ATLANTA – Wholesale used-vehicle values declined slightly more than 2% in the third quarter, as the market showed signs of returning to more normal levels after prices reached historically high levels earlier this year, according to 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%t compared to a year ago. The firm noted September marked the fifth straight month used-vehicle prices have fallen after posting increases over the winter and early spring.
The firm attributed the downward pressure on prices to inventories increasing thanks to the boom in new-car sales during the quarter. The price declines, however, took place as the market showed positive signs.
Loan delinquencies and repossessions remained low, while certified pre-owned sales increased 20% in September and 10% year to date thanks to consumer demand for quality, late-model used vehicles. Lease penetration rates also increased, 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.”
By vehicle segment, compact cars continued to exhibit weakness in the third quarter, with prices falling 3.4% from a year ago. Midsize cars matched the overall market and experienced a 1.1% decline in values compared to a year ago.
Looking at the luxury car segment, prices decline 3% from a year ago. Webb noted that the multi-year decline in luxury cars did show signs in slowing in September, however.
Pick-ups and Vans remained the strongest segment, with prices up 6.5 percent for pick-ups and 1.5 percent for vans. Owners in this segment tend to hold onto their vehicles for longer than the average, Webb noted, keeping supplies tighter even as the overall market increases.
Additionally, SUV and CUV prices were down 1.5 percent to end the quarter vs. one 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 upside 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 continued. “We should see a return to more normal prices and volumes across the entire industry.”
Originally posted on F&I and Showroom