Wholesale used vehicle prices increased for the third consecutive month in June, resulting in wholesale prices at their highest level in four years. This brought the Manheim Used Vehicle Value Index – a measure of wholesale prices adjusted for mix, mileage and season – to a reading of 126.2. This represents a difference of just 1.3 percent from the record high reached in May 2011.
“Despite the second quarter’s uptick in pricing, there’s no doubt that the overall long-term trend for wholesale pricing is still down,” said Tom Webb, chief economist for Cox Automotive. “With this in mind, the recent rise in pricing should be taken advantage of now, as well as appreciated, given that the gains will likely raise the floor to which prices will fall in this cycle.”
Pointing to overall long-term stability in the market, total used retail unit volumes increased 4 percent in the first five months of 2016. According to the National Automobile Dealers Association (NADA), franchised dealer sales were up 3 percent and independent sales up 6 percent.
“These gains exceed what the fundamentals of employment gains, credit availability and ownership needs would suggest and more likely reflect the forced churn caused by higher wholesale supplies,” said Webb. “With this environment remaining in the second half of the year, experts predict continued pressure on pricing and gross margins.”
Within the pricing tiers, there was weakness in the lower-middle tier in the $7,000 to $8,000 range. On the opposite side of the spectrum, strength in wholesale pricing remains concentrated in pickups, vans and certain sports cars. These are also the same segments enjoying the strongest increases in average new vehicle transaction price. For all other classes, wholesale pricing is flat to down.
Second quarter wholesale pricing for vehicle segments included:
- Compact Car prices represented the biggest pricing decrease of all car classes, which was down 2.4 percent in June over the same period last year due to continuing competitive pricing of new vehicles.
- Midsize Cars remained one of the weaker segments with an extremely modest increase of 0.2 percent compared with the same time period last year.
- SUVs and CUVs increased 1.3 percent compared with last June thanks to overall lower gas prices, a favorable lending environment and consumer preference shifting towards crossover vehicles.
- Pickups and Vans represented the most significant increase of all car classes, with pickups climbing 8.1 percent and vans rising a more modest, yet still strong, 3.5 percent.
- Luxury Car wholesale pricing increased a modest 1.0 percent compared with last June, which can be partially attributed to solid off-lease remarketing programs.
For rental risk units, auction prices for those sold in June jumped nearly 18 percent from a year ago. However, after adjusting for broad changes in mix and mileage, rental risk auction prices were flat in June relative to a year ago because the average mileage on these units last year was a record breaking 51,200 miles. This year, however, the average has fallen to 38,500, which is the lowest since December 2013. June’s mix of crossovers and vans was significantly higher, while the share of rental risk unit sales accounted for by midsize cars was down.
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