The ADESA Canada Used Vehicle Price Index powered by ALG Canada has been updated through October, and it shows wholesale prices have recently seen one of the biggest drops this year.
With all segments experiencing negative price movement, the index shows that wholesale prices fell on average by 0.5 percent month-over-month in October.
As winter weather rolls in, seasonality trends were evident in October wholesale price movement.
Mid-compact cars declined at the fastest percentage rate, according to the Index, dropping by a 10.6 percent, or $776.
This segment was followed by midsize SUVs, which saw a drop of 8.0 percent ($1,193).
Midsize cars (down 5.5 percent or $499), minivans (down 4.0 percent or $328), compact SUVs (down 3.5 percent or $399), and full-size pickups (down 0.8 percent or $126) rounded out the top price declines in October.
Looking forward to the end of this year, RVI is predicting that used-car prices will finish up 2013 at about 2.5 percent higher than 2012 rates.
“Exchange rates and supply are lower than last year, contributing to higher used-car prices. Used-car prices could’ve been higher, but higher gas prices and high new-car sales put downward pressure on the market,” Wayne Westring, manager of RVI analytical services at RVI Group, told Auto Remarketing Canada in November.
And as we approach the new year, Tom Kontos, ADESA’s chief economist, is predicting “similar price increases in 2014 and the years to come.”
Editor’s Note: For more on wholesale price movement and what to expect in 2014, see the December edition of Auto Remarketing Canada Digital Magazine set to come out later this month. This issue includes a special Year-End Market Intelligence Report.
The results of Scotiabank’s Global Auto Report that were released today show auto industry profit margins have spiked to 10-year highs, reaching above pre-recession levels, with the highest profitability showing up in North America.
The report indicates that the five largest manufacturers are achieving net income levels of more than $50 billion.
Commenting on the news, Scotiabank senior economist and auto industry specialist Carlos Gomes said, "Profitability for the five largest auto manufacturers remains healthy, with gross margins at 10-year highs and net income consistently exceeding $50 billion per year since 2011.
"Profitability is highest in North America, but is improving in every region, including Western Europe, the only jurisdiction where the industry remains unprofitable."
The report also included a few Canada-specific statistics that bode well for the industry.
According to the report, November sales set a fifth consecutive monthly record for new-car sales, as car and light truck purchases rose 6.5 percent year-over-year.
This kept volume above an annualized 1.8 million units for the second consecutive month, and well above the January-September average of 1.74 million, Scotiabank reported.
And which manufacturers are dominating sales in Canada?
The Japanese brands lead by a large margin, taking 44.4 percent of total November sales.
The Big 3 came in a far second with 22.7 percent of the market share pie.
The remaining percentage was broken up amongst the following: Hyundai (11.3 percent), Volkswagen (6.8 percent), Kia (6.2 percent), BMW (3.3 percent), Mercedes-Benz (3.4 percent) and what Scotiabank reported as other (1.9 percent).
And though not surprising with Canadian’s tendency towards trucks and larger units, light trucks are leading automotive sales this year.
From January through September, 980,000 light trucks were sold in Canada. This is compared to 755,000 cars sold during the same period.
And the sales outlook this year is shaping up to be far above 2012 rates. In 2012, 1.68 million new cars were sold in Canada. The annual forecast for 2013 is coming in at 1.75 million, according to Scotiabank.
The new-car market is seeing record numbers in Canada, but the country has been plagued by a shortage of quality used cars since leasing fell off during the recession.
As such, used prices have been rising consistently, pushing the price of new and used cars even closer — causing many consumers to turn to the new market.
Scotiabank provided the following charts, using Canadian Black Book data, to illustrate new and used-car prices indicators:
Editor’s Note: For more information on market share and used prices, see the upcoming Auto Remarketing Canada Digital Magazine issue set to come out this month. This issue will include a special Year-End Market Intelligence Report.
The ADESA Canada Used Vehicle Price Index powered by ALG Canada has been updated through October, and it shows wholesale prices have recently seen one of the biggest drops this year.
With all segments experiencing negative price movement, the index shows that wholesale prices fell on average by 0.5 percent month-over-month in October.
As winter weather rolls in, seasonality trends were evident in October wholesale price movement.
Mid-compact cars declined at the fastest percentage rate, according to the Index, dropping by a 10.6 percent, or $776.
This segment was followed by midsize SUVs, which saw a drop of 8.0 percent ($1,193).
Midsize cars (down 5.5 percent or $499), minivans (down 4.0 percent or $328), compact SUVs (down 3.5 percent or $399), and full-size pickups (down 0.8 percent or $126) rounded out the top price declines in October.
Looking forward to the end of this year, RVI is predicting that used-car prices will finish up 2013 at about 2.5 percent higher than 2012 rates.
“Exchange rates and supply are lower than last year, contributing to higher used-car prices. Used-car prices could’ve been higher, but higher gas prices and high new-car sales put downward pressure on the market,” Wayne Westring, manager of RVI analytical services at RVI Group, told Auto Remarketing Canada in November.
And as we approach the new year, Tom Kontos, ADESA’s chief economist, is predicting “similar price increases in 2014 and the years to come.”
Although prices are still up over 3 percent from 2012 levels, this past month auction prices experienced one of the only drops seen this year.
Used-car prices in Canada fell slightly in October, going down 1.8 percent when compared to September, according to the lasted RVI Market Update for Canada.
But despite the fairly significant decline, prices are still up 3.6 percent on a year-over-year basis, the report shared.
Interestingly, even though winter weather has arrived, used-car prices for larger vehicle segments saw large price drops in October.
In fact, full-size pickups and midsize SUVs had some of the highest price decreases in the market for October.
Full-size pickups saw prices drop 4.9 percent, but rates are still up 10 percent year-over-year.
Midsize SUVs dropped an average of 4.9 percent from September, bringing rates 9.7 percent lower than what was seen during the same period of 2012.
On the other hand, small sedans saw auction prices climb the most in October, rising by 5.8 percent from September.
In a recent interview with RVI’s Wayne Westring, manager of analytical services at RVI Group, he offered some predictions for the remainder of Q4.
Westring was predicting a bit of a decline from Q3 when asked his opinion.
“For the last quarter of the year, we are expecting used car prices to decline only slight from the previous quarter, roughly 0.5 percent. We expect supply to increase only slightly along with exchange rates. The two factors make up the small decline,” he said.
Though the end of summer brought a respite from the spiking wholesale prices that dealers have suffered all year, it seems rates are on the upswing once again.
According to ScotiaBank’s Global Auto Report, Canadian used-car prices “picked up” in early October.
The report also shared some factors behind the price increases, that may not come as a surprise to the industry.
And the report explained that used-car prices will “remain strong in coming months due to ongoing tight supplies of pre-owned models.”
This prediction comes off of a mild reprieve for dealers, as used-car prices fell a bit as summer came to a close.
According to the ADESA Canada Used Vehicle Price Index powered by ALG Canada, wholesale prices fell on average by about 0.5 percent month-over-month this August. And price movements were negative for nearly all the segments.
RVI’s Risk Outlook Newsletter shows a bit higher of a decline, as officals reports used-car prices fell by 2.9 percent in August from July’s rates.
But the reprieve was short lived.
Carlos Gomes, Scotiabank's senior economist and auto industry specialist said, “In Canada, car and light truck sales set a third consecutive monthly record in September. In addition, used-car prices picked up in early October alongside the recent expiry of enhanced incentives on several new vehicles, and will remain strong in coming months due to ongoing tight supplies of pre-owned models.”
Much of this shortage of volume is being caused by what Scotiabank coined “plunges” in fleet and leasing volumes.
In fact, according to the report, leasing volume for 2009-2010 came in at an average of 350,000 units, which is less than half the volume seen during the previous decade.
Now, Scotiabank said rates are up from Great Recession lows, but in 2012, fleet/lease volume came in at 577,000, still 30 percent below pre-recession norms.
Dealers are definitely still feeling the effects of fewer off-lease vehicles coming on to the lots in Canada.
Interestingly, Scotiabank also shared that the supply situation in the U.S. is affecting the Canadian market, as well.
Since the U.S. is experiencing a tight supply environment, as well, Scotiabank contends this is stopping the flow of pre-owned vehicles imported into Canada from the U.S., which has dropped considerably.
And as used-car prices go up, new-car prices are on the way down — bringing pre-owned and new prices dangerously close.
This trend is made apparent, as new car and light truck sales are predicted to reach a record 1.72 million units this year, Scotiabank reported.
It seems manufacturers are set on making these units more affordable, which in turn could have a negative effect on used-car sales, as prices continue to rise in this market.
With increased incentives, new-vehicle prices in Canada have fallen by 5 percent since the beginning of 2013, according to the report. And this marks the fifth year in a row that automakers have ramped of incentives on new cars to push sales.
But it’s not all bad news for those in the used-car market.
Scotiabank did provide some good news for dealers looking forward.
Although off-lease vehicle supply is tight, some loosening is expected to being in 2014.
Scotiabank contributes this loosening to the new-vehicle sales recovery from recession lows, a turn of events that is predicted to “increase the supply of pre-owned models for the first time since 2009.”
But there’s a caveat.
“Nevertheless, we estimate the supply response will be modest, and lease returns will remain well below pre-recession levels for an extended period,” Scotiabank indicated.
According to RVI’s latest Risk Outlook Newsletter, used-car prices are expected to decline between 2015 and 2018, as well.
“Used vehicle supply will increase between 2014 and 2018. This puts downward pressure on used-car prices and will result in year-over-year declines starting in 2015,” RVI reported.
RVI predicts that used-car prices will decline by around 2.4 percent from current level through 2018.
After rising almost every month this year, it seems wholesale prices have slowed their game, as fall is bringing lower rates at auction.
The ADESA Canada Used Vehicle Price Index, powered by ALG Canada, has been updated through August, and shows a decrease of 0.5 percent from July.
And the negative price movement was consistent among nearly all the segments. After showing strong price retention this year, full-size pickups declined at the fastest rate in August, according to the index. This segment saw prices fall by 5.67 percent, or $1,066.
Minivans followed, falling 5 percent ($454).
Midsize cars (down 4.3 percent or $405), mid-compact cars (down 4.1 percent or $302) and midsize SUVs (down 3.8 percent or $565) rounded out the top five declining segments in August.
And this price trend may continue, as ALG reported in its September/October Canada Market Outlook that used market supply is forecasted to rise very slightly this month and into October.
In the analysis, ALG officials said the bump in supply will have no significant effect on residuals, though impacts by segment will range from -0.4 percent to 0.4 percent.
And according to ALG’s latest Canada Market Outlook report, new-vehicle sales in August were the highest on record.
ALG Canada reported sales increased 6.5 percent year-over-year to 159,004 last month.
"This marks the best August result ever, surpassing the previous peak of 158,394 units reached in August 2007,” ALG Canada reported.
This brings year-to-date sales (as of the end of August) up 3.4 percent to a total of 1,201,664 vehicles sold.
And a strong new-car market bodes well for used departments in the near future as trade-ins may serve to loosen used supply in the coming years.
