Wholesale Prices Rebound With Start of Spring Bounce

By Jonathan Smoke
Cox Automotive

Wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) increased 0.58 percent month-over-month in March. This brought the Manheim Used Vehicle Value Index to 136.0, a 4.0 percent increase from a year ago.

Looking at trends in weekly Manheim Market Report (MMR) prices, March saw the traditional spring bounce in values, particularly in non-luxury vehicles. Three-year-old vehicle values in aggregate saw four straight weeks of price gains that erased most of the price declines in January and February. The pattern is likely to continue for two to three more weeks, leading to higher prices relative to the start of the year.

On a year-over-year basis, most major market segments saw seasonally adjusted price gains in March. Midsize cars outperformed the overall market, while all other major segments underperformed the overall market.

Weak Retail Results for Vehicle Sales in March - According to Cox Automotive estimates, used vehicle sales volume was down 1.7 percent year-over-year in March. We estimate the March used Seasonally Adjusted Annual Rate (SAAR) to be 39.0 million, down from 39.7 million last March and down from February’s 39.4 million rate.

Like the used market, the new vehicle market showed weakness in March. March new vehicle sales were down 2.2 percent year-over-year, with one less selling day compared to March 2018. However, the March SAAR came in at 17.5 million, improving versus last year’s 17.2 million. Cars continue to see declines, as sales in March fell 7.9 percent compared to last year. Light trucks outperformed cars in March, finishing the month up 0.6 percent year-over-year.

Combined rental, commercial, and government purchases of new vehicles were up 4.5 percent year-over-year in March, and up 16 percent month-over-month. Rental (up two percent), commercial (up 11 percent), and government (up seven percent) fleet channels were up year-over-year in March. New vehicle retail sales were down four percent in March, leading to a retail SAAR of 14.0 million, down from 14.1 million last March.

New vehicle inventories came in above 4 million units for the second consecutive month.

Rental Risk Pricing Improves - The average price for rental risk units sold at auction in March was down one percent year-over-year. Rental risk prices were up two percent compared to February. Average mileage for rental risk units in February (at 45,200 miles) was up 0.4 percent compared to a year ago and up one percent month-over-month.  

Slowing Economic Growth and Declining Confidence - The fourth quarter’s real GDP growth rate was revised down to 2.2 percent from the originally estimated 2.6 percent. Downward revisions were caused by lower consumer spending, reduced fixed investment, and declining government spending compared to what was initially reported. Consumer confidence in March declined six percent and is now lower than last year. However, plans to purchase a vehicle in the next six months jumped in March. Plans to purchase had been on a multi-month slide consistent with declining confidence and sales.