February wholesale prices remain on stable path


Cox Automotive chief economist Tom Webb explained why February’s wholesale price data reinforced a possible market moniker — stability.

Manheim reported on Tuesday that wholesale used-vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) fell by 0.2 percent in February. However, Webb pointed out that given a sharp decline in pricing in February of last year, the Manheim Used Vehicle Value Index showed a year-over-year gain of 1.1 percent as the index reading stood at 124.6 for February.

“Although wholesale prices rose in only one month out of the last seven, stability remains the watchword for used-vehicle values given that all of the declines were small,” Webb said in his commentary that accompanied the latest index update.

“In the face of heavy new-vehicle inventory and incentives, the stability of used vehicle values is a credit to the retail market that continues to provide dealers the ability to quickly retail wholesale acquisitions at reasonable grosses,” he continued.

Webb’s observer colleagues from Cox Automotive — Kelley Blue Book’s Alec Gutierrez and Autotrader’s Michelle Krebs — as well as Jessica Caldwell from Edmunds — recently discussed the new-vehicle market’s impact on potential used-vehicle sales performance, too. This Auto Remarketing report highlighted how those analysts noted challenges franchised dealerships face in finding buyers for their new models — which in some cases are taking the amount of days to turn not seen in almost eight years.

Pricing trends by market class

Price declines and rises split evenly within the six vehicle segments Manheim tracks for its monthly update, again showing the cut between cars and trucks.

Each of the three segments to post price gains in February were in the truck category as prices for pickups rose 6.5 percent, prices for vans climbed 4.9 percent and prices for SUVs and CUVs moved 2.0 percent higher.

Conversely, prices in the three car segments all softened in February, led by luxury cars (down 2.2 percent) and closely followed by midsize cars (down 2.1 percent) and compacts (down 1.6 percent).

“Although it remains the case that pricing for trucks, CUVs, and vans remains up year-over-year while cars are down, the weakest of the car segments (compacts) has actually tracked the overall market the past three months,” Webb said. “It is risky to say that compacts reached their bottom because there have been so many false bottoms over the past couple of years, but there are promising signs.

“On a non-seasonally adjusted basis, sports cars were the only segment that was up, but the February lift was much less than normally occurs,” he continued. “As such, the seasonally adjusted price for sports cars in February was down more than any other major segment. This might have been one area where reduced tax refunds did have an impact.”

Rental market update

Manheim reported that the volume of rental-risk units actually sold grew during the first two months of 2017, even though conversion rates were a “little weak,” according to Webb.

“Given that new-vehicle sales into rental were down during this period, it suggests that the rental companies were getting their fleets right-sized,” he added.

Manheim indicated a straight average of auction pricing for rental risk units in February generated a 5-percent lift from a year ago.

“But much of that reflects mix shifts and mileage changes as well as a temporary weakness in the market last year,” Webb said.

“Our index of rental risk pricing that adjusts for broad changes in mix and mileage was down both sequentially (1.2 percent) and year-over-year (3.8 percent),” he continued.

Manheim went on to mention the average mileage on rental risk units sold at auction was 39,100 miles, “which is very close to what it has averaged since the summer of last year,” Webb said.

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