Some April Wholesale Price Moves Are ‘Misleading’

As the Manheim Used Vehicle Value Index edged slightly lower in April, economist Tom Webb cautioned wholesale observers and dealers to watch that some individual segment movements are “misleading.”

Supporting Webb’s point was the 0.8-percent softening of compact car prices last month. Meanwhile, Manheim discovered pickup prices rose 3.2 percent.

“Unusual year-ago environment makes some market class statistics misleading,” Webb began as his shared the latest index report on Monday.

“In April, compact cars had a year-over-year decline in adjusted pricing,” he continued. “That is simply a result of last year’s exceptional strength in the wake of supply disruptions.

“This impact will be even more pronounced next month,” Webb projected.

Then Webb explained how the “reverse situation” played out for pickup trucks, noting the segment showed the largest year-over-year increase of the major market classes.

“As witnessed by activity in the new-vehicle market, pickups will only need a small boost from improved employment conditions in construction, home services and general trades to take off,” Webb said.

“Right now, as to be expected, trade-ins on new pickups have been much older pickups than normal,” he added.

Despite what happened with compact cars and pickups, Manheim determined that wholesale used vehicle prices (on a mix-, mileage- and seasonally adjusted basis) declined marginally in April. The Manheim Used Vehicle Value Index now stands at 126.1 versus 126.2 in March.

“In April, year-over-year comparisons came up against much harder comps and, as a result, the overall Index as well as many segments showed annual declines in pricing even though valuations remained near historic highs,” Webb explained.

“The auto industry has significantly outperformed the overall economy in this recovery,” Webb continued. “That pattern continued in April as most economic indicators pointed towards slower growth. While new- and used-vehicle retail sales continued to show strength, used-vehicle operations produced growing profits and bidding activity at auction remained solid.”

As for the other four vehicle segments Manheim tracks, most moved less than 1 percent as midsize car prices ticked 0.9 percent higher and van prices edged 0.5 percent higher while SUV/CUV prices softened by 0.5 percent.

However, luxury car prices dropped the most year-over-year of any segment in Manheim’s analysis, sliding 3.3 percent.

Off-Rental Discussion

Webb summed up this wholesale segment by stating that he watched units post strong pricing, higher volume and lower mileage.

Manheim pointed out the average price for rental risk units sold at auction reached a new high in April.

“However, after accounting for a thousand fewer miles on average, adjusted prices were basically even with March’s level,” Webb calculated.

“The volume of off-rental units sold at auction in April rose from the year-ago level, but not at the same rapid pace of the first quarter,” he added.

Retail Sales Remain Strong and Profitable

In recapping the retail side, Manheim reiterated new cars and light-duty trucks sold at a seasonally adjusted annual rate of 14.4 million in April, up from 14.3 million in March. Due to a strong February, Webb said the sales pace for the first four months was 14.5 million, “which even after recent upward revisions, is still on the high side of most full-year forecasts.

“New-vehicle sales strength continues to be achieved without undue reliance on incentives or sales into fleet,” he continued. “In fact, in April, incentive spending was at multi-year lows.

“The year-over-year change in new-vehicle sales into rental declined in April, after frontloaded purchases pushed first quarter rental sales up more than 20 percent,” Webb went on to say.

Turning over to used sales, Manheim noticed used-vehicle retail volumes posted further gains in April and year-to-date.

Webb mentioned the rise came “despite the fact that the total dollar amount of individual income tax refunds is down this year for the first time in many decades.

“The number of tax refunds (often a better indicator) is, however, up slightly (less than 1 percent) through the end of April,” he continued.

Webb also touched on how the certified pre-owned market is behaving and how large dealer groups are leveraging what their used departments can do for financial performance.

“Statistics reflecting higher-priced used vehicle sales continued to run at a record pace,” Webb said.

“For example, although CPO sales were reported to have declined in April, they are still up significantly year-to-date,” he continued. “And, results for the seven publicly traded dealership groups showed 11 consecutive quarterly gains in same-store used vehicle retail unit volumes.”

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