by: Layne Weber, VP National Remarketing Sales, OneMain Remartketing
While temperatures across the country have been hot the past few weeks, the used car market continues a cooling trend. All industry reporting services have indicated that wholesale used vehicle prices have dropped for the past several months and the forecast is for more of the same into next year.
Moody’s projects that the supply used vehicles will increase and as a result sales will soften through the middle of 2014 with a likely drop in price of 3-4% from current values. Industry reports indicate that prices declined in August for the fifth consecutive month and that trend is expected to continue in September as well. Estimates on the retail side are mixed with TrueCar.com predicting that overall used vehicle sales will be down about 10% in August from July results. However, CNW research reported that retail used vehicle sales actually rose just over 1% in August and dealers reported 2.8 used vehicles sold for every new vehicle sale.
The results for wholesale used vehicle sales through auctions are consistent reporting a downward trend. Black Book noted that while 29% of vehicles had a positive price adjustment the first week of September, the overall market was down. The biggest drop in their results was from the prestige luxury car segment which has seen significant declines over the past three weeks. Conversely, used pickups have outperformed the overall market and the recent increase in gas prices has not hurt that segment.
The Manheim Market Index was at 126.1 at the end of March and is currently at 120.7, after declines in five consecutive months, indicating a roughly 5% drop in overall prices at auction during this period. The August decline was less than 0.5% which may indicate a trend that the market is stabilizing. Manheim reported that the biggest negative impact in August was on compact and midsize vehicles. Midsize cars have a larger proportion of late model units and are strongly influenced by new vehicle incentives. A rise in incentives on new cars will typically lower the resale values for this segment. Manheim also noted that overall auction sales volume was low in August, a norm for this time of year.
Manheim economist Tom Webb offered that ‘a further downward realignment in wholesale prices would be consistent with current market conditions. But the adjustments will likely be less severe going forward and prices will probably show periodic upticks along with the declines. As a historical perspective, wholesale prices are still up 24% from their trough in the fourth quarter of 2008 and down 6 percent from the record high reached in May 2011.’
The current environment still offers strong returns for credit unions selling repossessed vehicles at both a retail and wholesale level but expectations should be adjusted in line with current market conditions.
This article is provided by Layne Weber. Layne is a 20 year industry veteran and currently serves as VP – National Remarketing Sales for OneMain Remarketing, an industry leading provider of used vehicle remarketing services for credit unions, banks, and other financial institutions. www.onemainremarketing.com