Used-car price shift confirms these 2 trends


ATLANTA – Cox Automotive chief economist Tom Webb explained last month’s movement of the Manheim Used Vehicle Value Index confirmed two trends. Webb said it is now certain that the full-year 2015 Manheim Index will post an increase on both an annual average and year-over-year basis.

Even though Webb discussed increases in the monthly report, Manheim noticed that wholesale prices (on a mix-, mileage-, and seasonally adjusted basis) actually ticked lower in November after posting increases in each of the previous five months. This latest movement brought the Manheim Used Vehicle Value Index to a reading of 125.1 for November, which represented an increase of 1.5 percent from a year ago.

“Although the upward movement in wholesale pricing this year defied market expectations, it did not defy market realities. Consider, for example, the robustness of the retail market where both new unit retail deliveries and used CPO sales are poised to set all-time highs,” Webb said when Manheim posted the latest index report on Monday.

“As a result, rather than dreading the higher wholesale volumes, remarketers are embracing the opportunity to re-engage retail customers and fleet buyers to their brand or services,” he continued.

“Some lessors are still posting a gain-on-sale for end-of-term units,” Webb went on to say. “To be sure, that situation will change shortly, but wholesale consignors will continue to find a receptive market for their vehicles as long as the retail markets remain so strong.”

Market class and consignor segment trends

Looking deeper into Manheim’s data showed that prices for pickups spiked 12.3 percent higher year-over-year in November. That figure was nearly double the combined increases for the three other vehicle segments that registered price rises.

Analysts also spotted price increases in November for midsize cars (up 2.6 percent), vans (up 2.2 percent) as well as CUVs and SUVs (up 2.0 percent).

Leading the price decliners were compacts, which Manheim indicated were off by 6.6 percent last month. Prices for luxury cars also softened by 4.4 percent.

“As expected, wholesale prices for luxury cars suffered in November due to large volumes,” Webb said.

“In November, compact cars erased some of the losses they incurred earlier in the year, but they remained the weakest market segment overall,” he continued. “Prices for pickups and sports cars remained strong in November, and for the full year.”

Manheim calculated that a straight average of all auction prices showed less of a bump higher in November than in each of the last three years.

Webb also mentioned average mileage was the lowest since April 2012. He pointed out the average auction price for dealer-consigned units in November declined relative to October, but was up about 5 percent from a year ago.

Rental risk pricing moves up in November

Manheim reported that a straight average of auction prices for rental risk units marked 3.5-percent climb in November relative to October and a 2.5-percent rise year-over-year.

On a mix- and mileage-adjusted basis, analysts noticed prices were up 1.2 percent during the month and up 0.8 percent year-over-year.

“Relative to the past four years, rental risk prices are now in the high range after dipping in the summer months due to a high volume of older, rough-condition vehicles being sold,” Webb said.

“Average mileage on rental risk units remained above 45,000 miles in November, as it has for every month this year but one,” he added.

November sales recaps

As he does with each Manheim index update, Webb touched on the most recently new- and used-vehicle sales performance.

In November, Webb pointed out that new vehicles sold at a seasonally adjusted annual rate of more than 18 million for the third consecutive month.

“If December sales are strong (and there is little reason to believe they won’t be), full-year new vehicle sales will be close to, or may even eclipse, the record 17.4 million units sold in 2000,” Webb said.

“It’s true that incentives are once again rising faster than transaction prices (a sure sign of a fatiguing market),” he went on to say. “But even if the market takes a deserved rest, 2016 promises to be another healthy year for sales.”

Webb also noted used-vehicle sales, which were up 1 percent year-to-date through October, were estimated to have advanced at a faster pace in November. CPO sales declined 4.7 percent in November, but are up 8.7 percent year-to-date “and are destined to set a new record for the year,” according to Webb.

“More important, dealers continue to report quick turns and strong F&I income in their used vehicle operations,” Webb said. “Higher-than-expected trade-ins have more often produced retail profits than wholesale losses.”