New, Used, And Wholesale Markets Continue Steady, Strong Performance

New, Used, And Wholesale Markets Continue Steady, Strong Performance. Wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) rose in June after declining in each of the first five months of the year. This brought the Manheim Used Vehicle Value Index to a level of 119.7, which was three percent lower than a year ago. On a quarterly basis, wholesale prices declined 0.8 percent in the first quarter of 2013 and 2.1 percent in second quarter.

Wholesale pricing patterns in the first half of 2013 were influenced by the delayed, and light, tax refund season and by "payback" for price hikes in late 2012 resulting from Hurricane Sandy. Nevertheless, total market activity was consistent with earlier expectations and helped bring wholesale prices in better alignment with retail new and used vehicle prices.

Looking ahead to the back half of 2013, continued healthy used vehicle sales and profits should enable wholesale prices to show only a modest easing in the face of higher supplies.

Mid-priced vehicles show some weakness. An analysis of mileage changes by wholesale price tiers shows that vehicles in the $11,000 to $13,000 price range remained the weakest segment of the auction market in June. This hurt the overall resale performance of some commercial fleet managers (since that is their primary price range), but many makes and models popular with commercial fleets continue to perform very well in the auction market.

Rental risk prices strong in June. Relative to a year ago, prices for rental risk units sold at auction, unadjusted for market class and mileage, increased 4.8 percent in June. After adjusting for broad shifts in market classes and mileage, rental risk prices in June were basically unchanged from both May and a year ago. Volumes were down for the month.

Pickup prices remain strong. Among the market classes, pickups have been the best-performing segment, both in recent months and over the past year. Wholesale pricing for compact and midsize cars remained pressured by competition from the new vehicle market and increased wholesale supplies.

New vehicle sales beat expectations in June. New cars and light-duty trucks sold at a seasonally adjusted annual rate (SAAR) of 16 million in June. It was the strongest pace since November 2007. Although the outdated notion of trading day adjustments likely boosted the June sales rate somewhat, there is clearly an underlying strength in new vehicle sales. That should keep inventory levels in check and lessen the need for aggressive incentive activity during model year closeout.

One should not conclude, however, that the industry’s goal of achieving 15.5 million in sales in 2013 will be cakewalk. As witnessed by the large (and varying) market reactions to an innocuous Federal Reserve statement regarding future policy, the economic recovery remains susceptible to random shocks.

Used vehicle sales steady, and profits strong. Used vehicles sold by dealers increased 3.6 percent in June, after falling in both April and May. Although CNW reported that second-quarter used unit sales by dealers were down 1 percent relative to 2012, our channel checks continue to indicate that dealers are satisfied with their unit volumes and profits.