Last month showed some price softening in off-rental wholesale cars, according to the latest Manheim Used Vehicle Value Index analysis, which said that not since 2013 has the straight average of rental-risk auction prices been this low in February.
Even with rental-risk units having 11.5 percent less mileage on them, prices still fell 4.1 percent year-over-year in February, Cox Automotive chief economist Tom Webb said in the report.
He also pointed out that Manheim’s rental-specific index, which is adjusted for “broad” mix and mileage changes, dropped 5.5 percent.
From a volume standpoint, you can expect more to flow into auctions, Webb said, pointing out a near 13-percent rise in year-to-date sales into rental fleets.
“Given indications that rental car companies are over-fleeted, we expect this pace of deliveries to slow in the coming months and for the number of units entering the wholesale market to rise,” Webb said.
Along those same lines, in the 2016 Used Car Market Report, Webb acknowledges the “justifiable concern” that off-rental pricing will be hurt by the surge in off-lease cars. But he also points out that OEM incentive and inventory practices will play a bigger role in the fate of off-rental prices — which is typically the case, he said.
“On that front, manufacturers, of late, have been better at equating production with demand. But the real test will come in future years when the pace of new-vehicle sales levels off. Most rental car companies are expecting — and planning for — a higher per-vehicle monthly depreciation cost in 2016, but nothing like 2008 and 2009,” Webb said in that report.
Going back to volumes, the Used Car Market Report projects the off-rental wholesale volume should hover in the 1.8 million-unit range for next few years, which compares to 1.66 million off-rental cars in 2015.
“The future growth in off-rental volumes should mirror the growth in the total rental fleet size, as we foresee no significant change in holding periods,” Webb said.