Analysts at J.D. Power Valuation Services found that May wholesale prices for used vehicles up to 8 years old declined by an average of 1.9 percent.
And their expectations predict a similar softening to happen in June, as well.
According to the June edition of Used Car and Light Truck Guidelines Industry Update, J.D. Power Valuation Services explained that the May price decline ended up being slightly better than the way the month has historically performed during the past 20 years.
“In spite of this glimmer of positivity, the 31-day period underperformed J.D. Power Valuation Services’ expectations for the month,” analysts said in the report. “It appears there has been no payback for February’s abnormally weak performance.”
Should analysts’ June forecast hold true, the report indicated that only a 1.9 percent price softening would be an improvement compared to June of last year.
“At the segment level, mainstream losses are expected to be fairly consistent with the exception of midsize and large pickups, which continue to perform very strongly and are forecast to perform significantly better than the industry average,” the report said.
“Losses for all premium segment are forecast to fall around the industry average,” the report continued.
In terms of full-year expectations, J.D. Power Valuation Services — formerly NADA Used Car Guide — maintained that used-vehicle prices should fall by about 6 percent, which would be 2 percentage points more than the 4 percent drop recorded a year ago.
“Ongoing increase in supply, higher incentives and normalizing retail environment — including credit conditions — will ultimately dictate losses,” analysts said.
More details about May movements
In lieu of a mitigated February federal tax season bounce back, J.D. Power Valuation Services’ seasonally adjusted used vehicle price index managed to increase for the first time in a year, ticking up by 0.8 percent to 111.1.
The May index reading settled 7.6 percent below the year-ago measurement of 120.2.
At the segment level, analysts explained in the report that mainstream segment losses were led by what they deemed to be a “usual suspect,” midsize cars. Prices for these units decreased by 2.6 percent.
The report indicated prices were “weak” for all midsize models, but especially the Nissan Altima, which sustained a 4-percent price decline.
“Additionally, late model year Altima volume accounted for 20 percent of all midsize car volume over the past few months, which has helped keep prices for the group depressed,” analysts said.
Like their sedan counterparts, the report mentioned that midsize van values also softened as prices fell by 2 percent. Analysts attributed that movement to a 70-percent increase in 2017 model year volume, which was traced back to an “elevated” number of Kia Sedona units returning to the marketplace.
Meanwhile on the opposite end of the spectrum, the report pointed out that midsize pickups continue to perform “exceptionally well” despite a 37-percent year-to-date increase in late-model volume.
On the luxury side of the market, J.D. Power Valuation Services mentioned that luxury midsize car prices dropped by 2.6 percent in May, following what the firm called a “strong April showing.”
Prices for luxury large utilities fell by 2.1 percent, which turned out to be the worst May for that segment since 2012, according to the report that also mentioned the decrease came in part because of a “sharp” 8 percent increase in month-over-month auction volume.
When asked about May's 1.9 percent price drop, David Paris, executive analyst at J.D. Power Valuation Services said in separate news release, “It’s normal to see a drop the fifth month of the year. However, this May was a little different since the decline slightly outperformed what we've seen during the month the past 20 years.”
Paris went on to say, “While the index may have increased by 0.8 percent during May, it was 7.6 percent below May of last year. That said, we expect wholesale prices of 8-year-old or younger vehicles to drop about 1.9 percent during June. We still expect prices to decline by about 6 percent for the year as a whole.”