Auto Remarketing Correspondent
Used-vehicle sales this past month were strong — as were prices, perhaps easing tight margins in the dealership a bit. These stats and more painted a rosy picture for the used industry, even while many are waiting for the shoe to drop in terms of consequences from rising interest rates and an expected wave of off-lease supply. That’s according to the "July 218 Used Car and Light Truck Guidelines Industry Update" from J.D. Power Valuation Services.
"In terms of full-year expectations, with exceptionally strong performances observed over the past few months, our forecast is improvement for the second month in a row," said David Paris, executive analyst at J.D. Power Valuation Services. "We expect used prices to increase, especially as negative forecast factors hurting used vehicles such as increase in used supply, worsening credit conditions and increase gasoline prices continue to be incentives."
And according to a July prediction from Edmunds.com, an estimated 3.4 million used vehicles will be sold in July 2018, for a SAAR of 39.5 million; this is compared to 3.2 million ― or a SAAR of 39.2 million ― in June.
Highlighting June numbers in more detail, according to the J.D. Power report, seasonally adjusted used-vehicle prices rose by 1.2 percent when compared to May to reach 118.2. As a result, the J.D. Power index rose 4.1 percent year-over-year last month. Interestingly, the report also noted that wholesale prices took a downturn of 0.9 percent. That said, historically, J.D. Power analysts pointed out that over the past five years, June losses have averaged 2.2 percent, so wholesale prices are still holding relatively strong.
Incentives were also on the way up in June, even while rising interest rates may make these offers more burdensome for automakers in the near future. Last month, according to the J.D. Power monthly report, incentives grew for the 39th straight month.
Taking a look at what we can expect for July in the auction lanes, J.D. Power expects wholesale prices of vehicles up to 8 years in age to decline by less than 1 percent. Taking a look at the full-year perspective, with what J.D. Power is calling “exceptionally strong performances” over the past few months, its July forecast has improved for the second month in a row.
New-vehicle sales’ unusually strong showing for June
J.D. Power reported that new-vehicle sales were on the way up in June, as well. According to the J.D. Power report, new-vehicle sales grew by 5.4 percent for a new-vehicle SAAR of 17.38 million vehicles for the year.
But Edmunds.com pointed out in their forecast for July new-vehicle sales results, that this month may spell out a different story. According to a new Edmunds report, the company expects 1,378,108 new cars and trucks will be sold in the U.S. in July for a SAAR of 16.7 million. According to Edmunds’ data, this number would reflect a 10.7 percent drop in sales from June, and a 2.3-percent drop year-over-year.
But this may just be your average market correction. Edmunds analysts shared that “unseasonably strong” June new-car sales may have played a role in pulling some July sales away prior. But Edmunds.com analysts stated they do expect to see rising interest rates becoming a factor in the new-car showroom.
"July sales are looking reasonably strong, but we're starting to see the first signs of speed bumps on the road ahead," said Jeremy Acevedo, manager of industry analysis at Edmunds. "With market factors such as rising interest rates keeping shoppers at bay, we expect to see a continued slowdown of the vigorous sales pace that the industry experienced in the first half of the year."