Tom Webb: Wholesale Prices Decline In November, Ending Five-Month Climb
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Wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) ticked down in November after increases in each of the previous five months. This brought the Manheim Used Vehicle Value Index to a reading of 125.1 for November, which was an increase of 1.5 percent from a year ago.
It is now certain that the full-year 2015 Manheim Index will post an increase on both an annual average and year-over-year basis. Although the upward movement in wholesale pricing this year defied market expectations, it did not defy market realities. Consider, for example, the robustness of the retail market where both new unit retail deliveries and used CPO sales are poised to set all-time highs.
As a result, rather than dreading the higher wholesale volumes, remarketers are embracing the opportunity to re-engage retail customers and fleet buyers to their brand or services. Some lessors are still posting a gain-on-sale for end-of-term units. To be sure, that situation will change shortly; but wholesale consignors will continue to find a receptive market for their vehicles as long as the retail markets remain so strong.
Market class and consignor segment trends. As expected, wholesale prices for luxury cars suffered in November due to large volumes. In November, compact cars erased some of the losses they incurred earlier in the year, but they remained the weakest market segment overall. Prices for pickups and sports cars remained strong in November, and for the full year.
A straight average of all auction prices showed less of a bump up in November than in each of the last three years. Average mileage was the lowest since April 2012. The average auction price for dealer-consigned units in November declined relative to October, but was up about 5 percent from a year ago.
Rental risk pricing moves up in November. A straight average of auction prices for rental risk units was up 3.5 percent in November relative to October and up 2.5 percent year-over-year. On a mix- and mileage-adjusted basis, prices were up 1.2 percent during the month and up 0.8 percent year-over-year.
Relative to the past four years, rental risk prices are now in the high range after dipping in the summer months due to a high volume of older, rough-condition vehicles being sold. Average mileage on rental risk units remained above 45,000 miles in November, as it has for every month this year but one.
New and used vehicle sales keep rising. In November, new vehicles sold at a seasonally adjusted annual rate of more than 18 million for the third consecutive month. If December sales are strong (and there is little reason to believe they won’t be), full-year new vehicle sales will be close to, or may even eclipse, the record 17.4 million units sold in 2000. It’s true that incentives are once again rising faster than transaction prices (a sure sign of a fatiguing market); but even if the market takes a deserved rest, 2016 promises to be another healthy year for sales.
Used vehicle sales, which were up one percent year-to-date through October, were estimated to have advanced at a faster pace in November. CPO sales declined 4.7 percent in November, but are up 8.7 percent year-to-date and are destined to set a new record for the year. More important, dealers continue to report quick turns and strong F&I income in their used vehicle operations. Higher-than-expected trade-ins have more often produced retail profits than wholesale losses.
Tom Webb is Chief Economist for Cox Automotive. 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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