While J.D. Power Valuation Services saw wholesale prices edge lower in June, analysts are holding on to their projection that used-vehicle prices will tick up on a year-over-year basis by the time 2019 closes.
In its latest installment of Guidelines, analysts repeated that they expect prices for vehicles up to 8 years in age to increase by approximately 0.2% to 0.7%.
“From where prices are currently through the remainder of the year, we are expecting a mild decline, which barring any serious economic changes or a dramatic shift in new-vehicle incentive strategies should hold true,” J.D. Power Valuation Services said in the report.
At the segment level, the report indicated mainstream passenger car prices are expected to be the strongest through the remainder of 2019. For example, J.D. Power Valuation Services stated that compact and midsize car prices are expected to increase by around 4.5% and 3.5% year-over-year.
“This will be driven by lower supply, especially now with manufacturers discontinuing or cutting back new-vehicle production on these models coupled with continued demand for cost-conscious consumers,” analysts said.
J.D. Power Valuation Services predicted mainstream SUV prices are also expected to remain positive with compact SUV prices projected to increase by around 0.5% while midsize SUV prices should climb by about 1.5%.
“SUV prices will continue to be suppressed by increasing levels of supply coming back to the market,” analysts said.
Bolstered by increasing levels of used supply, J.D. Power Valuation Services shared that all premium segments are expected to experience declines in 2019 ranging between 3.5% for compact premium SUV to 5.5% for midsize premium cars.
“As new-vehicle prices rise and affordability concerns increase, consumers will continue turning to used vehicles as alternatives to their new counterparts,” analysts said.
“Even with increasing levels of used supply, healthy consumer appetite for used vehicles will help keep used values relatively strong,” they added.
Data at 2019 midpoint
J.D. Power Valuation Services insisted that the used-vehicle market generated a strong performance during the first half of 2019.
Through June, analysts determined used-vehicle prices are on average 2.1% higher than during the same six-month a year ago.
“Prices this year were initially expected to contract slightly due to increases in used supply, interest rates, tighter credit conditions and pressure from new-vehicle incentives due to a slowdown in retail sales,” analysts explained in Guidelines.
“Several of these variables have surprised the industry with interest rates and incentive spending remaining relatively flat,” they continued. “These factors coupled with a continuation of used-vehicle demand will ultimately result in used price performance that will end up slightly outperforming 2018.
In terms of June’s performance, the used-vehicle market cooled as J.D. Power Valuation Services found that wholesale prices declined by 0.8%. However, the month’s performance was better than historic June figures.
As a result, the J.D. Power Valuation Services’ Seasonally Adjusted Used Vehicle Price Index increased by 1.3 points relative to May to 122.0.
Guidelines offered more insight by comparing the first half of this year versus the same stretch last year.
“Mainstream passenger car price increases have outpaced their SUV counterparts. More affordable small, compact and midsize car segment prices have increased the most, while mainstream SUV segment prices have also increased, however not nearly to the same degree as passenger cars,” said analysts, who pointed out that the supply of SUVs less than 5 years old influenced the readings.
“As for the luxury side of the market, premium segment prices are down across the board and are also feeling the pressure of elevated levels of wholesale volume returning to the market,” analysts added.