Wholesale Prices Rise Once Again In April
Wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) rose for the fourth consecutive month in April. This resulted in a Manheim Used Vehicle Value Index reading of 124.9 for the month, which represented a 4.8 percent increase from a year ago.
Market class and price tier trends. All major market classes now have year-over-year prices gains. The increase for luxury cars is, however, insignificant. Although wholesale pricing in the luxury segment has suffered for more than a year, luxury vehicles outperformed the overall market in April. Most of that was due to easy year-over-year comps.
An analysis of average mileage by price tiers indicates the sweet spot in the wholesale market has moved up in price. In April, the strongest pricing (and lowest relative supply) was in the $12,000 to $14,000 price range. In 2013 and early 2014, the strongest pricing was often found in the $8,000 to $10,000 price range.
Rental risk units: low volumes, high prices. Unadjusted for mileage and mix shifts, auction prices for rental risk units continued to rise in April. Adjusted for mileage and mix, prices were down marginally from March, but still up nearly seven percent from a year ago. Average mileage slipped below 40,000 for the first time this year, but was still nine percent higher than a year ago. Volumes sold at auction remained on the low side, and industry sources indicate new units sold into rental fleets declined seven percent in the first four months of 2014 compared to a year ago. The bulk of that decline was accounted for by domestic manufacturers.
New vehicle sales: higher volumes and transaction prices. New cars and light-duty trucks sold at a seasonally adjusted annual of 16.1 million in April. Stronger retail new vehicle demand and reasonable production schedules left dealer inventories in much better shape than they were a couple of months ago. That suggests manufacturers might continue to enjoy higher average transaction prices and flat incentive spending. Both of which, of course, support used vehicle values.
Used vehicles: strong sales, and even stronger profits. Total dealer sales of used vehicles rose four percent in April, resulting in a year-to-date increase of two percent (according to CNW). Retail used unit sales by the seven publicly traded dealership groups increased more than ten percent in the first quarter of 2014 (up seven percent on a same-store basis), and more important, net profits were at record levels due to greater throughput, increased operating efficiencies, and strong F&I income. Likewise, CPO sales increased 9.5 percent in April and 10.5 percent year-to-date.
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.
