Wholesale Prices For Fleet Vehicles Reach All-Time High

Auction prices for end-of-service commercial fleet units hit a new high in March. Prices for midsize fleet cars were exceptionally strong, but fleet managers also enjoyed higher pricing in most other segments. The improved availability of retail credit continues to increase the retail demand for end-of-service fleet units.

Given that the primary use of a vehicle is to provide transportation to and from one's place of work, it was good news for everyone in the auto industry that private-sector employment growth exceeded the quarter-million mark in March. This marked the second consecutive month of such gains, a feat not achieved since back in March 2006. If this trend continues (and indications are that they will), it will help offset some of the decline in consumer confidence caused by higher gas prices.

Although gasoline prices moved up only modestly in the last half of March, the earlier-than-usual rise has shifted consumer expectations and slowed the rise in discretionary spending. Already, energy, as a percentage of the average household's total spend, is above 6 percent – a level that in the past has produced changes in consumer behavior.

Not surprisingly, then, compact and midsize cars were – by far and away – the strongest segments at the wholesale level in March. And, within any given model lineup, wholesale prices rose fastest for those with the most fuel-efficient powertrain options. Meanwhile, prices for fullsize pickups and SUVs fell.

Despite negatives such as declining consumer confidence, higher gas prices, and a second dip in the housing market, new vehicles sold at a seasonally adjusted rate of 13.1 million in March. We expect some pullback in April as manufacturer and parts supplier shutdowns stemming from the events in Japan create selective inventory shortages. Those shortages will surely drive up the prices of nearly new used units of the same model.

Tom Webb is chief economist at Manheim Consulting. He shares insights on this automotive industry through his blog, www.manheimconsulting.typepad.com, and via Twitter (TomWebb_Manheim).

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