“When the tax refund season comes to a conclusion, it appears we will basically have a flat level of refund dollars in 2014 compared to 2013,” he continued.
Webb also touched on the sentiment he gained from conversations with dealers he’s had when the conversation topic turned to tax season.
“They seemed to be pretty happy with it. I didn’t hear the complaints you would expect maybe in March because refunds had dried up, relatively speaking, to last year,” Webb said. “Certainly we heard complaints last year that tax refunds in terms of total monies were actually not only delayed, but they were also relatively low. They weren’t much higher this year. But later on we’ll know the complete details of tax refunds. That makes a difference to who those tax refunds flow to and in what form.
“For the buy-here, pay-here dealer, the earned income tax credit is much more important than the other types of tax refund monies that flow back because that’s their buyer base,” he added.
Tax Season Impact at Auction
With his primary focus on the wholesale market, Webb also discussed how inventory acquisition by BHPH dealers is changing in part to how operators are approaching tax season differently than in years past.
“I would also note that the popularity of down payment deferral programs has impacted what we see in the lanes in terms of wholesale pricing on lower-end units. They’ve either become increasingly spread out. It remains a very important factor in terms of the market both on wholesale and retail,” Webb said.
“The deferred down payment programs allow a lot of buy-here, pay-here dealers to do what normally would be tax refund sales and push them into October, November and December. Those programs have worked successfully,” he continued. “Prior to those types of programs, we used to have refund anticipation loans, but the regulators looked down at those. So now deferred down payment programs are basically the main gig so to speak. It basically spreads out the purchases.
“We have some large buy-here, pay-here dealers and some normal-size buy-here, pay-here dealers actually buying in the fourth quarter because they’ve pulled their sales ahead that far,” Webb went on to say.
Latest Manheim Index Movement
Manheim determined wholesale used vehicle prices (on a mix-, mileage- and seasonally adjusted basis) rose 0.9 percent in March versus a month earlier. This movement resulted in the Manheim Used Vehicle Value Index reading coming in at 124.4 for the month, an increase of 2.2 percent for the first quarter, and a rise of 3.3 percent on a year-over-year basis.
“The strength of wholesale pricing in 2014 has been consistent with the fundamentals of the retail market,” Webb said. “In March, new-vehicle sales sprung back from a weather-induced stall in January and February. Used vehicle retail sales also picked up, even though those sales were less impacted by the harsh weather.
“Certified pre-owned sales, which have hit successive annual highs in each of the past three years, rose 10.9 percent in the first quarter. That supported late-model used vehicle values — the very segment that many analysts were worried about because of rising wholesale supplies,” Webb went on to say.
That 3.3-percent price jumped record on a year-over-year basis arrived as a result of increases with four of the six vehicle segments Manheim tracks.
Pickup prices led the way with a 9.8-percent jump, followed by van prices, which moved 5.3 percent higher. Prices for midsize cars rose 4.5 percent in March while prices for SUVs, and crossovers moved 3.6 percent higher.
The two segments to post marginal price declines in March included compact cars (down 0.1 percent) and luxury cars (down 0. 6 percent).
“Pickups, by far, have shown the strongest wholesale pricing — both in recent months and over the past year,” Webb said. “Compact cars and luxury cars are the only two major segments down over the past year. And those declines are very modest.”
“With respect to price tiers, the wholesale market is performing well across-the-board,” he continued.
Webb also discussed rental risk units in his latest index commentary, mentioning how volumes are lower and prices are higher.
“Rental risk units flowing back into the wholesale market remained depressed in March after being at low levels in January and February,” Webb said. “As with everything else in the economy, blame the weather. Rental car companies took delivery of nearly a half million new vehicles in the first quarter, but high demand in the insurance replacement segment meant defleeting was delayed. Massive recalls and a late Easter suggest the flow back into the wholesale market will continued to be pushed back.
“The end result has been high prices and high mileage,” he went on to say. “In March, average auction prices for rental risk units (both adjusted and unadjusted for mix and mileage) were up year-over-year and sequentially. Average mileage remained above the 40,000 mark for the third consecutive month.”