Wholesale Prices Rise Again In March
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Wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) rose 0.9 percent in March. This resulted in a Manheim Used Vehicle Value Index reading of 124.4 for the month, an increase of 2.2 percent for the first quarter of 2014, and a rise of 3.3 percent on a year-over-year basis.
The strength of wholesale pricing in 2014 has been consistent with the fundamentals of the retail market. In March, new vehicle sales sprung back from a weather-induced stall in January and February. Used vehicle retail sales also picked up, even though those sales were less impacted by the harsh weather. Certified Pre-Owned (CPO) sales, which have hit successive annual highs in each of the past three years, rose 10.9 percent in the first quarter. That supported late-model used vehicle values – the very segment that many analysts were worried about because of rising wholesale supplies.
Rental risk units: lower volumes, higher prices - Rental risk units flowing back into the wholesale market remained depressed in March after being at low levels in January and February. As with everything else in the economy, blame the weather. Rental car companies took delivery of nearly a half million new vehicles in the first quarter, but high demand in the insurance replacement segment meant de-fleeting was delayed. Massive recalls and a late Easter suggest the flow back into the wholesale market will continued to be pushed back.
The end result has been high prices and high mileage. In March, average auction prices for rental risk units (both adjusted and unadjusted for mix and mileage) were up year-over-year and sequentially. Average mileage remained above the 40,000 mark for the third consecutive month.
Market class and price tier trends - Pickups, by far, have shown the strongest wholesale pricing – both in recent months and over the past year. Compact cars and luxury cars are the only two major segments down over the past year. And those declines are very modest. With respect to price tiers, the wholesale market is performing well across-the-board.
Used vehicle sales: from good to better - Total dealer sales of used vehicles were down only marginally in January and February, despite the drag of weather conditions. March sales picked up noticeably. And dealers continue to report that the improvement in their bottom line is even better than the underlying unit numbers would suggest.
New vehicle sales: March’s bounce back exceeds expectations - New car and light-duty trucks sold at a seasonally adjusted annual rate of 16.4 million in March – more than a million units higher than the pace achieved in either January or February. A rebound was anticipated, but it was not expected to be that strong. As such, the sales gain was achieved without the aggressive use of incentives. Current inventory levels and production schedules suggest the market will be able to maintain pricing discipline for a while longer.
Tom Webb is chief economist for Manheim Consulting. Contact him at Thomas.webb@manheim.com, follow him via Twitter at www.twitter.com/TomWebb_Manheim and read his blog at www.manheimconsulting.typepad.com.
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