If you think vehicle prices are high in 2020, just wait ‘til next year.
According to the 2020 Vehicle Depreciation Trends Report released by Motus last month, 2021 is likely to see depreciation rates slow between 1% and 3% throughout the year, assuming current trend lines remain in play.
As you might expect, the current and forecasted high vehicle prices are being driven largely by pandemic-related impacts. When automakers shut down production this spring, Motus explained, that led to a new-vehicle shortage.
But demand remained strong.
And subsequently, used-vehicle supply took a hit, as well.
“The pandemic has decimated vehicle inventories, and consumer demand has remained surprisingly steady. It’s no surprise we’re seeing premium prices on both new and used automobiles,” Ken Robinson, market research manager at Motus, said in a news release.
“New-vehicle prices and residual values both influence depreciation and both have been impacted by the pandemic. If supply and demand trends in motion remain consistent, we predict that depreciation will decrease by 1-3% over the course of 2021.”
In the full report, Motus said: “New-vehicle prices and residual values both influence depreciation. Both have been influenced by the pandemic. Assuming consumer demand remains steady, we expect the tight supply of new vehicles to mostly offset the increased used-vehicle inventory entering the market.”
For more on Vehicle Depreciation Trends Report from Motus, listen to our podcast below with Robinson.
The streak of record wholesale vehicle prices looks like it might stop at three months.
The latest mid-month reading of the Manheim Used Vehicle Value Index — which reached all-time highs in June, July and August — came in at 162.3. The index finished August at 163.7.
In an analysis accompanying the report, parent company Cox Automotive said the first half of September showed a 0.9% drop in wholesale prices (adjusting for mix, mileage and seasonality) against the month of August.
That said, wholesale prices are still quite high. The mid-month reading of the index is up 16% year-over-year.
And looking at selective market classes, segments like pickups (up 27%) and luxury cars (17.1%) are beating the industry average, according to the Cox Automotive data. Compact cars are up 6.7%, midsize cars are up 8.7%, SUVs/CUVs have climbed 13.1% and vans are up 2.0% through the first half of the month, the data shows.
Over at J.D. Power, its Used Market Update report released last week indicated that the week ending Sept. 13 was the fourth straight week of price declines, falling 1.1% week-over-week.
However, wholesale prices are beating April figures by 33% and are 13% ahead of where they began March, according to J.D. Power.
“Despite a slowing used market, wholesale prices remain strong. Prices are expected to continue to move lower through the remainder of September and into October as pent-up demand has been satisfied and pandemic-related macro-economic headwinds increase,” J.D. Power indicated in its report.
“By year's end, prices are expected to be greater than pre-virus levels. It is important to note, however, that while the outlook is relatively optimistic, there remains a great deal of uncertainty surrounding the impact of new virus outbreaks, the potential for another round of federal stimulus and overall employment conditions,” it added. “Given these unknowns, a heightened degree of market volatility should be expected.”
