By Jonathan SmokeCox Automotive
By Jonathan Smoke
Cox Automotive
Wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) decreased 0.74 percent month-over-month in January. This brought the Manheim Used Vehicle Value Index to 131.0, which was a 4.9 percent increase from a year ago and the lowest level since last July.
On a year-over-year basis, all major market segments except midsize cars saw gains. Luxury cars, pickups, and vans outperformed the overall market.
Depreciation accelerated for most vehicles to catch up with the abnormal pricing performance in September; but now that prices are more in line with the general trend prior to the hurricanes, expect the rate to slow down to normal. As we look ahead in 2018, we will likely miss the usual “bounce” in used vehicle prices in March as tax refunds will again be delayed as part of the IRS effort to combat identity fraud. Prices should be on firmer footing by April as retail demand kicks into gear.
Rental risk pricing strengthens. The average price for rental risk units sold at auction in January was up one percent year-over-year. Rental risk prices were up one percent compared to December. Average mileage for rental risk units in January (at 44,600 miles) was four percent above a year ago.
New vehicle sales increase in January. January new vehicle sales volume increased one percent year-over-year with one more selling day compared to January 2017. January SAAR came in at 17.1 million, the fifth straight month of over 17 million SAAR. Cars continue to see sharp declines as sales in January fell 11 percent compared to last year, with major car segments having sales declines. Light trucks outperformed cars in January and were up eight percent year-over-year.
Combined rental, commercial, and government purchases of new vehicles were down three percent year-over-year, led by declines in rental (-11 percent) and government (-5 percent) fleet channels.
New vehicle inventories remained below four million units for the seventh straight month.
Used sales decrease in January. According to Cox Automotive estimates, used car sales decreased by two percent year-over-year in January. The January used SAAR came in at 39.2 million units.
Economy showing strong momentum. The Employment Report for January was better than expected as monthly job creation increased to 200,000. Unemployment remained at a 17-year low of 4.1 percent; however, the underemployment rate, the broadest measure of unemployment, ticked up again to 8.2 percent, indicating that there is some slack left to be worked out. Consumer confidence in January was the second-best reading in more than 17 years and up substantially over last year. Positive wage growth combined with the parade of businesses announcing bonuses and pay increases from tax reform is producing fertile ground for strong and growing consumer spending and auto buying in the spring.
Jonathan Smoke is Chief Economist for Cox Automotive. Follow Jonathan on Twitter at @SmokeonCars for the latest industry research and insights.
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