Average |
Current Week |
% Change |
$ Change |
| NADA Segment |
$9,650 |
$9,575 |
$9,400 |
-1.8% |
($175) |
| $13,825 |
$13,750 |
$13,725 |
-0.2% |
($25) |
| NADA Segment |
$14,500 |
$14,400 |
$14,400 |
0.0% |
$0 |
| $21,575 |
$21,525 |
$21,475 |
-0.2% |
($50) |
| Large SUV |
$26,125 |
$25,825 |
$25,900 |
0.3% |
$75 |
| Luxury Car |
$20,150 |
$20,200 |
$20,200 |
0.0% |
$0 |
| Luxury Utility |
$24,850 |
$25,025 |
$25,125 |
0.4% |
$100 |
| Mid-Size Car |
$11,125 |
$11,075 |
$11,025 |
-0.5% |
($50) |
| Mid-Size Utility |
$17,600 |
$17,375 |
$17,500 |
0.7% |
$125 |
| Mid-Size Van |
$13,900 |
$13,825 |
$13,850 |
0.2% |
$25 |
Auto Remarketing is hosting NADA Used Car Guide for a free webinar to help dealerships smooth out what consumers consider one of most dreaded parts of the buying process.
During the free session titled, “Close More Deals, Negotiate Less,” a pair of NADA UGC experts will ask dealers how satisfied their customers are with the store’s appraisal process and how it compares to recent research.
The Deloitte 2014 Global Automotive Consumer Study indicates that consumer dissatisfaction with the appraisal process is at 79 percent. That’s up from a dissatisfaction rate of 68 percent in 2009.
In this webinar, NADA Used Car Guide experts will identify the factors that are primary concerns for consumers and the actions dealers can take to improve the appraisal process. Managers will learn how to make the process one that consumers can understand, earn their trust faster and close more deals with less back and forth.
Webinar presenters Stu Zalud and Jim Dodd will demonstrate how taking the consumer through the appraisal process from start to finish, showing them everything that goes into the store number and presenting that number in an official appraisal document will close more deals faster, without the back and forth.
The webinar is scheduled for 2 p.m. ET on Thursday.
Leveraging more than 35 years of automotive retail experience, Zalud brings a dealer-focused perspective and insight to his role as director of dealer services for NADA Used Car Guide. Zalud joined NADA in this position in April 2007 and is responsible for promoting NADA Used Car Guide’s data and services to franchised and independent dealers, presenting at various industry events, and contributing to the development of future products and services to meet changing dealer needs.
Zalud’s previous experience includes 30 years as an Oldsmobile and Pontiac dealer in Cleveland and eight years as a Cadillac dealer in Hilton Head, S.C. In addition, he served on the NADA board of directors, NADA Used Car Guide board of advisors, and as chairperson of both the Greater Cleveland and Ohio Automobile Dealers Associations. He also served a five year term as a member of Ohio’s Dealer Licensing Division of the State.
Dodd joined the NADA Used Car Guide team in 2010, bringing more than 10 years of auction experience and dealer-focused perspective to his role as the account executive for automotive dealers.
At Southern Auto Auction, Dodd held various positions in sales and marketing. As Southern’s director of marketing, Dodd focused on information technology to develop electronic delivery systems that communicate auction information and data to dealers in real time.
Dodd was instrumental in the development and marketing of the industry’s first hand held utility, CarLots-2-Go, allowing dealers to download vehicle lists to their PDA or Smartphone through a WiFi network.
Dodd served on the board of directors for the Connecticut Auto Dealers Association representing the auction industry.
Dealers can complete the registration for the free webinar by going to this website.
After wrapping up the weakest third quarter for used prices observed since 2002, fourth-quarter rates are expected to continue dropping as fall marks one of the softest seasons for the lanes.
Black Book analysts reported on the eight segments expected to lead Q4 depreciation. The team predicts luxury-level segments, which has been dropping in price at a rapid rate, will see the largest price declines in the last quarter of the year.
This movement will be largely driven by off-lease returns in lease-heavy segments, according to Black Book.
Luxury-level cars are expected to see a 6.7-percent drop from Q3, followed by the near-luxury cars with a decline of 4.7 percent and the prestige luxury cars with a slide of 4.6 percent.
Leading the pack for year-over-year drops is predicted to be the prestige luxury cars. Black Book predicts this segment will end the year with prices down 18.9 percent from 2013 rates.
An as gas prices drop and demand softens, entry-level and small cars are also expected to see noticeable price drops.
The entry midsize cars are predicted to lead with the biggest drop, falling by 7.5 percent from the third quarter and 13.7 percent year-over-year. The compact cars will most likely follow with a 6.3-percent drop from Q3. Next up is the upper midsize cars with an expected drop of 7.1 percent.
“Fuel prices and off-lease returns will continue to have a noticeable impact on luxury-level and smaller car segments through the remainder of the year,” said Ricky Beggs, editorial director of Black Book. “The compact crossovers are experiencing higher than normal depreciation because of the large number of various models available within the segment.”
Beggs pointed out two more segments expected to see higher depreciation than most: the full-size SUVs and the compact CUVs.
The smaller compact CUVs are expected to see prices drop 5.3 percent from Q3, while the full-size SUVs are expected to see a 4.5-percent slide.
