Perhaps the surprising summertime surge in wholesale prices might come to an end before Labor Day arrives.
Following a rise in July on par with other industry watchers have seen, J.D. Power Valuation Services is projecting that wholesale prices of vehicles up to 8 years in age are expected to soften by about 0.5 percent in August.
Analysts added in the latest installment of Guidelines that their full-year expectations remain intact as wholesale prices this summer have stayed higher than what’s typically seen during this time of year. J.D. Power Valuation Services pegs wholes prices ticking up by about 1 percent by the time 2018 finishes.
“Negative forecast factors hurting used vehicles continue to be incentives, such as an anticipated increase in used supply, worsening credit conditions and increasing gasoline prices,” analysts said in the report that’s available here.
“However positive factors — such as favorable labor conditions, strengthening housing prices along with long-term quality improvements — will outweigh the negatives,” continued J.D. Power Valuation Services, who will send multiple experts to share insights during Used Car Week 2018, which begins on Nov. 12 in Scottsdale, Ariz.
As has been the auction story of the summer, analysts pointed out that the wholesale market “performed exceptionally well” in July. As a result, the J.D. Power Valuation Services Seasonally Adjusted Used Vehicle Price Index rose by 1 point compared to June, reaching 119.3 and marking a rise for the second month in a row.
The report mentioned that July’s action pushed the index 4.7 percentage points higher than the same month last year and 4.8 percentage points above January’s reading.
“Used-vehicle prices have been strengthening since the middle part of 2017 and remain strong deep into the summer selling season,” analysts shared via Guidelines.
“Through July, prices have been elevated for most mainstream segments,” they continued. “However, luxury-segment prices have been declining due in part to higher incentive spend on the new side of the market.”
Drilling deeper into the mainstream-segment world, J.D. Power Valuation Services determined that prices for three car segments are notably higher now than compared to January with prices for compact cars leading the way with a gain of 9.1 percent. Prices for midsize cars and large cars aren’t far off that pace, climbing by 7.3 percent and 7.1 percent, respectively.
What might be a surprise given their popularity, analysts acknowledged that prices for utilities are higher, too, but they’re not rising at the rates seen among cars. Year-to-date, the report indicated that prices for compact utilities is up by 2.8 percent, while prices for midsize utilities are 3.1 percent higher.
Large utilities have absorbed a price hit, sliding by 2.2 percent since the beginning of the year. J.D. Power Valuation Services attributed the softening to a 28-percent rise in volume of those units that are less than 5 years old.
Moving over to the luxury arena, analysts reiterated that higher incentive spending is curtailing a potential price lift for luxury units that’s been experienced by their mainstream counterparts.
Prices for luxury large utilities have dropped the most year-to-date, declining by 5.6 percent. Luxury compact utilities are down 2 percent year-to-date, according to J.D. Power Valuation Services.
Bottom line: Analysts explained that the over-arching value of used vehicles — for both consumers and dealers — is supporting wholesale prices.
“Used vehicles continue to gain popularity with consumers and dealers alike,” J.D. Power Valuation Services said.
“Consumers can save money buying a well-maintained, late-model used vehicle (especially as overall reliability continues to improve), while dealer can capitalize on used-vehicle sales where profit margins are higher than new-vehicle sales.”