The upturn in wholesale vehicle prices “showed a more sizable gain” in November, according to the latest update of the Manheim Used Vehicle Value Index.
After ticking up in October, Manheim determined the movement of wholesale used-vehicle prices (on a mix-, mileage- and seasonally adjusted basis) pushed the November index reading to 123.3, which represented an increase of 0.7 percent from a year ago.
“Wholesale price movements since April suggest that, if there was a price misalignment between new and used vehicles, it was modest at best,” Manheim chief economist Tom Webb said.
“The five-month decline in pricing lowered wholesale values by less than 3 percent, and the subsequent two-month rise has brought prices within 1.3 percent of their April high,” Webb continued.
“Recent wholesale pricing also suggests that the low- to mid-16 million new-vehicle SAAR in September and October did not create the level, or age/model/condition mix, of trade-ins and lease turn-ins that dealers needed for today’s robust used-vehicle market. The dealer’s mood in November was one of active acquisition at auction,” he went on to say.
Four of the six vehicle segments Manheim tracks for its index report moved higher in November. On a year-over-year comparison, prices for pickups led the charge higher by rising 6.2 percent, followed by vans (up 2.1 percent), luxury cars (up 1.4 percent) as well as CUVs and SUVs (up 1.4 percent).
In particular, that luxury-car price metric caught Webb’s attention.
“Luxury vehicles continued to outperform the overall market in November; but due to weakness earlier in the year, they still have a lot ground to make up,” Webb said.
“Maintaining luxury car residuals in the months ahead will be important due to the current, and upcoming, seasonal rise in lease returns in this segment,” he continued. “Pricing in the compact car market remained competitive in both the new- and used-vehicle markets.”
Keeping the overall price reading from going higher was the softening of the remaining two segments as midsize car prices dipped by 0.9 percent while compact car prices dropped by 2.5 percent.
Reviewing the wholesale market as whole, Webb said, “Our analysis of changes in mileage by price tier suggests that vehicles in the $8,000- to $10,000-price range are showing the weakest demand, whereas vehicles in the $13,000- to $15,000-range are enjoying the strongest relative pricing.
“Dealer-consigned units at auction had a 1-percent increase in average selling price despite a 2-percent rise in average mileage,” he added.
Rental-Risk Vehicle Update
Manheim indicated the average mileage on rental-risk units moving down the lanes in November crossed the 45,000-mile threshold for the first time ever.
Along with that development, Webb shared his assessment of the rental-risk market by stating it enjoyed a “bounce-back” in pricing.
Manheim determined average auction prices for rental risk units (both adjusted and unadjusted for mileage and mix shifts) moved up in November relative to October, but were still down year-over-year.
“In hindsight, we can now see that October’s sharp downward movement was exaggerated by heavy volumes and a greater share of below-average condition vehicles,” Webb said.
“November’s auction volume of rental risk units was up significantly from a year ago,” he continued. “But due to the normal large seasonal reduction, November was still the lowest-volume month of the year.”
November Sales Recap
Beginning on the used side, Webb recapped CNW Research data that showed used-vehicle retail sales by dealers ticked up by less than 1 percent in November, after declining in October.
Although year-to-date used-vehicle sales by dealers are down 1.1 percent, Webb emphasized that all indications show profits are being generated at record levels.
“Growing lease turn-ins, as well as newer trade-ins, have significantly raised the average used-vehicle selling price at franchised dealers,” Webb said.
“Relatedly, another strong month of CPO sales in November pushed the year-to-date tally to 2.14 million, an increase of 10.2 percent from the year-ago period,” he added.
On the new-vehicle side, Webb pointed out that new cars and light duty trucks sold at a seasonally adjusted annual rate of 17.1 million in November.
“That pace might have been artificially boosted by the selling day adjustment and higher fleet sales, but still it was a solid report,” Webb said.
The average new-vehicle transaction price rose to $33,754 in November, up 1.7 percent from a year ago, according to Kelley Blue Book.
“Maintaining that pricing strength over the course of the coming year may prove challenging,” Webb said. “Clearly, the expected plateauing in new-vehicle sales, the significant weakening of the yen, and the large amount of dry powder that manufacturers have to raise incentives could lead to aggressive pricing next year.
“And don’t forget the usual year-end step-up in promotions that will occur this month,” he added.