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Auction Price Drops Expected to Slow This Week

After seeing prices drop by an average of $50 or more for the past three weeks, NADA Used Car Guide is predicting depreciation will slow slightly this week in the lanes.

Wholesale prices are expected to drop by 0.2 percent (or $25) this week, according to NADA UCG AuctionNet data.

This prediction compares to last week’s drop of an average of $57 for the car segments and $9 for trucks, according to Black Book data.

Declines this week will be led by the midsize car segment, with average declines of 0.6 percent, according to NADA UCG.

Compact cars and midsize utilities are expected to follow with declines of 0.4 percent each.

“Smaller declines are expected in all other segments as prices are expected to slip by 0.2 percent to 0.3 percent,” said David Paris, NADA UCG automotive analyst.

The only segment expected to see prices remain unchanged are luxury cars.

As for increases, midsize vans are expected to lead the pack with an increase of 0.3 percent (or $50).

Black Book’s Ricky Beggs said earlier this month that an improving economy and high construction rates are pushing strong retention in the van segments.

"There continues to be healthy demand for cargo vans because of the construction activity and the improving economy. We anticipate this will continue into the near future. Passenger vans are holding their retention right now because this is a category that is in sync as far as supply and demand," Beggs, editorial director and senior vice president at Black Book, told Auto Remarketing.

Wholesale prices began falling in May, and according to NADA’s latest Guidelines report, the trend isn’t expected to slow down this month.

NADA is predicting that prices will fall between a range of 2 percent to 2.5 percent this month.

As for the rest of the summer, used-vehicle depreciation is expected to drop to a range of 1 percent to 1.5 percent in July, before increasing to a 2-percent decline in August, according to NADA data.

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.

CPO Retail Demand Impacts Auction Lanes

ADESA noticed dealers are seeing some post-tax season price relief in the lanes, but the amount managers are paying for inventory remains higher than a year ago.

According to ADESA Analytical Services’ monthly analysis of wholesale used-vehicle prices by vehicle model class, prices in May averaged $10,321 — down 1.5 percent compared to April but up 5.4 percent relative to May of last year.

In addition to explaining that truck prices continue to generally hold firmer than car prices, ADESA’s Tom Kontos also shared how consumer appetitie for certified pre-owned cars is affecting volume and price metrics at auction.

“Wholesale prices in May softened from their April spring-market/tax-season peak, although they remain significantly above year-ago levels,” Kontos said in his monthly commentary issued this week.

“Retail demand, particularly for ‘certifiable’ units for record CPO sales, helped absorb off-rental volume and growing off-lease supply without significant price declines,” he continued. “However, there was some hesitancy from a few sellers to accept May’s lower prices, and this was reflected in low conversion rates for those consignors.

“May’s downturn could be a precursor to further softening, especially in areas such as the Northeast, where the growth in off-lease supply is expected to be concentrated,” Kontos went on to say.

ADESA’s latest analysis also showed that prices for used vehicles remarketed by manufacturers softened by 1.4 percent month-over-month but rose 5.0 percent year-over-year.

“More off-rental program units entered the market, many of which were no-sold,” Kontos said.

ADESA also mentioned prices for fleet/lease consignors dipped 1.5 percent sequentially but climbed 4.2 percent annually.

“More off-rental risk units entered the market (although in many cases these, too, were no-sold) along with more off-lease vehicles,” Kontos said.

Furthermore, ADESA pointed out dealer consignors saw a 2.5-percent average price decrease versus April and a 3.7-percent uptick versus May of last year.

“They wholesaled units obtained in part from trade-ins generated via May’s strong new vehicle sales,” Kontos said.

Kontos wrapped up his commentary by recapping May sales in the used space.

He noted that based on data from CNW research, retail used vehicle sales in May were up 12.3 percent month-over-month and 3.9 percent year-over-year. Kontos also highlighted Autodata Corp. figures that determined sales of certified pre-owned vehicles hit a record of 207,371 units in May, up 7.4 percent versus April and up 10.9 percent from the prior year.

Market Strength Pushes NADA Used Price Index to Record High

Tax season market strength wasn’t done with the auction in May — wholesale prices remained elevated for the third straight month.

And according to NADA’s latest Guidelines report, strong seasonal demand served to lift NADA’s used-vehicle price index to a new high of 126.8.

This is 0.5 percent better than the previous record set just a month earlier.

NADA reported wholesale prices over the first five months of 2014 are considerably stronger than what was seen last year, with prices year-to-date sitting 2.9 percent higher than they were through May 2013.

According to the report, prices remained high last month, but fell by 2.2 percent compared to April.

It pointed out this outcome is “slightly better” that what has been seen during May in the past, leading to an increase in prices when seasonally adjusted.

The slight depreciation in May resembled similar trends seen during the period in 2011 and 2012, “where declines for small and mid-size cars exceeded the overall market average, while losses for other segments were at or below the industry mean,” NADA UCG senior director of vehicle analysis and analytics Jonathan Banks explained in the report.

For example, collectively, subcompact, compact and midsize car prices fell by 2.8 percent in May.

Combine the past two months, and prices for these segments have declined by an average of almost 4 percent.

This is in part due to tax season price inflation as this number makes up half of what the three segments gained in price in the first quarter. Luxury compact cars and large SUVs also saw larger-than-average declines this past month, falling by 2.4 percent and 2.3 percent, respectively.

“The decline in small luxury cars prices wasn’t unusual; however, the month marked only the second time since early 2011 that large utility prices dropped by more than 2 percent,” Banks said.

Lastly, prices for large pickups began to dip in May, falling by 1 percent. That said, prices for this segment remain 12 percent above last year’s level during the time.

All other segments fell within 0.5-percentage point of the industry average decline of 2.2 in May, according to NADA data.

June Auction Prices Could Fall As Much As 2.5%

Wholesale prices began falling in May, and according to NADA’s latest Guidelines report, the trend isn’t expected to slow down this month.

NADA is predicting that prices will fall between a range of 2 percent to 2.5 percent this month.

As for the rest of the summer, used-vehicle depreciation is expected to drop to a range of 1 to 1.5 percent in July, before increasing to a 2-percent decline in August, according to NADA data.

Looking back at used price trends this year so far, the report shared February results fell in line with forecasts, but a “combination of pent-up demand and restrained supply resulting from severe winter weather drove prices well above expectations in March,” NADA's Jonathan Banks said in the report.

April and May, however, saw prices come down a bit and “realigned”with NADA’s expectations for the year.

“The results of the past eight weeks and the lack of any major looming threats suggest that prices will continue to track back toward an expected course moving forward,” Banks added..

Editor’s note: For more from NADA’s latest Guidelines report, see Wednesday’s Auto Remarketing Today.

Auction Prices Continue to Slide in June

After falling 0.4 percent last month, auction prices were still on the way down during the first week of June.

According to Black Book data, the car segments saw prices fall by $57 last week, larger than the $44 decline seen the week prior.

This is compared to a $33 slide for cars during the same week last year.

Highlighting another sign prices across the board are softening,  Black Book’s Ricky Beggs said, “The similarity between this past week and the time period of one year ago is that in neither period there were no individual (car) segment types with positive week-over-week change.”

In the Black Book editorial director’s latest “Beggs on the Used Car Market” video report, he said the four segments showing the strongest retention among the cars were the entry-level cars, the compact cars, and both the entry midsize and the upper midsize car segments.

Beggs explained these were also the four segments to see the biggest price spikes during tax season earlier this spring.

And for the smaller units, in particular, when highlighting May auction price results last week, Beggs told Auto Remarketing, "The strong compact car prices are a result of the strong spring selling season, where buyers are very focused on this price point for a used vehicle. We anticipate that this segment will see rising depreciation as the year moves forward."

Rounding out the car segments, the upper midsize cars fell by $48 this past week, similar to its $51 drop the week prior.

The truck market continues to see strong price retention, falling only by an average of $9 last week, compared to a decline of $13 two weeks ago.

The truck segment with the biggest price drop this past week was the compact crossovers, which saw a decline of $48.

“This segment continues to adjust downward, now for five consecutive weeks, after an amazing run of retention over the past couple of years,” Beggs said.

The vans, on the other hand, continue to perform well.

For full-size vans, the cargo versions were only down $8 last week, while the passenger wagons were down $5.

Vans performed well during May, as well, as Beggs pointed out last week: "There continues to be healthy demand for cargo vans because of the construction activity and the improving economy. We anticipate this will continue into the near future. Passenger vans are holding their retention right now because this is a category that is in sync as far as supply and demand.”

Other truck segments that are touting strong price retention include the full-size pickup, which saw an increase of $12 last week, and the full-size SUV, which saw prices rise by $23.

To view the latest "Beggs on the Used Car Market" video report, see above.

May’s Manheim Index Shows 4.7% Price Rise

The Manheim Used Vehicle Value Index dipped ever so slightly on a sequential basis in May. But if dealers remember what they paid for inventory during the same month last year, they’ll notice that more funds came out of floor plan this past month.

Manheim determined wholesale used vehicle prices (on a mix-, mileage- and seasonally adjusted basis) moved the May index reading to 124.7, representing a 4.7-percent increase from a year ago.

For the record, the April index reading was 124.9, but Manheim chief economist Tom Webb emphasized how wholesale prices are maintaining their position well past the typical spring market.

“The continued strength in wholesale pricing reflects a strong retail market and only modest increases in wholesale supplies,” Webb said. “Readily available retail financing at attractive terms has enabled dealers to achieve healthy profits on the subsequent retail sale of their auction purchases.

“In addition, the always competitive retail used vehicle marketplace has become more so as franchised dealers increasingly focus on (and improve) this side of their business,” he continued.

For the second month in a row, prices for vehicles in all six segments that Manheim tracks climbed higher in May. On a year-over-year basis, prices for vans and pickups paced the industry, each jumping by 9.8 percent.

The price increase for midsize cars wasn’t far off that pace in May, rising by 7.4 percent. The remainder of the increases covered compact cars (up 4.2 percent), CUVs and SUVs (up 3.8 percent) and luxury cars (up 0.9 percent).

“As was the case in April, all major market classes have year-over-year prices gains. The increase for luxury cars is, however, less than 1 percent. And, although the year-over-year gain for compact cars is 4.3 percent, in recent months their pricing has been soft. Pricing for pickups remains exceptionally strong,” Webb said.

Webb also touched on another general wholesale price trend.

“An analysis of average mileage by price tiers indicates the sweet spot in the wholesale market continues to move up in price,” Webb said.

“In May, the strongest pricing (and lowest relative supply) was in the $11,000 to $14,000 price range,” he continued. “In 2013 and early 2014, the strongest pricing was often found in the $8,000 to $10,000 price range.”

Update on Rental Risk Units

Turning to the remarketing of vehicles previously in rental fleets, Webb summarized that slice of the wholesale market in just four words: low volumes, high prices.

Unadjusted for mileage and mix shifts, Manheim indicated auction prices for rental risk units declined in May from their April high but remained 5 percent above the year-ago level.

“Average mileage remained steady at just below 40,000,” Webb said. “Volumes sold at auction remained on the low side, but, with increased new-vehicle sales into rental in May, wholesale supplies should pick up in coming months.”

Used Retail Sales Commentary

As he usually does, Webb used part of his Manheim Index report to discuss how used vehicles turned at dealerships during the month.

Citing data from CNW Research and previously reported by Auto Remarketing, Webb mentioned how total used-vehicle sales in May came in unchanged from their year-ago level. He explained how the industry arrived at that level stemming from an 8-percent decline in private-party transactions.

“The combined used-vehicle sales of franchised and independent dealers were up 4 percent in May and 2.5 percent year-to-date,” Webb said. “That, combined with increased sales in each of the past four calendar years, means that dealer used-vehicle sales are on track to set a record in 2014.

“We have always considered wholesale pricing to be more closely tied (both theoretically and statistically) to dealer retail volumes than the overall sales total that includes private-party transactions,” he continued.

Surprise on New-Vehicle Side

Surpassing what was expected, Webb said new cars and light-duty trucks sold at a seasonally adjusted annual rate of 16.7 million in May.

“That was considerably above the consensus forecast that looked for something in the low 16-million range,” he said. “Clearly, analysts failed to appreciate the boost provided by five weekends and the Memorial Day pull ahead of some June sales. And, at least one manufacturer had a significant increase in rental deliveries. Nevertheless, there’s no denying that the retail new-vehicle market was hot in May, especially given the other measures of consumer spending in recent months.”

Beyond the raw sales numbers, Webb spotted another uplifting trend within the new-vehicle space.

“Importantly, in May, average new-vehicle transaction prices were higher and incentive spending was flat,” he said. “Inventory levels, with the benefit of higher sales, fell below the 60 days’ supply mark. That suggests that the healthy pricing and incentive scenario can continue.”

Financing Availability

Webb closed out his monthly commentary by returning to a previously mentioned topic — how the availability of financing for buyers is an uplifting driver on the wholesale side, too.

“There is no doubt that used-vehicle retail financing is always critically important to supporting wholesale values. But, in addition, there is the cascading effect from new vehicle financing,” Webb said.

“Growing new-vehicle sales with flat incentive spending would not have been possible without lenders’ stretching terms and offering higher loan-to-value ratios to keep monthly payments and down payments in check,” he continued.

“To be sure, those longer terms and higher LTVs could be interpreted as a shadow incentive, but that generally only comes into play if the loan turns sour. In May, the S&P Auto Default Index fell to a new low,” Webb went on to say.

Auction Prices to Slide Again This Week

Price softening in the lanes has become a weekly trend as we head into summer.

For the third week in a row, NADA Used Car Guide is predicting prices will drop by 0.3 percent (or $50).

Midsize vans are expected to see the only increase in price this week, rising by 0.3 percent ($50).

The van segments experienced strong price retention last month, as well.

Full-size passenger vans led all segments with the strongest monthly retention, with rates growing by 2.5 percent in May, according to Black Book data. This segment was followed by full-size cargo vans, with a lift of 1.7 percent.

An improving economy and high construction rates are pushing strong retention in the van segments.

"There continues to be healthy demand for cargo vans because of the construction activity and the improving economy. We anticipate this will continue into the near future. Passenger vans are holding their retention right now because this is a category that is in sync as far as supply and demand," Black Book editorial director Ricky Beggs told Auto Remarketing.

Coming back to this week’s trends, NADA UCG predicts luxury utilities are expected to see prices remain flat this week, with all other segments set up for price declines.

Losses will be led by the compact utitlity segment with average expected declines of 1 percent, followed by compact cars (down 0.7 percent) and luxury cars (0.6 percent).

“Smaller declines are expected in all other segments as prices are expected to slip by 0.1 percent to 0.4 percent,” said David Paris, automotive analyst at NADA UCG.

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.

Auction Price Drops Signs of Summer ‘Slowdown’

After tax-season kept prices strong in the lanes earlier this spring, May depreciation rates showed signs of the seasonal “summer slowdown.”

Average prices fell by 0.4 percent last month when compared to April rates, according to Black Book data. On top of normal seasonal changes, a softening in the lanes is also being spurred by dealers preparing for fall new models, Black Book said, which is lessening demand at the auction.

Specifically, domestic car prices fell by 0.5 percent; import cars saw a drop of 0.9 percent; domestic truck prices increased by 0.5 percent; and import trucks dropped by 0.4 percent.

"As we’ve seen firsthand from the dealer comments collected by our survey personnel at wholesale auctions, the summer season is kicking in and there is less activity around filling the car lots right now," said Ricky Beggs, editorial director at Black Book. "Many dealers will begin to prepare their inventory strategies for the incoming new model year in a few months, depicting higher depreciation between now and the end of the year."

But not every segment is succumbing to seasonal trends.

Full-size passenger vans led all segments with the strongest monthly retention, with rates growing by 2.5 percent.

This segment was followed by full-size cargo vans, with a lift of 1.7 percent.

An improving economy and high construction rates are pushing strong retention in the van segments.

"There continues to be healthy demand for cargo vans because of the construction activity and the improving economy. We anticipate this will continue into the near future. Passenger vans are holding their retention right now because this is a category that is in sync as far as supply and demand," Beggs told Auto Remarketing.

For the car segments, the smaller rides took the lead in May for price retention, perhaps a result of elevated gas prices.

Compact cars saw prices rise by 0.8 percent in May.

Beggs explained the trend is mostly caused by seasonality: "The strong compact car prices are a result of the strong spring selling season, where buyers are very focused on this price point for a used vehicle. We anticipate that this segment will see rising depreciation as the year moves forward."

The average compact car price at auction at the end of May was $9,383, which represents a 6.8-percent drop from year-ago levels ($10,668).

On the other hand, the luxury-level cars led the way for depreciation, falling by 1.5 percent in May.

The average segment price at the end of May was $20,190, a 15.5 percent slide from year-ago levels ($23,882).

"Even though these change levels are greater than the remainder of the market, they fit within normal pre-recession depreciation levels," the Black Book analysis pointed out.

Luxury vehicles weren’t faring much better in the truck segements; the luxury SUVs saw the biggest price drop for the trucks, with a price decline of 1 percent.

Beggs explained the luxury segments are undergoing natural depreciation patterns and are only on the bottom end of the chart because the majority of the other segments are still outperforming seasonal patterns.

"The tax season  is not supportive of the luxury market so that has led to the seemingly greater depreciation levels," he added.

The story is different for pickup tucks, as many continue to see price strength in the lanes.

In fact, four of the top eight best-performing segments of the month in May were the full-size pickups ( up 0.6 percent), midsize pickups (0.5 percent), full-size SUVs ( up 0.2 percent) and the mid-size SUVs ( up 0.1 percent).

As for what may be in store for the rest of the year, Beggs said, "We expect typical seasonality through the remainder of the year and we will settle in at roughly 13.5 percent depreciation across all segments by the end of 2014, slightly elevated from last year's level of 12.6 percent."

Auction Prices Show Signs of Approaching Fall Market

Last week, auction prices continued to soften.

Though the weather outside is indicating the approaching summer, this trend may be one of the first signs we “are heading toward the fall and the market getting ready for another model year to enter into the choices,” according to Black Book editorial director Ricky Beggs.

During his latest “Beggs on the Used Car Market” video report, he provided the following statistics to back up this assertion.

Last week saw the lowest amount of daily price adjustments in the lanes since the week ending Jan. 24, with just 1,390 adjustments per day.

And of these changes, only 38 percent were increases — the lowest level seen since the week ending Feb. 1.

That said, prices remained relatively stable last week, with no unusually large price drops.

The car segments saw an overall average drop of $44, which was actually the lowest level of decline over the past four weeks, during which prices fell by an average of $52.

Beggs also pointed out another trend that points to a shift in the market season.

Over the past three months, the entry level cars, compact cars, entry midsize cars and the upper midsiz cars have all experienced strong price retention due to the tax season market.

This past week, the tides turned, and these four segments joined the premium sporty cars with the largest weekly declining dollar amounts.

On the other hand, the truck market remains strong with an average decline of only $13 last week.

The truck segments with the largest price drops were the luxury SUVs, with a decline of $83, and the full-size crossovers, which saw prices fall by $43.

The full-size pickups continued to show price strength at auction with a $14 rise in prices last week, marking the 11th consecutive weekly increase for the segment.

The largest increase for the trucks this past week was within the mid-size pickup segment. coming in with a $40 price increase.

"Another couple of segments that are benefiting from the positive growth in the construction and service industries are the full-size vans, which have both increased for the past eight weeks. Even the small volume cargo minivans are prospering with increasing values for the past 12 weeks, although the increase was only $4 this past week," said Beggs.

And if you are looking for a segment that has had the least level of change over the past month, that would be the full-size SUVs, says Beggs.

The segment saw prices rise by an average of $2 last week, after touting a $1 increase the prior week. The full-size SUVs saw slight declines of only $8 and $12, three and four weeks ago.

Weekly Auction Price Declines Remain Consistent

Auction prices are falling at a consistent pace, as NADA Used Car Guide is predicting prices to drop by an average of $50 for the second consecutive week.  

According to NADA UCG’s AuctionNet data, the expected $50 drop translates to a decline in price of 0.3 percent at auction.

In fact, only two segments are expected to see price hikes at all this week, said David Paris, automotive analyst at NADA UCG.

The luxury car segment is expected to climb by 0.5 percent ($100) in price, while the midsize cars are expected to see prices rise by 0.2 percent ($25).

Interestingly, though the large pickups have experienced strong price retention so far this year, this week they are expected to lead the price declines in the lanes.

NADA UCG expected large pickups will see an average decline of 1.1 percent, or $250.

Compact utilities are expected to follow with a decline of 0.4 percent, and compact cars round out the top three segments with the lowest retention with a 0.4-percent drop.

“Smaller declines are expected in all other segments as prices are expected to slip by 0.1 percent to 0.3 percent,” said Paris.

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.