CARY, N.C. -

The week ending March 22 represented the largest week-over-week decline in wholesale vehicle prices in at least 20 years — and most likely, it’s the largest decline ever, says Larry Dixon of J.D. Power Valuation Series.

The 5% drop in wholesale prices last week was the largest in J.D. Power’s data set, which goes back to 2000.

It was larger than the largest weekly drops around 9/11 (which were slightly more than 2%), the Great Recession or Christmas Week 2013, both of which were in the neighborhood of 3%, according to J.D. Power data Dixon provided.

“It really stands out,” Dixon said by phone Thursday.

Meanwhile, wholesale auction volumes were down 50% week-over-week. “That’s just a massive number,” he said.

On the retail side of the market, used-vehicle prices were down 2% week-over-over-week for the period ending March 22.

In general, for the used-car market, last week was a critical one, as the impact of the COVID-19 pandemic really started to ramp up, Dixon explained.

The market had been strong leading up to last week, which is typical for this time of year, given that it is tax refund season, he said.

The market had seen that traditional upward movement in wholesale and retail used prices; it wasn’t until last week that prices started to accelerate downward, Dixon said.

Retail used-vehicle sales suffered, too, if not more so.

Citing PIN data, Dixon said retail used-car sales volume dropped 38% week-over-week.

Asked if after such a dramatic decrease, if things like would even out, like an “L-shaped” curve, Dixon said: “No, it’s going to get worse.”

That comes as shelter-in-place directives continue to increase in states and municipalities across the country.

All this happening during what is usually the strongest time of year for the used-car market: March and April.

“You have this highly concentrated activity as it relates to used vehicles,” Dixon said of what usually happens in March and April.

Smoke weighs impact on used

Elsewhere, Cox Automotive is conducting daily monitoring of new and used retail sales through its Dealertrack data, utilizing a same-store methodology.

Used-car sales were up 26% year-over-year on March 10, driven by tax returns and the beginning of the spring season, Cox Automotive Jonathan Smoke said Tuesday in this video report.

By March 19, they were down 16%.

Smoke was expecting sales, in general, to continue falling this week, with most people remaining at home and over 35% of franchised dealerships being closed.

“And then as you might expect, as used retail demand has shifted from being up 26% to down 16%, demand for wholesale vehicles has also fallen,” Smoke said.

Much of the wholesale industry, including Cox Automotive’s Manheim auction chain, has shifted to digital only.

“(Wholesale) sales transactions fell 45% last week, year-over-year,” Smoke said. “We are starting to see lower wholesale used-vehicle values, as well. But key metrics, like the 3-year-old MMR Index … are only showing a slight decline so far.

“In fact, the 3-year-old index declined only 0.1% last week,” Smoke said. “But it ended the spring bounce, and it was a real reversal of what we’ve been seeing for three weeks in a row of really strong, almost full percentage gains, on a week-over-week basis.”

The largest declines last week, Smoke said, were for 1-year-old vehicles.

He also pointed out that, “MMR is going to lag two to three weeks before fully reflecting declines, especially when we falling sales volumes, because there’s less transactions to influence the changing metrics of prices.

“Sellers, though, are basically in a mood right now (where) they’re not desperate to sell,” Smoke said. “So, values are holding up relatively well, while other metrics — like sales conversion rates, how many vehicles offered actually sell — are falling sharply.”

Pent-up demand

It had been such a strong start to 2020 in the used-car market.

But it’s not as if this underlying demand is gone, Dixon of J.D Power pointed out. It just can’t really be acted upon right now.

Asked if that demand would transfer to later in the year, should the market get back on track, Dixon said that depends on factors like the economic stimulus package and how quickly the economy recovers.

The used-car market had such strong momentum. Dixon points out how hot demand was and how many industry players were shifting focus to used: everyone from Carvana to CarMax to publicly traded dealer groups

“Those fundamentals are still there,” but releasing that pent-up demand hinges on the economy, he said.

Speaking of pent-up demand, Cox Automotive found in a survey conducted March 20-22 that 28% of six-month vehicle-purchase intenders plan on delaying their car purchase or lease because of COVID-19. That’s an increase from 17% on March 13 and 7% on March 6.

What’s more, 42% say they might change their vehicle consideration, meaning going with used instead of new, buying something less expensive, going with a subscription instead or moving to another segment, Cox found.

“We know that consumers are worried, changing their plans. We also know that they’re looking at some changes in what they plan to purchase,” Smoke said. “But the upside to this is we’re still not even seeing the majority of consumers say that they are planning on putting off that decision.

“And the majority, indeed, seem to be planning to move forward,” he said.

Smoke also pointed out that 29% of vehicle owners plan to delay service/maintenance, which certainly could have an impact.

Projection for used sales

As for how March could shake out, TrueCar’s ALG business unit is forecasting 2,707,235 retail used-car sales this month. That would represent a 29% year-over-year decrease and a 24% drop from February.

“While new- and used-vehicle sales are both down year-over-year, used sales declines aren’t as steep, signaling a shift in demand to vehicles at lower price points,” said Nick Woolard, director of OEM and affinity partner Analytics at TrueCar, in a news release. “As incentives surface to assist with new vehicle affordability and the price delta between new vehicles and recent-model-year used vehicles shrinks, we can expect to see the demand even out between new and used.”

Looking at full-year expectations, Cox Automotive has found that the immediate impact could results in full-year used-car sales of less than 38 million. Should the shutdown be prolonged, there may only be 36 million used-car sales for the year.

Meanwhile, Cox’s Xtime business unit is projecting a 35% dip in consumers servicing their vehicles.

This is the second in a two-part series on the impact of COVID-19 on the used-car market. Part I can be found here.