Along with looking ahead to how prices might move in August, analysts at J.D. Power Valuation Services determined that July’s wholesale depreciation matched historical trends.
According to the latest issue of Guidelines, analysts reported that the wholesale prices of used vehicles up to 8 years in age fell by 2 percent in July, mirroring what J.D. Power Valuation Services expected to happen. During the past five years, analysts pointed out that July movements regularly have come in at 2.1 percent, leaving the latest development in line with those historical trends.
As a result of July’s reading, the J.D. Power Valuation Services’ Used Vehicle Price Index dipped slightly by 0.7 percent to land at 110.4. What analysts classified in the report as the “consistent chipping away of prices month-over-month” has pushed the index 7.1 percent lower through July as compared to the first seven months of last year.
For reference, the report noted the index reading in July of last year sat at 119.1.
When it comes to what might happen in August, David Paris, executive analyst at J.D. Power Valuation Services, shared the firm’s projection.
“This August, we forecast wholesale prices of vehicles up to 8 years in age to drop about 2.6 percent, which would be the same as August 2016,” Paris said. “For the year, we believe used prices will decline by 6.5 percent, which is 2.5 points worse than 2016’s 4-percent loss.”
The report added that looking even further down the road, J.D. Power Valuation Services is expecting that wholesale prices should decelerate to about 3 percent in 2018.
More details on July price movements
Drilling down into J.D. Power Valuation Services’ data, the report showed car prices moved most significantly when looking at information at the segment level.
“This is a continuation of the now long-running trend where mainstream car losses outpace those of their truck and SUV counterparts,” analysts said.
Three car segments in particular were among the greatest declines in the report as compact cars, midsize cars and large cars softened by 3.4 percent, 3.1 percent and 2.8 percent, respectively.
Analysts pointed out that subcompact car values performed a bit better than that group (declining by 2.2 percent) in part because of tighter supply of these units. The report indicated supply of late-model subcompact cars is off by 8.1 percent year-to-date.
The report went on to mention losses for large utilities were more pronounced in July (down 1.5 percent) versus the same month in 2015 when the value of these units actually ticked up 0.6 percent, and a year ago when losses only registered in at 0.3 percent. Analysts noted what could be impacted this segment is a surge in late-model supply, which is 11.8 percent higher year-to-date.
Also of note, analysts mentioned prices for large pickups remained strong in July as values for units in this segment haven’t fallen more than 1 percent during a single month since last December.