Wholesale Prices Increase for Third Consecutive Month

By Jonathan Smoke
Cox Automotive

Wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) increased 0.53 percent month-over-month in June. This brought the Manheim Used Vehicle Value Index to 134.9, which was a 4.3 percent increase from a year ago and the highest level since last October.

Looking at trends in weekly Manheim Market Report (MMR) prices, the traditional spring bounce this year started three weeks later and peaked in April in week 15. Used vehicle prices had been moving down since that April peak, but that trend took a surprising turn in the last two weeks of June. As a result, prices remain higher now compared to where they were at the beginning of the year, or in any of the past three years. Price comparisons to last year are starting to get tougher, but this recent increase regained some ground to keep current price performance ahead of last year.

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

Positive results for vehicle sales in June. According to Cox Automotive estimates, used vehicle sales volume increased by two percent year-over-year in June. The annualized pace of used vehicle sales is up one percent over last year. We estimate the June used seasonally adjusted annual rate (SAAR) to be 39.8 million, up on a month-over-month basis.

New-vehicle sales continue to perform above forecast with a five percent year-over-year increase in June, which can be attributed primarily to strong fleet sales. Retail sales are flat and supported by healthy incentives, which are up six percent on a year-over-year basis. The new-vehicle SAAR in June came in at 17.4 million, up from last year’s pace of 16.6 million. Cars continue to see sharp declines as sales in June fell seven percent compared to last year. Light trucks outperformed cars in June and were up 12 percent year-over-year. New-vehicle inventories came in under four million units for the second consecutive month.

Combined rental, commercial, and government purchases of new vehicles were up 10 percent year-over-year in June, led by increases in commercial (+8 percent), rental (+11 percent), and government (+10 percent) fleet channels.

Rental risk pricing strengthens. The average price for rental risk units sold at auction in June was up seven percent year-over-year. Rental risk prices were down one percent compared to May. Average mileage for rental risk units in June (at 42,700 miles) was up five percent compared to a year ago but down one percent month-over-month.

Continued strong economic momentum. The economy grew two percent in the first quarter, which was a bit softer than originally estimated. The second quarter will see a strong rebound and will likely hit the peak in economic growth for the year. Consumer confidence declined in June as optimism about the economy and income growth declined, but it is important to note that consumer confidence remains higher than last year and near a 17-year high.

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