At least 9 elements impacting latest wholesale price movements and June forecast

LAWRENCEVILLE, Ga., and McLEAN, Va. - 

The experts at Black Book and J.D. Power Valuation Services are seeing a wide array of factors ranging the juncture of the calendar to fuel costs to volume in the lanes all impacting their forecasts and most recent wholesale price recaps.

Before looking at what happened at last month as well as last week throughout the auction world, let’s first focus on what the wholesale price expectations are for June.

J.D. Power Valuation Services projected that wholesale prices of vehicles up to 8 years in age are expected to soften by about 0.2 percent. However, when considering full-year expectations, analysts continue to peg wholesale prices ticking up by about 0.8 percent, triggered in part by what they dubbed “exceptionally strong performances” recorded earlier in 2018.

“Negative forecast factors hurting used vehicles continue to be incentives, an anticipated increase in used supply, worsening credit conditions and increasing gasoline prices,” J.D. Power Valuation Services said in its latest issue of Guidelines.

“However, positive factors — such as favorable labor conditions, strengthening housing prices, along with long-term quality improvements — will outweigh the negatives,” analysts continued in the report.

Looking at how analysts arrived that forecast, J.D. Power Valuation Services described the wholesale market turning in a “typical performance” in May.

The J.D. Power Valuations Services’ Seasonally Adjusted Used Vehicle Price remained flat in May when compared to April, sitting at 117.0. That reading settled 3.1 points above the year-ago level and 2.5 points ahead of where the index stood in January.

While the index didn’t shift, analysts determined wholesale prices for vehicles up to 8 years old fell by 1.7 percent in May on a month-over-month basis. The softening was on par for what J.D. Power Valuation Services often spots during this month and actually wasn’t quite as severe as the five-year average, which represented a 2.2-percent drop.

Analysts pointed out that prices for midsize and large trucks went counter to the overall May movement as the former eked out a 0.3-percent price uptick while the latter remained flat.

Prices for large utilities dropped the most in May, according to Guidelines, softening by 3 percent. Not far off that pace were compact utilities (down 1.6 percent) and compact cars (down 2.1 percent).

On the luxury side, J.D. Power Valuation Services noticed large luxury utilities sustained a 4.9-percent price tumble, the most intense monthly drop for the segment since 2008. Analysts mentioned that these units typically hold up well as the 5-year average stood at dip of less than 1 percent.

Prices for luxury compact utilities (down 3.5 percent) and luxury midsize cars (down 3.4 percent) also sustained notable drops in May, according to Guidelines.

Weekly price movement

As they do on a regular basis, the editors at Black Book chimed in with their analysis looking at how wholesale prices moved on a weekly comparison.

This week’s Black Book Market Insights report highlighted that car values in particular showed some of their highest value declines in the last four months, with segments such as Luxury and compact cars leading the way.

Conversely, editors pointed out that the only segment out of all cars and trucks to still show a price increase involved sporty cars.

“As the weather warms up, widespread seasonal declines begin to show in used vehicle values across most segments,” said Anil Goyal, executive vice president of operations at Black Book.

 Volume-weighted, Black Book determined that overall car segment values decreased by 0.38 percent last week. In comparison, the values had decreased on average by 0.20 percent per week during the previous four weeks.

Among car segments, those luxury cars declined by 0.59 percent or $112. Sporty cars edged up by 0.12 percent or $18.

Volume-weighted, Black Book noticed overall truck segment values — including pickups, SUVs, and vans dropped by 0.24 percent last week. In comparison, the values had decreased on average of just 0.09 percent per week during the previous four weeks.

Within truck segments, editors pinpointed that prices for full-Size vans decreased the most last week, sliding by 0.56 percent of $86.

Black Book closed its latest update by sharing some of the best anecdotes from its representatives stationed at roughly 60 sales nationwide. Two of the recaps surfaced out of Illinois.

“Overall, it was a good sale. Full size SUVs continue to drop in value but have slowed down the pace in the last couple of weeks,” one lane watcher in Illinois shared.

The other representative from the Land of Lincoln added: “A new-car dealer who sold 25 here today said that he was pleased with the activity as well as the prices.”

As Goyal referenced, the influence of summer is impacting auction activity, and it was apparent in Michigan where the observer noted, “A normal summer pattern as vehicles with issues sold only if they were floored very low.”

Over in Massachusetts, dealers didn’t dip into their floor plan unless the vehicle met their specifications.

“Nice, clean cars brought good money, but everything else was a challenge in both activity and value,” Black Book representative from Massachusetts said.

Finally, the story out West went this way: “We had a decent sale today, but I had several dealers tell me that prices are inching down in retail,” the lane watcher in Arizona said.

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