McLEAN, Va. -

J.D. Power Valuation Services noticed wholesale prices closed the first quarter stronger than analysts initially expected. As a result, the firm again is adjusting its 2019 forecast after incorporating March’s information.

After six consecutive months of declines, analysts reported in the latest installment of Guidelines that the used-vehicle market bounced back in March. The rebound resulted in the J.D. Power Valuation Services’ Seasonally Adjusted Used Vehicle Price Index increasing by 1.1 points relative to February to 117.5.

J.D. Power Valuation Services explained March’s positive result comes after weaker than usual January and February performances, which triggered previous forecast updates.

“Typically, prices begin to heat up in the February period, especially for affordable mainstream segments, however, that was not the case this year,” analysts said.

“The lackluster start to 2019 was driven by lower than expected and delayed federal tax returns,” they continued. “Historically, consumers have used tax refunds as healthy down payments on vehicle purchases. While there is still a lot of uncertainty surrounding the tax situation, it did begin to improve around the middle of February. The improvement was likely too late to be realized in February as it does take time for refunds to be realized and hit bank accounts.”

J.D. Power Valuation Services cited federal data that indicated average refunds distributed through the end of March reached $2,873, a figure only $20 below the same period in 2018. However, the firm pointed out the overall amount of refunds issued by the IRS was down 2.2%

“There is concern that average refund amounts will decline further because a greater share of late filers usually owe money,” analysts said in Guidelines.

Updated forecast

No matter how potential buyers receive from in a tax refund, J.D. Power Valuation Services acknowledge the used-vehicle market is expected to slow in 2019.

But with March’s rebound now on the books, analysts’ outlook improved with their expectations for wholesale prices softening by 2% by the time this year finished.

Along with March’s data, analysts explained their forecast was influenced by “increasing levels of used supply along with more volatile credit conditions and increasing gasoline prices, which are expected to apply downward pressure on the used side of the market.

“Labor conditions are expected to have a neutral impact, while solid home prices and overall consumer appetite for used cars, which is supported by increases in equipment as well as more advanced safety and technology features, will help to balance out but not overweigh the anticipated negatives for the year,” J.D. Power Valuation Services went on to say.

More details about March wholesale price movements

In terms of the wholesale market, J.D. Power Valuation Services determined prices of used vehicles up to 8 years in age increased by an average of 2.7% in March. The month’s result was nearly identical to March of last year and more than 1 percentage point better than how the market performed in both March of 2016 and 2017.

At the segment level, analysts the biggest increases were recorded among mainstream small, compact and midsize car segments.

“As affordability continues to become more important, prices for these segments should continue to be bolstered due to their cost in relation to comparable SUVs and because of decreases in used supply of these segments,” J.D. Power Valuation Services said.

“Pickup trucks and large SUV prices were the softest on the mainstream side of the market,” analysts continued in Guidelines. “Gasoline prices have ticked up for the eight straight weeks now and are now up by 50 cents over the last 90 days. This is unlikely the reason for price softness last month in these segments, however, it is something that will be monitored closely.”