ATLANTA — Wholesale used vehicle values declined by just over 2% in the third quarter, as the market showed signs of returning to more normal levels after historically high prices earlier in the year, according to a new report from Manheim.
The Manheim Used Vehicle Value Index, a measure of wholesale prices adjusted for mix, mileage and season, ended the third quarter at 121.4, a decline of 1.1% compared to a year ago.
After posting increases over the winter and early spring, used vehicle prices fell for five straight months through September. A boom in new car sales during the quarter resulted in more trade-ins and lease turn-ins in the quarter, which led to an increase in inventories and put downward pressure on prices, officials said.
The price declines, however, took place as the market showed positive signs. Loan delinquencies and repossessions remained low. Certified pre-owned sales increased 20% in September, and showed a 10% rise year-to-date, as consumers evidenced strong demand for quality, late-model used vehicles. Lease penetration rates went up, a sign of satisfied customers. Dealers also closed out the quarter with higher retail unit sales in September, moving more vehicles as prices fell.
“The decline in prices so far appears to be part of a healthy overall market,” Manheim Chief Economist Tom Webb said. “Valuation adjustments enabled dealers not only to retail the large number of customer trade-ins and lease returns but also actively purchase from the growing supply of late-model vehicles available at auction. Dealers were able to turn their inventory more quickly because of the lower wholesale prices.”
In the third quarter, compact cars continued to be the weakest segment with prices ending the quarter down 3.4% compared to a year ago. Midsize cars matched the overall market and experienced a 1.1% decline in values compared to a year ago, while luxury cars fell 3% compared to a year ago. The multi-year decline in luxury cars appeared to be slowing in September.
Meanwhile, pick-ups and vans remained the strongest segment with prices up 6.5% for pick-ups and 1.5% for vans. Owners in this segment tend to hold onto their vehicles for longer than the average, keeping supplies tighter even as the overall market increases. SUV and CUV prices were down 1.5% to end the quarter compared to a year ago. Normally one of the stronger segments, SUV and CUV prices fell in-line with the overall market.
Prices likely will continue to moderate during the rest of the year, Webb said. Volumes, though, should not increase as dramatically with new car sales returning to more typical levels. The automotive sector was among the first segments to grow with the economic recovery and may show less up-side for the rest of the year.
“Although economic forces suggest that the retail consumer sector will improve in the months ahead, it is likely that the auto industry will plateau given that it got out ahead of, and then ran considerably faster than, the overall recovery,” Webb said. “We should see a return to more normal prices and volumes across the entire industry.”
Originally posted on F&I and Showroom