While Black Book noticed that the 12-month annual depreciation shows the gap between cars and trucks is narrowing, the Manheim Used Vehicle Value Index made a slight upward turn in April after starting the year with three consecutive monthly declines.
Manheim determined that wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) inched up slightly in April, bringing the latest index reading to 122.8. Cox Automotive chief economist Tom Webb explained that given wholesale prices were easing at this time last year, the year-over-year decline in the index was reduced to 1.1 percent in April.
“Fundamentals suggest that the index’s rise in April will be temporary, but they do not suggest a near-term collapse in pricing,” Webb said. “A modest easing in wholesale pricing would not be unwelcomed by dealers, and it would not be overly painful for commercial consignors. A bigger, say 5 percent, decline would be harmful to both.”
Manheim reported that a straight average of auction sales in April showed prices rising approximately 3 percent from a year ago. But Webb pointed out that movement was the result of a higher commercial consignment share and newer units within that mix.
Webb also mentioned the average mileage on all auction sales in April was the lowest since January 2011.
“The influx of newer units into the wholesale market has had significant downward pressure on the pricing of slightly older, higher-mileage units,” he said.
Looking at the six vehicle segments Manheim tracks for the monthly index update, prices for pickups rose 6.4 percent, more than double the amount of the only other segment to post a price rise in April. That segment happened to be vans, which generated a 2.6-percent price rise.
Three of the four vehicle segments sustaining price declines in April fell in relatively close proximity as prices for luxury cars softened 2.4 percent, prices for CUVs and SUVs dipped by 2.0 percent and price for midsize cars ticked 0.8 percent lower. More pronounced was the price decline Manheim spotted for compact cars, which dropped by 8.8 percent year-over-year last month.
Also of note, Manheim mentioned the average auction price for rental risk units (adjusted for market class shifts and mileage) dropped by 7.5 percent in April as compared to a year ago. Furthermore, the average mileage at 41,137 miles was the lowest reading since September 2014.
Black Book’s depreciation rundown
According to Black Book data, the average price of a used vehicle for model years 2010-2014 depreciated by just 0.1 percent during April, signaling what is usually the last strong month of the spring season.
At the close of 2015, analysts found that 12-month truck depreciation was just 9.2 percent compared with 18.2 percent for cars. However, Black Book determined the past 12 months of results show depreciation rising to 14.3 percent for trucks and 20.6 percent for cars.
More noteworthy, Black Book insisted the 12-month annual depreciation shows the gap between cars and trucks is narrowing. Some truck segments such as full-size crossover/SUV, full-size Pickup and small pickup segments continue to show the lowest depreciation across the segments.
Analysts mentioned prestige luxury cars saw the largest segment depreciation during April at 2.2 percent. Vehicles in this segment include the Audi A8, BMW 7-Series, Lexus LS, Mercedes-Benz CLS Class, Mercedes-Benz S Class and Porsche Panamera. Vehicles in this segment finished the month with an average price of $43,616, an 18.9 percent change from year-ago levels ($35,389).
In a sign of the spring season, Black Book pointed out full-size cars saw the strongest retention during April at +1.3 percent. Vehicles in this segment include the Chevy Impala, Ford Taurus, Kia Cadenza, Nissan Maxima, Chrysler 300 and Toyota Avalon. Vehicles in this segment finished the month with an average price of $15,552, a 16.9-percent change from year-ago levels ($12,930).
Analysts went on to note eight vehicle segments, including full-size Cars, saw value increases during the month. Those vehicle segments were the small pickup trucks, midsize cars, full-size crossovers, midsized crossovers, sporty cars, sub-compact crossovers and the compact crossovers.
“Almost a third of all vehicle segments saw an increase in value this month, but we expect this volume of segment retention to subside moving through the remainder of the year,” said Anil Goyal, vice president of automotive valuation and analytics at Black Book. “As the supply levels for all used vehicles grow, we can expect to see a continued increase in overall depreciation moving forward.”
Analyzing April sales results
As he typically does, Webb also dissected the April sales results along with his analysis of the Manheim Used Vehicle Value Index.
On the used-vehicle side, Webb mentioned preliminary numbers and channel checks suggest sales rose again in April after the National Automobile Dealers Association reported total used retail unit volumes rose 6.5 percent in the first quarter of 2016.
Likewise, Webb noted sales of certified pre-owned vehicles jumped 8 percent in April, resulting in a year-to-date increase of 5.9 percent.
In the first quarter of 2016, Webb highlighted that the seven publicly traded dealership groups posted their 27th consecutive quarterly increase in same-store used retail unit volumes.
“The increase was modest (less than 1 percent), but naturally the comps are becoming increasingly hard,” Webb said. “Unfortunately, the year-over-year change in gross margins on those sales has declined for the same extended period.
“Higher throughput and increased operating efficiencies have enabled dealers to make record profits despite the narrow margins, and thus, we expect they will continue to be active bidders on the growing volumes of vehicles being offered for sale at auction,” he continued.
In the new-vehicle market, Webb began his assessment by recollecting about what he noted in March.
“We asked the question: Will the industry accept or defy the plateau? April was an encouraging sign of acceptance,” Webb said.
He highlighted the seasonally adjusted annual selling rate (SAAR) jumped back up to 17.3 million, up from 16.5 million in March.
“That had a lot to do with five weekends and less to do with incentives," Webb said. “Dealer inventories are a bit high, but transaction prices have continued to rise.
“On net, we feel the new-vehicle market remains benign with respect to its impact on wholesale used vehicle pricing,” he continued. “Given that the SAAR has averaged just under 17.2 million in the first four months of 2016, we would consider any pushing of the sales pace significantly above last year’s record 17.5 million as defiance against the market-based plateau — and one that would hurt used-vehicle residuals.”