Used Vehicle Wholesale Prices Up Second Consecutive Month in May

By Jonathan Smoke
Cox Automotive

Wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) increased 1.25 percent month-over-month in May. This brought the Manheim Used Vehicle Value Index to 134.2, which was a 4.9 percent increase from a year ago and the highest level since last November.

Looking at trends in weekly Manheim Market Report (MMR) prices, the traditional spring bounce this year started three weeks later than it did in 2016 and peaked in April in week 15. Used vehicle prices are currently moving down but remain higher now compared to where they were at the beginning of the year than any of the past three years. Price comparisons to last year are starting to get tougher, as 2017 saw very low depreciation starting in May and lasting throughout the summer.

On a year-over-year basis, all major market segments saw price gains in May. Compact cars, SUVs/CUVs, and vans outperformed the overall market, while midsize cars and pickups underperformed the overall market.

Rental risk pricing strengthens. The average price for rental risk units sold at auction in May was up eight percent year-over-year. Rental risk prices were down one percent compared to April. Average mileage for rental risk units in May (at 43,000 miles) was 11 percent above a year ago but down one percent month-over-month.

Mixed results for vehicle sales in May. According to Cox Automotive estimates, used vehicle sales volume decreased by one percent year-over-year in May versus last year. The annualized pace of used vehicle sales is up one percent over last year. We estimate the May used seasonally adjusted annual rate (SAAR) to be 39.7 million, flat on a month-over-month basis.

May new vehicle sales increased five percent year-over-year, with one more selling day compared to May 2017. May's SAAR came in at 16.8 million, up from last year’s 16.7 million; this breaks the streak of eight straight months of new SAAR coming in at or above 17.0 million. Cars continue to see sharp declines as sales in May fell nine percent compared to last year. Light trucks outperformed cars in May and were up 14 percent year-over-year.

Combined rental, commercial, and government purchases of new vehicles were up 18 percent year-over-year in May, led by increases in commercial (+2 percent) and rental (+30 percent) fleet channels.

New vehicle inventories came in under four million units for the first time in three months, and inventories are at their lowest levels since January.

Continued strong economic momentum. The employment report for May was much stronger than expected as job creation increased to 223,000 when analysts had expected 190,000. The prior two monthly numbers were also revised up for a net increase of 15,000 more jobs than originally estimated. Consumer Confidence, as measured by the Conference Board, increased in May to 128, the second-
highest level for the year and the third-best level in more than 17 years.

Looking for more insights into the automotive market? Visit https://www.coxautoinc.com/learning-center/2018-ucmro/ to download the 2018 Used Car Market Report and Outlook.

 Jonathan Smoke is Chief Economist for Cox Automotive. Follow Jonathan on Twitter at @SmokeonCars for the latest industry research and insights.