How dealers are handling wholesale prices on continued climb

CARY, N.C. - 

A pair of monthly wholesale market trackers showed price increases in July, propelled in part by what trucks and utilities are fetching in the lanes nowadays.

How are dealers reacting?

Well, one weekly sale observer described the scene as “many buyers were left shaking their heads.”

So let’s get into the numbers of what’s leaving dealers with visible signs of frustration.

According to ADESA Analytical Services’ monthly analysis of wholesale used-vehicle prices by vehicle model class, KAR Auction Services chief economist Tom Kontos reported that wholesale used vehicle prices in July averaged $10,902 — up 0.1 percent compared to June and up 0.1 percent relative to July of last year.

Meanwhile over at RVI Group, the firm’s Used Vehicle Price Index (UVPI) for the United States came in at 1.057 in July compared to 1.034 in June and 1.014 last July. RVI calculated that readings represented an increase of 2.2 percent month-over-month and 4.2 percent year-over-year.

In his monthly Kontos Kommentary, the KAR expert explained that actually more car and truck segments showed month-over-month declines than gains with a slight uptick in the mix of trucks accounting for the small overall average gain. Kontos pointed out that truck model classes now make up 53 percent of the total units sold at auction with the 50 percent threshold having been reached about a year ago. 

“After four months of year-over-year declines, average wholesale used vehicle prices registered a slight increase in July,” said Kontos, who is among the collection of experts coming to Used Car Week, which begins on Nov. 12.

“However, this was primarily due, once again, to a shift in sales mix towards the truck model classes and the continued influx of younger off-lease vehicles, both of which have been tending to drive up average prices.  Still, the summer market for used vehicles appears to be solid, both at the wholesale and retail levels,” Kontos continued.

The editors at Black Book are responsible for watching wholesale prices as well as collecting anecdotes from the lanes. According to the latest Market Insights report, Black Book determined small pickups and full-size cars both showed gains this past week, even though we’re getting deep into summer.

“Subcompact cars have started to show some weakness after a strong retention trend earlier this year. On the other hand, sub-compact crossovers are continuing to do relatively well,” said Anil Goyal, Black Book executive vice president of operations, who also will be on hand for Used Car Week, which is being orchestrated at the Westin Keirland Resort and Spa in Scottsdale, Ariz.

Volume-weighted, Black Book reported that overall car segment values decreased by just 0.20 percent last week. In comparison, editors mentioned values had decreased at a rate of 0.22 percent per week during the previous four weeks.

Among car segments, sub-compact car values decreased the most last week, softening by 0.56 percent or $34.

Again volume-weighted, Black Book noticed that overall truck segment values (including pickups, SUVs, and vans) dipped by 0.15 percent last week. Editors noted that values had decreased at a rate of 0.24 percent per week during the previous four weeks.

Within truck segments, full-size van values decreased the most last week, dropping by 0.50 percent or $74.

In light of all of those data points, Black Book’s lane observers stationed at sales nationwide shared some pretty vivid dealer responses to how managers are juggling their inventory needs against their floor-plan availability.

— From Michigan: “The retail market remains somewhat sluggish in contrast to what happened at the wholesale auction this week. Many buyers were left shaking their heads at the inflated prices on the block.”

— From Massachusetts: “Trucks still rule, and the money was strong except for the poorer quality vehicles.”

— From Georgia: “The sale started off with a lot of activity and very few no-sales. The conversion percentages soon dropped as the floors seemed to be too ambitious.”

— From California: “Strong bidding in person and online, resulting in a really good August sale.”

Whether the sale originated in the Golden State or elsewhere nationwide, if the event included fleet and off-lease units that were 3 years old and less than 45,000 miles on the odometer, Kontos shared how buyers needed to come up with more cash to make the hammer drop in their favor for those vehicles.

Kontos indicated that when holding constant for sale type, model year age, mileage and model class segment, prices for midsize cars in that late-model category rose 5.9 percent or $676 year-over-year in July to $12,169. Prices for midsize SUV in this wholesale space increased 2.2 percent or $435 year-over-year to $20,541.

“Once again, midsize car prices outperformed prices for midsize SUVs and crossovers, as the incoming supply of trucks continues to outpace that of cars,” Kontos said.

“The strength of prices for both groups in this analysis indicates that upstream sales are preventing an oversupply of off-lease units from reaching physical auction lots,” continued Kontos, who elaborated about the wholesale market in a video available here as well as at the top of the page.

Kontos went on to mention more data from KAR Auction Services — a member of the Automotive Intelligence Council — that indicated average wholesale prices for used vehicles remarketed by manufacturers in July rose 3.3 percent month-over-month and 3.4 percent year-over-year.

Kontos also noted that prices for fleet/lease consignors ticked up 0.4 percent sequentially and 8.1 percent annually in July.

Furthermore, Kontos mentioned that average prices for dealer consignors moved 2.0 percent higher versus June but slid 2.3 percent relative to July of last year.

The KAR chief economist closed his latest Kontos Kommentary by sharing information from Autodata that indicated July certified pre-owned sales softened 7.5 percent from the prior month and 1.9 percent year-over-year based on fewer selling days. On a year-to-date basis, Kontos added that Autodata has CPO sales up 2.8 percent versus last year.

ADESA Wholesale Used-Vehicle Price Trends

   Average  Price  ($/Unit)  Latest  Month Versus
   July 2018  June 2018  July 2017  Prior Month  Prior Year
 Total All Vehicles  $10,902  $10,895  $10,887  0.1%  0.1%
 Total Cars  $8,519  $8,548  $8,613  -0.3%  -1.1%
 Compact Car  $6,434  $6,441  $6,582  -0.1%  -2.3%
 Midsize Car  $7,457  $7,533  $7,633  -1.0%  -2.3%
 Full-size Car  $7,275  $7,495  $7,018  -2.9%  3.7%
 Luxury Car  $13,294  $13,172  $13,582  0.9%  -2.1%
 Sporty Car  $14,225  $14,515  $14,164  -2.0%  0.4%
 Total Trucks  $12,922  $12,901  $13,058  0.2%  -1.0%
 Minivan  $7,937  $8,652  $8,604  -8.3%  -7.7%
 Full-size Van  $13,306  $13,202  $11,875  0.8%  12.1%
 Compact SUV/CUV  $10,805  $10,829  $10,467  -0.2%  3.2%
 Midsize SUV/CUV  $10,992  $11,135  $11,402  -1.3%  -3.6%
 Full-size SUV/CUV  $13,198  $13,499  $13,353  -2.2%  -1.2%
 Luxury SUV/CUV  $18,495  $18,331  $19,099  0.9%  -3.2%
 Compact Pickup  $9,796  $9,471  $9,615  3.4%  1.9%
 Full-size Pickup  $16,583  $16,386  $17,061  1.2%  -2.8%

Source: ADESA Analytical Services.


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