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Used-car values fall in 4 of 6 segments

Wholesale prices in Canada in April were down an average of 0.6 percent from March, according to a report accompanying the latest ADESA Canada Used Vehicle Price Index, powered by ALG.

Four of the six segments tracked in the report saw their prices decline month-over-month, with two of those — minivans (down 15.9 percent) and midsize SUVs (down 12.6 percent) — off by double-digit percentages.

Used prices in the mid-compact segment fell 2.3 percent, the report said, with midsize car prices down 4.0 percent.

Two segments showed month-over-month gains: compact SUVs, which were up 3.3 percent, and full-size pickups (up 3.9 percent), the companies said.

2 segments pushing Manheim Canada Index

Full-size vehicles and sports cars told the Canadian used-car price story in March. These segments, up 56.6 points and 33 points respectively, were the drivers of the Manheim Canada Used Vehicle Value Index for the month, the company said in a statement.

Overall, the index was up close to 4 percentage points from February, with the year-over-year increase steady at 18.5 points.

Manheim noted declines for midsize vehicles, which dipped 11.2 points, and vans, which were off 6.4 points.

In a similar analysis, RVI Group said its price index was off 0.2 percent in February. However, the strength in the U.S. dollar has pushed Canadian residuals to a 5.5-percent year-over-year gain.

“We do not expect strong residuals to continue in Canada; a growing supply of used and off-lease vehicles, along with the potential for a strengthening Loonie will bring down used-car prices,” the company said in a summary of its quarterly report. 

Wholesale price change varies among segments

Canadian wholesale used prices were down an average of 0.3 percent sequentially last month and the results within the segments were largely mixed, according to analysis accompanying the latest ADESA Canada Used Vehicle Price Index

The index, powered by ALG, actually climbed in February after seasonal adjustment.

As for the individual segments, the data in the report shows that full-size pickup prices were off 2.3 percent month-over-month in February, with midsize SUVs down 1.9 percent.

The other segment in the data set to see a decrease was the minivan, whose prices were off 0.3 percent.

Meanwhile, compact SUV prices climbed 1.7 percent and mid-compact cars were up 1.5 percent. Midsize cars saw their prices increase 0.3 percent from January.

Used-vehicle price indexes on the rise in Canada

ADESA and Manheim have both released their respective used vehicle price indexes for the month of January and both reflect increases.

The ADESA Index, powered by ALG, reported that wholesale prices increased, on average, by 0.6 percent compared to December after adjusting for seasonality. The Manheim Canada January index increased by nearly 5 points from December, maintaining a year-over-year increase of 26.1 points.

According to Manheim, the month’s increase was bolstered by an increase in sports car values (which had a 25.6 point increase in January) and luxury values (which had a 6.7 point increase). Manheim says the only category that declined was the full-size vehicles, which dropped 3.2 points last month.

Looking at ADESA’s January numbers, price movements were positive for all segments. Minivans experienced the most rapid increase, seeing prices rise by 12 percent ($1,246), followed by midsize cars (6.9 percent, $636), mid-compact cars (5.2 percent, $388), full-size pickups (4.9 percent, $1,171), midsize SUVs (4.1 percent, $607) and compact SUVs (1.7 percent, $245).

According to ADESA, consumer confidence in Canada fell by 10.9 points in January to 80.1, the lowest level since the end of 2011. The unemployment rate rose by 0.1 percent to 7.2 percent, while the national gas price fell by approximately $0.10 per liter to $0.87 per liter.

Looking at the Canadian loonie, the value had fallen to a 12-year low by January 19, to $0.687 against the U.S. dollar, with a monthly average of $0.7051.

ADESA reports that overall light-duty vehicle sales in Canada increased by 9.6 percent year-over-year in January, with the SAAR currently tracking at 1.94 million units. January passenger car sales declined by 3.8 percent (to 33,826 units) year-over-year but light truck sales increased by 17 percent (to 74,727 units).

CBB ‘Best Retained Value Awards’ show impact of exports to US

A lower Canadian dollar is contributing to record values for many used vehicles — a trend which is particularly evident in the results of this year’s Canadian Black Book Best Retained Value Awards. In other words, it’s a seller’s market for used vehicles in Canada.

The awards were released Wednesday evening in advance of the Canadian International AutoShow, which begins Friday.

The awards recognize 4-year-old models that retain their percentage of MSRP the best, across 20 categories.

The Jeep Wrangler once again showed impressive price strength, holding on to 79 percent of its original MSRP. Also note, this is 10 percent higher than last year, and the highest ever recorded retained value in the history of the awards program.

“The Wrangler remains a very hot commodity both new and used. When this happens late model used vehicles will often draw nearly the same price as a new model,” Josh Bailey, vice president of research and editorial at Canadian Black Book, told Auto Remarketing Canada. “We are seeing that occur in this case.  There have been occasions were one-year-old models are selling in the wholesale market above invoice price. A Wrangler might be a better place to invest than the stock market.”

The Wrangler is always a bit of an outlier, but overall, values are holding stronger-than-normal for many of the models highlighted this year.

Driven by a stronger economy and decreasing fuel costs, CBB editors explained, U.S. demand is growing for Canadian trucks and SUVs, pushed in part by a dropping Canadian dollar. The demand south of the border is contributing to already tight used supply and putting even more upward pressure on used values.

According to Black Book data, these factors have contributed to an overall 6.3-percent drop in depreciation among the 11 trucks, SUVs and vans that won or placed in this year’s CBB Retained Value awards.

And much of this price strength can be attributed in part to the 200,00 used vehicles imported into the U.S. last year, the most popular of which were trucks and SUVs, according to auto analyst Dennis DesRosiers, of DesRosiers Automotive Consultants.

 “American dealers have found new demand in the U.S. and more buying power in Canada, creating a desirable sellers’ market here,” said Brad Rome, president at Canadian Black Book.

“With a low dollar and sluggish Canadian economy largely due to poor oil prices, it can be hard to find positives anywhere.  But I can say that for several segments the used vehicle business is healthier now than it was a year ago.  It’s smart to take the time to get educated on values,” he adds.

Let’s break down the results.

First off, 2016 results marked a major milestone for the awards program: Fiat Chrysler won the full-size car class with its Dodge Charger. This marks the first win ever for any domestic model in the four mainstream car categories. And the automaker’s Dodge Challenger won the award for the sports car class for the fifth year in a row.

“Fiat Chrysler’s increased success in these awards is evidence of stronger North American brands, something we’ve been predicting for the last few years,” explained Bailey.  

In fact, when the 2011 Dodge Charger came out, there were a lot of improvements compared to the previous model, Bailey pointed out. Specifically, the new model was much quieter, and the interior quality had a bit of a face lift.

“Those are two important areas for full-size car buyers. There was also a reduction in the price of the AWD option which has helped increase the residuals,” Bailey added. “The 2012 model, what we are looking at for these awards carried those trait forward, and since the awareness around Charger has grown. This is certainly helpful for used-car prices.”

Toyota came out on top, for the ninth year in a row, for the most awards in 2016. The Japanese automaker took hope six first-place finishes. And the brand continues to rock the truck side of the business, with both its Tacoma and Tundra winning awards for the seventh consecutive year. CBB also pointed out that the Toyota Camry surpassed long-time winner Subaru Outback with its midsize car win.

So, why are Toyota vehicles so strong when it comes to holding their value? It might come down to their loyal customers, actually.

“At the risk of sounding trite, they continue to excel in these awards because buyers are willing to pay more for the vehicles,” said Bailey. “While that oversimplifies things, it is true. They continue to produce cars and trucks which are packaged well, built well, along with a reputation for being reliable. This covers most of the desires for used car buyers which drives up demands and prices as well.”

The midsize SUV category stood out this year with the highest Best Retained Value score out of all categories at 71 percent. The Toyota FJ Cruiser, Toyota 4Runner and Toyota Highlander placed first, second and third, respectively, in this high-performing category.

The ‘Mid-size SUV’ category saw the highest ‘Best Retained Value’ of all categories at 71 per cent, with the Toyota FJ Cruiser, Toyota 4Runner and Toyota Highlander placing first, second and third, respectively.  Toyota’s domination in this segment is directly tied to that impressive stat, of course.

“Toyota really has a lock on this segment as it would appear here.  The brand certainly has an influence on the high numbers but also this segment is popular at the moment for those looking to export to the U.S. market,” said Bailey. “In the case of the FJ Cruiser specifically, it has something of cult following, and it has gone out of production which drives prices upwards, no question.”

On the alternative fuel front, two vehicles placed this year, and both are Toyota plug-ins. The Prius V took home the award for the compact car category, and the Prius c was No. 2 in the subcompact car segment.

As for whether the Prius line will have any major competition when it comes to retained value from other alt fuel vehicles, that remains to be seen.

“At the moment that is hard to predict, but the Prius models are what many people think of when they think of hybrids. The competition presents very compelling options, no question but, the alternatively power segment is so small in Canada it may be tough to overcome the innovator, the Prius,” Bailey said.

Honda also made a good showing. It’s Fit won in the subcompact car category for the fourth year in a row, and the Odyssey was No. 1 in the minivan segment for the sixth time in seven years.

Overall, Japanese brands continued to dominate the awards, including the Nissan NV, which beat out the Mercedes-Benz Sprinter in the full-size van class. At the end of the day, Japanese automakers notched 27 first, second and third place finishes, which is almost half of the possible placings.

As for what’s in store in terms of future price retention and whether depreciation will grow or drop off, that depends on a variety of factors — namely, used supply.

“There is a good chance it will continue to grow, but that will depend upon the exchange rate, continued U.S. economic expansion, and cheap fuel prices,” said Bailey. “With things going well in the U.S. there is a demand for trucks, especially those that have a 30 percent discount, that to say those imported from Canada. Pump prices are likely to continue to stay low and likely will creep lower than today.  That all bodes well for truck values, but don’t expect the same pace of appreciation in 2016.”

Check out below the full results from Canadian Black Book’s 2016 Best Retained Value Awards:

Wholesale prices once again on way up

Though many are holding on to the hope that wholesale prices might be on the way down this year as used supply is expected to expand, a growing number of exports into the U.S. may put a damper on that prediction for 2016. And prices in the lanes were still on the way up as 2015 came to a close.

According to the ADESA Canada Used Vehicle Price Index, powered by ALG, after being adjusted for seasonality wholesale prices increased, on average, by 0.2 percent last month from November.

This uptick comes after three months of consecutive declines, reported Geoff Helby, Canada regional director at ALG.

Although overall prices were up slightly in December, Helby said most price movements by segment were nearly all negative last month, save for one.

Pickups, which continue to surge in popularity among Canadian consumers, saw prices rise by 2.9 percent or $583 last month. The full-size pickup segment ended the month with an average transaction price of $20,762.

Midsize SUVs also had a strong performance, with prices holding steady with a slight $7 drop. Midsize SUVs ended December with an average transaction price of $14,151.

Mid compact cars took the biggest hit, with prices dropping by 3.8 percent or $243 to end the month with an average price of $6,124. In terms of depreciation, this segment was followed by the minivans (down by 3.7 percent or $304), midsize cars (down 2.9 percent or $210) and compact SUVs (down 2.7 percent or $317).

The current new-vehicle market is soaring, which may bode well for growing used supply for dealers in the coming years.

Helby pointed out that although new-vehicle sales in December fell by 1.9 percent year-over-year to 128,874, this was the only month of 2015 to see a drop in new-car sales.

“Despite this sole monthly regression, this was the best sales year ever in Canada at 1,898,843 units — up 2.5 percent from 2014,” said Helby.

Light truck sales continue to lead the market with a 5.6-percent uptick in new sales in December year-over-year for a total of 88,055 units sold.

“For the year, total light truck sales equated to 1,182,766 units, representing a robust 8.8-percent increase over 2014, and the overall share of the vehicle sales market for light trucks increased to 62.3 percent in 2015 from 58.7 percent in 2014,” said Helby.

This increasing interest in the SUV and crossover segments in the Canadian new market is starting to have an impact on what units buyers are seeing in the auction lanes.

Over the past few years, the industry has been watching this shift in the new-car sales business. And now, these new-sales trends are impacting the vehicle makeup in the auction lanes as many of these same units are entering the remarketing cycle as trade-ins. The growing supply of used SUVs and trucks is also serving to push average used-vehicle prices higher, as these models typically go for more on the lots and at auction than their smaller counterparts.

ADESA Analytical Services’ Tom Kontos explained to Auto Remarketing Canada that, in recent years, new-vehicle sales growth in the SUV and truck segments has climbed significantly, and now we are seeing these units enter the auctions at a rapid pace.

“New-vehicle sales in Canada in the last couple of years has been highly skewed toward trucks, primarily SUVs, whereas Canada historically has been much more concentrated in cars and minivans … And that sort of wave the U.S. has been through for many years now, and now the CUVs, too, seem to be pretty popular in both countries, too,” said Kontos, executive vice president and chief client officer at ADESA Analytical Services. “So the composition of what we are seeing at auction is starting to reflect the growth in popularity a few years back of SUVs and crossovers.”

For more insight on the rise of truck and SUVs in Canada, see the Auto Remarketing Canada “Wholesale Issue.”

Canadian used-vehicle prices to soften over next 5 years

Looking at the most recent data available, 2015 was a strong year for residuals in Canada.

According to the RVI Group’s RVI Risk Outlook for December, the strong U.S. dollar helped maintain those high residual values in Canada through the end of November, with real used-car prices, after adjusting for MSRP, up 4.9 percent over the previous month and up 8 percent year-over-year by the end of November.

But RVI is expecting a softening in the coming years, mostly due to a growing supply of used vehicles alongside “the potential for the USD and CAD exchange rate to increase.”

Over the next five years, RVI expects to see a softening in used-vehicle prices as their supply is forecasted to increase through 2019. By 2018, RVI’s prediction is that used vehicle prices will fall by 8 percent compared to their current levels.

Here are a few other Canadian economic overviews, according to RVI, at the end of November:

• In November, the exchange rate was $0.75 USD/CAD
• Gas prices averaged $1.03/liter (a 12 percent decline from November 2014)
• After two quarters of contraction, Canada’s GDP growth in Q3 was 2.4 percent

The Manheim Canada used-vehicle price index increased by a tad bit over 2 points from November, marking a year-over-year increase of 21.2 points. According to Manheim, the month’s increases were mostly powered by an increase in mid-size and SUV values (4.9 and 3.8 points, respectively). Sports cars decreased by 17 points while pickups saw a 4-point decrease. 

Auction prices drop for 3rd month in a row

Wholesale prices fell for the third month in a row in November but remain elevated in light of low supply.

According to the ADESA Canada Used Vehicle Price Index, powered by ALG, wholesale prices fell on average by a slight 0.1 percent this past month.

ALG’s Canada regional director Geoff Helby reported almost all vehicle segments took a price hit in November.

One outlier was the full-size pickups, which are growing in popularity in Canada. Consequently, demand is high and prices remain strong. In November, full-size pickups saw prices increase by 1 percent or $210 at auction. The average transaction price at auction for a full-size pickup was $20,178 in November.

Midsize SUVs were also up slightly by 0.2 percent or $35 to end the month with an average price of $14,157.

Mid-compact cars took the biggest hit with prices falling by 8.5 percent or $589, Helby reported. This brought the average price down to $6,367.

This segment was followed by midsize cars with a drop of 8.4 percent or $667 to an average rate of $73,11. Minivans (average price of $8,272) also experienced a heavy decline of 5.6 percent or $491, while compact SUVs (average price of $11,913) dropped in price by 3.9 percent or $482 in November.

This marks the third month of consecutive declines. In September, prices fell by 0.6 percent and dropped another 0.5 percent in October.

And new-sales trends may bode well for continued price relief in the future as supply is expected to expand as some of these new vehicles enter the remarketing cycle.

According to ALG, light duty vehicle sales in November increased 4.7 percent year-over-year to 145,426. And this is even with two fewer selling days. Year-to-date, sales are up 2.9 percent from 2014 rates with 1,769,611 vehicles sold so far.

“This is the best November ever, beating the previous record from 2014 when sales climbed to 138,854 units. This exceptional performance pushed the SAAR up to an impressive 1.96 million units,” said Helby.

Light truck sales were once again very strong, with sales spiking by 12.3 percent to 94,718, while car sells fell by 7 percent to 50,708 vehicles sold.

As far as supply movement goes, Tom Kontos, chief economist and executive vice president of ADESA Analytical Services, took a look at the new-car market in making his predictions for future off-lease and institutional volume at auction. Leasing has been picking up a bit again, as well, in recent years after penetration fell off dramatically in 2008.

“We had a record year last year, and it looks like it will be another record this year in new-vehicle sales. So even if lease penetration is kind of stagnant, when you have a bigger pie, the same percentage of that pie will yield growth,” said Kontos. “The short answer is yes, we do expect growth in off-lease auction volume going forward.”

According to Kontos, we should expect to see supply expand considerably in the time frame of 2016-2017.

Editor’s Note: For more insight into auction supply, prices and more, see the Auto Remarketing Canada Wholesale Issue.

Auction prices drop ‘significantly’ for 2nd month in a row

Wholesale prices in Canada have risen almost every month this year, but the tides began turning a bit in September when prices declined by 0.6 percent. And rates took another dip this past month.

After being adjusted for seasonality, the ADESA Canada Used Vehicle Price Index, which is powered by ALG, showed October prices dropped on average by 0.5 percent from September rates.

Geoff Helby, Canada regional director at ALG, pointed out October’s movement is the second consecutive month of large declines after the Index registered increases every month through August.

“Price movements by segment were nearly all negative in October,” Helby said.

The only category to see a price increase was the compact SUVs, whose prices rose by 0.1 percent or $18.

Interestingly, though full-size pickups have outperformed the market in terms of auction price for much of the year, this segment took the biggest hit last month. Helby reported that pickup prices fell by 7.7 percent or $1,669 last month.

Interestingly, though pickup prices seem to be changing their tune as the year progresses, gas prices remain low, which normally spurs interest for trucks and SUVs. According to Helby, gasoline prices ended the month at an average of $1.03 per liter.

They were followed by mid-compact cars, which took a 6.9-percent or $513 hit to prices last month.

Midsize SUVs (down by 6.1 percent or $917), minivans (down 5.9 percent or $546) and midsize cars (down 2.7 percent or $218) also saw prices slide significantly in October.

New-vehicle sales continue to soar, which bodes well for used inventory down the line as these vehicles enter the remarketing cycle in future years.

“New-vehicle sales for the month of October increased 5.1 percent from sales a year ago to 163,053,” said Helby. “Year-to-date, overall sales are up 2.7 percent to a total of 1,624,185 vehicles sold.”

This marks the eighth month in a row of record new-car sales and the second consecutive month the market tracked above a 2 million SAAR.

Trucks continue to be popular with Canadian consumers, as sales for the light truck market shot up by 15.7 percent last month and represent 61.5 percent of total sales year-to-date. On the other hand, passenger car sales fell by 9.6 percent year-over-year.  

5 keys to understanding current auction environment

To look deeper into today’s auction trends — from volume and pricing to the leasing market’s impact and U.S. exports — Auto Remarketing Canada reached out to Tom Kontos, executive vice president and chief client officer at ADESA Analytical Services.

See the key highlights below that provide a full-picture view of Canada’s current wholesale environment.

Auction volume

In looking at ADESA Canada data, in particular, Kontos explained the company has seen growth in auction volume this year. However, much of the growth is coming from dealer consignment and not from “institutional growth.”

That is to say, Canadian auctions are still not seeing dramatic supply expansion from avenues such as off-lease, fleet and rental, which normally serve as some of the biggest sources for quality used vehicles at dealerships.

“I don’t think that (institutional volume) is growing at the kind of clip the dealer volume as grown. We have seen growth in volume, but it has not been from the off-lease volume,” Kontos said.

Impact of leasing trends

Leasing has been picking up a bit again in recent years after leasing penetration fell off dramatically in 2007 and 2008. This, as well as a surging new-vehicle market, bodes well for used supply in coming years.

“We had a record year last year, and it looks like it will be another record this year in new-vehicle sales. So even if lease penetration is kind of stagnant, when you have a bigger pie, the same percentage of that pie will yield growth,” said Kontos. “The short answer is yes, we do expect growth in off-lease auction volume going forward.”

According to Kontos, we should expect to see supply expand considerably in the timeframe of 2016 to 2017.

Rise of the SUV

An interesting trend has arisen in Canada as of late that is having a dramatic impact on what units you are seeing in the auction lanes: increasing interest in the SUV and crossover segments. Kontos explained that in recent years, new-vehicle sales growth in the SUV and truck segments has climbed significantly, and now we are seeing these units enter the auctions at a rapid pace.

“New-vehicle sales in Canada in the last couple of years has been highly skewed toward trucks, primarily SUVs, whereas Canada historically has been much more concentrated in cars and minivans … And that sort of wave that the U.S. has been through for many years now, and now the CUVs, too, seem to be pretty popular in both countries, too,” Kontos said. “So the composition of what we are seeing at auction is starting to reflect the growth in popularity a few years back of SUVs and crossovers.”

Kontos explained the surge in popularity of SUVs and trucks in Canada can be attributed to three factors:

• Stable gas prices
• Variety of models available
• Versatility of SUVs and CUVs (the fact that many of them are on car platforms versus heavier body-on-frame platforms)

Wholesale Prices

According to ADESA data, auction prices were up 8.8 percent year-over-year by mid-2015. But Kontos said that some of the average prices were skewed by the fact ADESA auctions sold more SUVs and higher dollar vehicles this year.

However, the majority of segments have seen price increases in 2015; so after adjusting for the change in mix of vehicles, Kontos said the increase would still equal around a 5-percent spike.

“It is still significant growth in average prices year-over-year in Canada. That, again, is a reflection of still tight supply, especially for the off-lease side,” Kontos said.

A few of the car segments are seeing prices decrease a bit, namely the entry midsize cars. 

“I would say the strength of the market tends to be in the SUV segment and pickup truck segments, whereas the rest of the markets in some segments, you will have some decline, or much less growth than what you are seeing in the SUV and pickup truck segment,” Kontos said.

U.S. exports on the rise

Many in the industry are seeing growth in wholesale U.S. exports in light of a weak Canadian dollar and suffering exchange rate. This is serving to put even more pressure on used supply and, consequently, auction prices, as well.

“I did also want to draw attention to the fact that U.S. bidders are contributing to the strength of the market, too,” said Kontos. “You have got tighter supply, and dealers coming in from across the border from the U.S. and bidding aggressively for cars, because of the strength of the U.S. dollar. The U.S. buyers are contributing to the strength of prices in the Canadian wholesale market.”

These keys were included in Cherokee Media Group's inaugural North American Used Car Industry Report. The report, which higlights retail, wholesale, finance trends and more in the North American remarketing industry, will be available on-site to Used Car Week attendees. The Report will be available online and will be sent out to subscribers in December. To make sure you receive this comprehensive data report, subscribe here.